Toward Sustainable Supply Chains

March 2004 Volume II Number 1

Net Contents
I. Network Presentation
Key Learnings
Perspectives

II. New Sponsor

III. The Women’s Network for a Sustainable Future
The Concept of the Network

IV. What’s Next?

I. Network Presentation
Many thanks to those who attended WNSF’s February 23rd luncheon and panel discussion: “Toward Sustainable Supply Chains (introducing women in management to those on the factory floor).” The event, co-hosted by Eileen Fisher, Inc. and Interface, Inc. at Interface’s NYC showroom, explored challenges and successes of managing supply chains.

Key Learnings

Panelists agreed that to make supply chains more sustainable, companies should:

  • Create partnerships with government and factory workers. Stakeholder exchange fosters better understanding among various parties and improves communication and processes to bring about lasting change.
  • Make a business case for corporate social responsibility both inside and outside the company. Raising public awareness of corporate social responsibility encourages consumers to make buying decisions based on companies’ sustainability practices – rewarding those that comply with standards and creating incentives for those that don’t. This kind of public accountability can encourage greater corporate transparency overall.
  • Build capacity at the local level. Companies should help factories develop procedures to facilitate positive change and create or strengthen capacity building initiatives that engage local managers and workers.
  • Integrate CSR throughout the corporation. Successful CSR initiatives that transcend divisions can help drive sustainable supply chain management throughout the company.

Perspectives

Moderator: Joyce LaValle, Senior Vice President of Design Relations at Interface, Inc. and Chairman of the WNSF Board of Directors. Corporate: Marcela Manubens, Vice President of Human Rights Programs at the Phillips – Van Heusen Corporation, and Tom DeLuca, Vice President, Imports and Compliance at Toys “R” Us. Non-Profit: Mil Niepold, Director of Policy at Verité, a nonprofit organization that ensures people worldwide work under safe, fair and legal conditions.

Dr. Ann Goodman, Acting Director of WNSF and President of Telesis Consulting, welcomed those in attendance and introduced moderator Joyce LaValle of Interface, Inc.

Joyce LaValle introduced the panel by offering an overview of the topic. She defined a supply chain as the entire lifecycle of a product (or service), from development and production through sale and eventual reuse, recycling or disposal. Because virtually all organizations in some way manage such a process, they should aim to do so in a responsible, sustainable way.

Marcela Manubens discussed the traditional monitoring approach and its efforts to uncover and correct non-compliance at factories worldwide. She then shared some lessons she has learned at Phillips – Van Heusen and concluded with some thoughts on the future of the field.

During the past decade, the traditional approach to building sustainable supply chains focused on uncovering infractions in factories abroad and effecting immediate, corrective action. Prompted by Northern NGOs and pro-labor groups, leading multinational corporations accepted their responsibility and attempted to increase transparency surrounding these issues. In many cases, codes of conduct were developed independently, drawing from ILO conventions and UN Declarations. However, many leading companies didn’t monitor activities, nor were they subject to scrutiny for inaction. Many companies are still missing from the debate today.

A key problem with this traditional approach is that it doesn’t improve corporate accountability or build understanding through interaction of stakeholders, including civil society and government. Dialogue and negotiation have taken place in only a few instances. One such example is the Fair Labor Association (FLA), created in 1996, a tripartite organization representing nonprofit and pro-labor organizations, universities and corporations, including founding member Phillips Van Heusen. However, there was little trust and collaboration, and efforts focused on policing rather than capacity building.

Additionally, because it often overlooks the importance of overseas workers, the traditional approach doesn’t effect change at the factory level. Ineffective local labor laws – often inconsistent with internationally recognized rights – and the lack of inspection and corrective action by local governments have also contributed to the current human rights crisis.

A more effective model is to engage those in the field in order to:

  • Improve transparency in companies, government and NGOs by building understanding of complex labor and human rights issues overseas.
  • Develop partnerships among companies, pro-labor groups (and other NGOs), and government to improve monitoring standards, retraining current monitors, as appropriate.
  • Empower managers at the local level to create sustainable practices, helping them improve communications channels with those on the factory floor and create a safe space where workers feel comfortable speaking out.
  • Build the business case for responsible corporations, partly by publicizing success stories – such as new partnerships and innovative solutions – as a step toward improved accountability.
  • Train associates in the field, who are “activists at heart” and eager to improve human rights.
  • Consolidate code-monitoring efforts, thus preventing audit fatigue and inconsistencies.
  • Share expertise to bring consistent, measurable progress.
  • Integrate CSR into the whole business by raising awareness among employees of how their roles affect workers overseas.

Tom DeLuca talked about his efforts to integrate corporate social responsibility throughout Toys “R” Us, partly sparked by customer demand. Toys “R” Us has worked especially to improve toy safety and supply chain management.

A code of conduct is one way to integrate CSR into the company. In fact, 60% of the Fortune 500 companies have such codes, but they can be effective only if the corporation’s actions stand behind its words. The Toys “R” Us Code of Conduct for Suppliers attempts to do that. The company frequently audits its suppliers (using a third party) to make sure they meet its standards; it uses similar procedures to investigate allegations of manufacturing problems. A factory certification using the SA8000 program of Social Accountability Int’l helps build accountability by means of continuous improvement. However, non-compliance with the Toys “R” Us programs could ultimately lead to terminating the business relationship as a last resort.

Toys “R” Us’ most important customer is “Mom.” At one end of the company’s distribution channel, Moms from diverse backgrounds in the 25-to-44 year-old age bracket are the main toy buyers. At the other end, 75% of toys sold in the US are made in China, where the vast majority of workers are young women between the ages of 18 and 25. So the success of Toys “R” Us depends critically on treating women well, as both customers and workers.

That’s one reason the company pays such close attention to safety. In late January, allegations were made about unfair labor practices at a Toys “R” Us supplier that makes the “Etch-a-Sketch” product. Immediately, Toys “R” Us launched an audit to assess the working conditions at the factory. It wasn’t easy. The audit firm first had to find the factory and then wait until after the Chinese New Year to begin the audit. To determine if workers were working excessive hours at less than minimum wage, workers were interviewed and time cards were analyzed. The results of the audit disputed the allegations, but nonetheless discovered problems at the factory, which was given a deadline to change to its safety practices.

Toys “R” Us has worked to play a proactive role in toy safety, working with both the federal government and the toy industry. The company was the first to add age grading to its products and the first to remove unsafe products from its stores, including look-alike toy guns. Toys “R” Us also supports other organizations affecting change. Once example is Kids in Danger, a non-profit that works to pass legislation on products used in non-toy environments such as day care centers. Toys “R” Us is also currently involved in a new government initiative to launch a national website that allows consumers to register and receive direct information from a number of government agencies that have recall authority.

Based on his experience, DeLuca outlined remaining challenges for CSR managers:

  • Developing fair standards and holding everyone accountable, including competitors.
  • Harmonizing efforts, because no one company can do it alone.
  • Increasing the role of the federal government in CSR programs.

Toys “R” Us does business in a socially responsible way because, says DeLuca: “It’s the right thing to do. It’s the smart thing to do. And, it makes good business sense.”

Mil Niepold began with the history of the United Nations Declaration of Human Rights and the continued to discuss Verité’s role in the field of labor rights and ethical supply chain management. She then shared thoughts on the future of labor rights compliance and how managers can create sustainable supply chains.

Verité is the only global non-profit that conducts social audits, as well as training and research. Mostly known as a global monitor, the organization is small but operates in 65 counties. To date, Verité has conducted 1,000 audits and interviewed over 13,000 workers. Its monitors are trained to use socially responsible techniques to garner information. For example, only female monitors interview female workers in order to build trust. Such practices are crucial, given the high percentage of women in workforce (80% to 90% of workers interviewed are women) and the severity of violations encountered, including: forced sterilization, abortions, high toxicity levels that lead to infertility, and lack of childcare.

The so-called cowboy approach, where each organization works alone, used to be the core belief of the US business world, not the global workers, said Niepold. In addition, “cops and robbers” monitoring, where offenders are penalized, may not be the best approach, mainly because it categorizes stakeholders according to good and bad, often without actual verification. There are no standards or quality control measures for monitoring; instead, each organization has developed its own technique, making it difficult to draw parallels and collaborate. The most successful Verité initiatives have been those that brought together people from disparate spheres of influence.

The main flaw of monitoring, said Niepold, is that workers often don’t see an improvement. A factory may be audited as many as 40 times a month without any change. A potential danger is that workers feel they’re not heard and stop talking. In a recent lawsuit in Saipan, the settlement was weak and took almost five years to be paid out. Attorneys have had a hard time finding the original workers. Of the total $20 million settlement, the attorneys received the majority of the funds while the workers received just $120 each.

Monitoring is just the first step towards sustainable supply chain management, Niepold said. Capacity building requires not just resources but a paradigm shift, where local knowledge and partnerships inform change efforts. To achieve long-term, systemic change, Niepold recommended: * Exploring the economics of supply chains. Child labor, contract labor, overtime systems all have economic roots.

  • Getting away from the cops and robbers approach and creating partnerships. CSR is not just about corporations; it’s a shared responsibility among government, consumers, and corporations.
  • Building capacity at the local level.
  • Focusing on the business case for CSR. Morality goes only so far. Simply put, bad factories don’t make high quality products.

II. New Sponsor
WNSF’s is glad to welcome its latest sponsor, Swiss pharmaceutical manufacturer Novartis Corporation.

III. The Women’s Network for a Sustainable Future
The Concept of the Network

The network provides a forum for business and professional women to congregate, reflect and act on the converging issues of corporate social responsibility and sustainable development. Through meetings and simple electronic support tools, the Network aims to facilitate the exchange of experiences and best practices on these vital workplace issues. By creating a new network of executive women, the Network seeks to: improve responsible practices in workplaces; sensitize corporate culture more generally to issues of sustainability and social responsibility; and encourage a public commitment locally, nationally and internationally to sustainability principles.

The Women’s Network for a Sustainable Future is a 501c3 organization.

For more information, please contact:

Ann Goodman, Acting Director
Women’s Network for a Sustainable Future
Please direct inquiries to: mailto:Eugenia.shafer@us.interfaceinc.com

Fiscal Agent:
National Environmental Education & Training Foundation
1707 H Street NW, Suite 900
Washington, D.C. 20006
T: 202-833-2933
WNSF Board Member/NEETF Liaison: Deborah Sliter, Vice President of Programs

Board of Directors: Linda Descano, COO, Women & Co., CitiGroup; Muni Figueres, formerly of the Costa Rican Foundation for Sustainable Development; Joanne Fox-Przeworski, Director, Bard Center for Environmental Policy, Bard College; Ann Goodman, President, Telesis Consulting and Acting Director, WNSF; Clair Krizov, Executive Director of Environmental and Social Responsibility, AT&T; Joyce LaValle, Senior Vice President, Interface Inc.; Kathy Robb, Esq., Partner and Head of Environmental Practice, Hunton & Williams; Deborah Sliter, Vice President of Programs, National Environmental Education & Training Foundation.

IV. What’s Next?
Look for an email invitation to the next NYC luncheon panel hosted by McKinsey on May 6: Businesswomen and Business Responsibility: The NYC Mayor’s Commission on the Status of Women presents results of a survey of NYC women and companies

This issue of Net Notes was written by WNSF Executive Associate Dana Vetrecin and edited by Acting Director Ann Goodman.

WNSF thanks founding sponsors AT&T and the Ford Foundation for their generous support.

“Plans to protect air and water, wilderness and wildlife are in fact plans to protect man.” – Stewart L. Udall

“Forget the damned motor car and build the cities for lovers and friends.”- Lewis Mumford

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