The importance of how companies manage social responsibility across the
whole of their production process - including that part owned by their
suppliers - has been stressed for some years now. Nevertheless, it
remains the area where current practice remains pretty poor.
Benchmarks such as the UK's Business in the Community Corporate Responsibility Index show that the management of impacts in the supply chain remain amongst one of the least developed areas.
So it should be of interest that the World Bank, with Business for Social Responsibility, should produce a report seeking to identify some of the barriers to progress in responsible supply chain management.
The World Bank began with three challenges, which it sought through this research to prove or dismiss. The first was that "The plethora of individual buyer CSR codes is now generating inefficiencies and confusion."
The second was that "An increasing number of buyers are recognising that traditional top-down CSR strategies are not achieving improved CSR implementation."
The third, that "Suppliers have an insufficient understanding of the business benefits associated with making the required investments in CSR."
In the case of the first, it will amaze nobody that its research broadly supported the contention. There is a growing dissatisfaction, not to mention frustration, at the growing number of codes, standards and benchmarks. That being said, there are often very good reasons why different purchasers will stress different approaches, and the participants in the World Bank survey reportedly showed no great enthusiasm for work on a single base code of conduct.
In many areas, the requirements of codes have converged of their own volition. The main improvement to the current state of affairs would be more opportunities for data and information gathered for one to be eligible to act as a submission for others.
The second area is probably the most contentious. Everyone knows the power of the strong purchaser. If the buyer wants to see standards improve, and the alternative is that they take their business elsewhere, that's going to act as a pretty major incentive.
Even without the compulsion, it can make a big difference. I remember myself running some well-attended workshops for small to medium sized businesses on environmental policy and practice. Why so well-attended? Principally because the major retailer who was a number one customer for these suppliers had let it be known that it thought they should attend.
However, there's no doubt that suppliers don't like this approach - it is a very blunt tool, and can be extremely confusing if almost every other signal that is received from the buyer is that it is price alone that makes the difference. Some of the NGOs and labour groups feel similarly - preferring a model that involves bottom-up labour empowerment - almost in spite of what the top management might do.
The challenge is that there are not many successful examples of the latter - and there is plenty of progress that has been made so far with the former. Some of the most successful supplier programmes - such as that operated by B&Q - have been predicated on a strong central direction for conformance, backed by support and help to improve. There are a number of documented sources that suggest the requirements of multinationals have been a big factor in improving conditions in some labour markets - although this can never be consistent if the national legislature of those countries is too weak to enforce decent minimum standards itself.
The third challenge might be instinctively be held to be true - and this instinct is backed up by the findings of the report. By and large suppliers are resistent to pressure in responsible business practice if they have no understanding of a business case for how it can benefit the business. It is important, therefore, for both buyers and suppliers to undertake some investment in the time and resources to thoroughly establish the best reasons and processes for going forward.
The truth is that there are mixed perceptions of the degree to which the business case actually exists. Even those buyers may feel they have been pushed into their position by public pressure from NGOs the validity of which they may reject - so they cannot act as effective agents of change within their supply chain.
The study identified certain issues that had not formed the initial premise. The labour unions, for instance, rejected the basis for the study altogether - ie. that codes on CSR could be a positive contribution to business practice. They felt that legislative implementation and enforcement was really what would make the difference.
In many ways, this is undeniably correct - but not much help for the business in establishing what it should do in a business environment where those conditions patently do not exist.
The World Bank report was inconclusive in its recommendations, noting that the consultees were completely divided as to the best way forward. Some wanted more standardisation in codes, others rejected their value altogether. Some wanted to build the capacity of local NGOs, civil society and business support organisations, others drew attention to the lack of a level playing field that failed to reward companies that took actions beyond those of their competitors.
Interestingly, one phenomenon that didn't raise its head very much at all, is the growing body of multistakeholder initiatives. These were considered by many of the respondents as being of little importance - the buying companies who call the shots are the ones who really define the terms of reference. There were some buyers and Northern groups who saw these to be an important part of the solution - but so far they are apparently the only ones who think so.
The survey, which covered the views of 194 individuals from 164 organisations provides some interesting food for thought. It would, however, have been useful to have been able to separate out the views of the buyers and suppliers group from that of the 'usual suspects' campaigning NGOs - not because the views of one group is more valid than the other, but one suspects the differences of perception were rather large and it would be helpful to see them clearly drawn.
What are the models going forward? This is unclear, but
there are some promising initiatives that the report draws attention to
that may prove to be instructive. So, for instance, the Better Banana
Project - an initiative operated by the Rainforest Alliance and its
partners in the Sustainable Agriculture Network, developing guidelines
with multiple stakeholders on the certification of coffee, banana,
cocoa, orange and cut flower and fern farms. As of 2002, 474 farms and
in Brazil, Costa Rica, Colombia, Ecuador, El Salvador, Guatemala, Hawaii, Honduras, Mexico, Nicaragua, Panama, and the Philippines have been certified by the programme.
Also, the International Council of Toy Industries (ICTI), an industry group that has launched an effort to create a common monitoring protocol for factories in China producing toys for export.
This is an issue that will run and run. Performance on responsible practice in the management of supply chains will continue to be an area of growth for the major buyers, as they are increasingly held accountable for the parts of their manufacturing process that are owned by their suppliers. Likewise, the absence of a single emergent model of best practice will mean there is plenty of room for development and growth. Watch this space.
An Article from Business Respect, Issue Number 65, dated 2
By Mallen Baker