Building Supply Chain Capabilities to Improve Workplace Conditions

• Posted by Laura Commike Gitman
• On October 07, 2008


• Interests: Corporate Social Responsibility

For the past 10 years, companies concerned about corporate social responsibility (CSR) issues in their supply chain focused most of their efforts on monitoring factory conditions. While this uncovered persistent issues such as labor standards violations, environmental degradation and poor health and safety protections, it did frustratingly little to improve conditions.

Instead, companies need to work directly with their factories to equip suppliers with the skills, knowledge and systems to take ownership of and better manage CSR issues themselves.

The BSR report "Pilot Summary Report: Building Capabilities to Implement CSR Management Systems at ICT Suppliers in China," published today, addresses how companies in China's Information and Communications Technology (ICT) industry did just that. The report is the culmination of a two-year project to break through common barriers to improving factory conditions — such as the lack of a clear business case to invest in CSR, and the absence of systems to manage social and environmental issues. The project was organized by BSR; the World Bank Group's investment climate advisory service, Foreign Investment Advisory Service (FIAS); the Electronic Industry Citizenship Coalition (EICC); Global e-Sustainability Initiative (GeSI); and Shenzhen Electronics Industries Association (SEIA).

After a 2007 workshop that included various stakeholders — Chinese government authorities, the labor union, international buyers, local suppliers and civil society organizations — and a subsequentreport of recommendations, the industry collaborated to launch pilot projects to test the effectiveness, costs and benefits of four specific supplier capability-building approaches: 

Customer-Supplier Mentorship: develop a mentoring relationship to help the supplier implement CSR management systems 

Worker Hotline: evaluate worker-management communications and feedback mechanisms 

Worker Training: assess worker training programs
Environmental, Health and Safety Committee (EHS): create a system and culture of better workplace safety 

Based on findings from the report and the pilot projects, there are several steps companies can take to create a successful capability-building strategy for their suppliers: 

Support multiple capability-building approaches to balance effectiveness and scale. There is no one correct strategy. Approaches can include providing generic tools and resources (such as tips for a worker EHS committee or considerations for an effective worker hotline), conducting trainings, creating supplier support networks and implementing factory-specific projects.

Focus on the business case, identify real incentives and enable suppliers to shape their approach to ensure their investment. This is done to achieve real buy-in and ownership from suppliers. In the case of the worker training pilot, the supplier assessed its own worker training program, and in doing so discovered a clear link between improvements in its program and the ability to attract a skilled workforce. As a result, its management team invested more money in CSR improvements within the factory.

To strengthen the business case, companies can help their suppliers track metrics and identify a return on suppliers' investments. For example, the EHS committee pilot established reduced injury and illness targets to create a better workplace safety system. In the end, the supplier used the estimated savings from the reduction in accidents to justify to its management team an investment in improvements to the EHS systems.

Identify the root causes of problems and integrate mentorship into monitoring processes. The mentorship pilot integrated coaching and mentorship practices into existing compliance and procurement relationships. For example, the company involved helped the supplier identify the root causes of certain compliance issues to determine which management systems the supplier should implement. This helped them address one of the most significant causes of noncompliance: conflicting communications from companies to their suppliers. Suppliers often complain that companies' procurement representatives don't care about their compliance with CSR requirements and focus only on price or delivery time. By ensuring consistency of messages in this pilot, the supplier had greater incentive to achieve improvements. The relationship between the company and the supplier also became more of a partnership, focused more on continuous improvement than immediate compliance.

Create an ongoing dialogue among key stakeholders. These include customers, suppliers, NGOs, local government and industry associations. The long-term nature of improvements in workplace conditions requires stakeholders to collaborate on learning and constructive solutions. For sustainable, on-the-ground change, stakeholder groups must work together and reinforce each other's efforts.

The lessons from this pilot are aimed at improving future pilots and capability-building efforts in the ICT industry, and they are broadly applicable to other industries and countries. Moving forward, companies must push for efforts to enable supplier ownership, and make continuous improvements by measuring progress against clearly defined success metrics.

Laura Commike Gitman is Director, Advisory Services, and Cody Sisco is Manager, Advisory Services, at Business for Social Responsibility. 

Want to learn more?

Turn your sustainable business strategies into action at this year's BSR Conference from November 4-7 in New York City. Sessions include "CSR's ROI: Does It Matter?" which explores the different approaches of accounting for CSR's return on investment; and "Long-Term Value Creation vs. Quarterly Earnings," where leaders of Credit Suisse First Boston, Office Depot and the Aspen Institute discuss metrics that align with long-term value creation for both investors and the public good.

• Tags: bsr,sustainability,csr

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