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Forbes: Raising the Bar on Supply Chains

Companies must shift from mere “supply chain management” to corporate supply chain improvements. But the data show there is still a long way to go.
by Mindy S. LubberForbes Sustainable Capitalism Blog Posted on May 17, 2012

Floodwaters inundate parts of Thailand in 2011, knocking out factories supplying automakers like Honda and Ford. A rash of suicides at Foxconn, the Chinese electronics assembly company notorious for long hours, low pay and disregard for worker safety, tarnishes the reputation of one of the world’s most admired companies, Apple.

In the modern economy, supply chains stretch across the globe, creating both efficiencies and risks. Severe weather spurred by climate change, human rights abuses, worker health and safety, or environmental degradation – any of these can trigger disruption and financial losses for corporations and their investors. A supply chain is only as strong as its weakest link.

In this environment, companies must shift from mere “supply chain management” to corporate supply chain improvements. But the data show there is still a long way to go.

Ceres and Sustainalytics recently analyzed 600 major U.S. companies as part of the Road to 2020 report on corporate sustainability. While 43 percent of the firms surveyed have supplier codes of conduct, only 25 percent perform even minimal monitoring to determine if suppliers are abiding by those codes, and only 10 percent have codes that reference International Labor Organization conventions.

In the 21st century global economy, we can – and should – do better. Some companies already are trying.

Levi Strauss & Co. was one of the first companies to adopt a supplier code of conduct more than 20 years ago. Last month, after a Ceres-led dialogue with labor and human rights groups, NGOs, suppliers and other companies, Levi Strauss released a new blueprint for supply chain engagement that promises deeper efforts to improve the lives and well-being of its supply chain workers, and challenges and inspires other companies to do the same.

The blueprint, Improving Worker’s Well-Being: A New Approach to Supply Chain Engagement, signals a shift away from a one-dimensional, compliance-driven model in which companies periodically police supplier factories to see if they are complying with minimal standards. Instead, this new effort involves workers, suppliers and companies as active partners in efforts to improve child and maternal health, promote gender equality and empower women, combat disease, strengthen local communities and protect the environment wherever they do business.

It’s a profoundly ambitious goal, and its large-scale success requires the commitment of a large cohort of major companies, NGOs, suppliers, workers and local governments. For Levi Strauss, that road to success begins with listening to workers to identify their needs and aspirations at five pilot locations, in Bangladesh, Cambodia, Egypt, Haiti and Pakistan.

“We believe a focus on worker well-being will not only benefit individual workers and their families, but strengthen the factories in which they work; improving efficiency and productivity, and ultimately Levi Strauss & Co.’s bottom line,” chief supply chain officer David Love wrote in the blueprint. “It will create the enabling environment for business success.”

In today’s highly integrated global economy, no company can afford a “hear-no-evil, see-no-evil” approach to problems in its supply chain. Levi Strauss should be applauded for its approaching corporate sustainability with its eyes wide open. Other firms now must join them at the vanguard.

Read the post at Forbes Sustainable Capitalism Blog

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Meet the Expert

Mindy S. Lubber JD, MBA

Mindy S. Lubber is the president of Ceres and a founding board member of the organization. She also directs Ceres’ Investor Network on Climate Risk (INCR), a group of 100 institutional investors managing nearly $10 trillion in assets focused on the business risks and opportunities of climate change. Mindy regularly speaks about corporate and investor sustainability issues to high-level leaders at the New York Stock Exchange, United Nations, World Economic Forum, Clinton Global Initiative, American Accounting Association, American Bar Association and more than 100 Fortune 500 firms. She has led negotiating teams of investors, NGOs and Fortune 500 company CEOs who have taken far-reaching positions on corporate practices to minimize carbon emissions, water use and other environmental impacts. She has briefed powerful corporate boards, from Nike to American Electric Power, on how climate change affects shareholder value.

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