7
Supplier responsibility:
Part 2
The four essential program elements
This chapter sets out four elements for implementing your supplier responsibility program and provides tips to balance compliance activities with other techniques for maximum effectiveness.
Trust, but verify (Ronald Reagan).
In setting up the Apple supplier responsibility program, I spent hours on benchmarking and research to understand how other companies (most in the footwear and apparel industries, which have years of experience in dealing with these issues) had structured their supplier responsibility programs. The goal of this research was not to copy what others had done, but to assess what had worked and what had not. Based on the results of this study, I established the following four program elements: compliance; business integration; capacity building; and communications and stakeholder relations.
Program element 1: Compliance
Most supplier responsibility programs are compliance-focused, with most of their resources consumed by conducting audits, correcting deficiencies, and following up. This chain of events sets up a paradigm where the customer is in the role of enforcer and the supplier is being regulated. The compliance paradigm is necessary, but it is not sufficient for creating an effective supplier responsibility program. As the next few sections will outline, additional program elements are equally important and you must titrate the emphasis that you apply to these programs to find the right balance for your company’s goals. But first, let’s explore the aspects of a robust compliance program:
The audit protocol
A good audit program is based on a specific, objective, and actionable audit protocol. The audit protocol is like a detailed instruction manual that instructs your auditors on what they should be auditing and the documents, interviews, and inspections they must review to determine conformance with the standards in your code.
Creating an audit protocol can be a laborious task. Start from your code of conduct and break it down into specific and actionable standards that can be audited. In some cases this is straightforward: for example, the EICC code states that no worker may exceed 60 work hours per week and must have at least one day off every seven days. While these are seemingly objective standards, even here you will need to define the meaning of a “work week” and set out specific formulas to evaluate the 60 hours per week and one day off in seven days standards. For example, you could state that a worker must have one day off for any seven-day period, or you could state that a worker must have one day off for a workweek defined as Sunday to Sunday. In the first case, the worker must always get one day off in any seven-day period, in the second case a worker could work for 13 days without a day off by getting the first and last day off in a 14-day period.
When you start developing your audit protocol, you will discover that your code is full of less objective standards, such as this example from the EICC code: “Worker dormitories provided by the supplier or a labor agent must be clean and safe and provide adequate emergency egress, adequate heat and ventilation, and reasonable personal space.”
When an auditor is confronted with words like “reasonable personal space,” it is best to put some numbers around the concept so that you get consistent and actionable results. Consider developing guidance documents that clarify each of the ambiguous areas of the code. In this example, your guidance document could set a minimum of 2 square meters per person in a dorm room, double bunks only (no triple bunks, no bunk sharing), adequate and separate arrangements for hanging clothing and storing personal items for each person, and so on.
By defining unambiguous standards for each area in your code, you can create actionable and auditable standards that your auditors can objectively assess. When you march through this process, do some research – you will find that other companies have defined many of these areas and you can choose the definitions that work best for your program. In addition, once you have developed your audit protocol with these supplemental definitions and guidance, it is best to share this information with your suppliers and/or hold training sessions so that they understand your expectations.
While it is impossible to eliminate all ambiguity from your audit protocol, it is essential to invest the time and effort to make this part of your program as objective and efficient as possible. The time, effort, and money that it takes to send auditors into a facility will be optimized if you are able to turn the results into demonstrable, sustainable improvements.
Below are the fundamental elements for an effective audit protocol:
Repeat the standards from your code
• State the code section (e.g., health and safety)
• Create an identifier for each standard (e.g., Health and Safety Protocol #1 could be “H&S 1”)
• Repeat the wording for each standard in the code section verbatim (e.g., “The facility provides appropriate controls to mitigate health and safety risks in the workplace”)
Provide clear procedures for assessing conformance to the standards
• Identify the documents that must be reviewed (e.g., worker injury and illness records, results from exposure assessments, and specifications for personal protective equipment)
• Specify the interviews that must be conducted (e.g., facility health and safety manager, and employees who work with hazardous chemicals)
• List the required physical inspections (e.g., manufacturing equipment that uses hazardous chemicals)
Establish a method to score compliance
It is a common misconception that compliance is a binary function. In practice, you might find a very minor issue that should be noted (like one fire extinguisher at the wrong height on the wall) vs. a widespread issue (like no fire extinguishers in the facility). Consider establishing a scoring system to rate the level of compliance (or the prevalence of the violation). For example, if the violation is widespread, the score might be one out of five. If the violation is observed once or twice it might be considered “isolated” and scored three out of five. If there are no violations, you would assign a score of five.
Severity is another important aspect to grading your compliance findings. Most programs will categorize findings as “minor, major, or severe” (Apple referred to severe violations as “zero-tolerance”). For example, if your audit team discovers underage workers on the manufacturing line or conditions that create an imminent threat to health or safety, such as blocked fire exits or heavy equipment with no safety guards, you might consider these severe violations. Typically, any severe violations require an immediate response and correction by the supplier. Similarly, major violations require faster resolution than minor non-conformances. The EICC is a good reference for severity categories, but I would recommend conducting a full review of these categories and making adjustments for your program.
Establish a method to score management systems
The difference between a good and great audit protocol is the focus on management systems. Compliance findings are really just a snapshot of the conditions when the auditor was in the factory and don’t tell you much about how the supplier is managing risks in its factory on a sustaining basis. Again, you could set up a scoring system to evaluate the management systems for each element of the code. These scores can evaluate whether the supplier’s management system has a policy, procedure, qualified staff, feedback systems, and a process to correct problems.
You can review the scores for compliance and management systems independently or combined. Apple multiplied the management system scores with the compliance scores to get the total score for each item. This meant that even if a supplier was in full compliance (five out of five) for an item, but had no system to manage this area of the code (one out of five), they would have received the ultimate score of five out of a possible 25 points. This may seem very tough for a company that is in full compliance, but without a strong management system, compliance will not be sustained over the long term.
Instruct auditors on recording their findings
There is an important distinction between audit findings and notes. Findings should succinctly state the issue: for example, “five of ten worker dormitory rooms found with triple bunks, which are not allowed.” The notes can go into more of the subjective details about the finding: for example, “workers seem crowded in their rooms and several complained that they are unhappy with the situation.” While notes providing background information can be helpful, overly detailed reports create ambiguity and unnecessary work for anyone who is trying to understand the problems and work on solutions.
Working in China
At this point there are likely a few readers thinking, “Wait. Workers live in dorms?” It is an eye-opening experience to visit factories in “low-cost economies” such as China, where it is fairly common to provide accommodation and meals for workers. Many of these workers have traveled far away from home for these jobs and do not have the resources to afford reasonable housing and/or food. Without the room and board provided by their employers, these workers would have a much more difficult time supporting themselves because most of their wages would be taken up with living expenses. Many companies provide living facilities as a benefit in addition to salary – or with a substantial subsidy. This allows the workers to save more of their wages while the company ensures that the workforce is well cared for and thus more reliable.
At Apple, I made it a point to personally conduct at least one audit every year and met with the managers of major supplier factories at least once per quarter. There is no substitute for visiting supplier facilities in person to get a sense of the culture at the factory and how things really work. One of my favorite tactics was to wait until the end of a long day of meetings or auditing and, without prior notice, tell the factory managers that I wanted to stay in the worker dormitory for the night. I did this a couple of times and, even though the factory managers found an empty room for me, I got a first-hand sense of how it feels to sleep in a worker dormitory. In addition, with the help of an interpreter, I was able to talk with some of the workers who were living on my floor to understand their perspectives and make a few friends.
In addition to the audit protocol, you should outline a step-by-step audit procedure that lays out all of the steps for how to conduct an audit. The audit procedure should set out the instructions and the sequence starting with pre-audit preparation to following up on corrective actions after the audit. This document will help prepare both your audit team and the audited facility and make the audit far more professional and meaningful.
Below are the fundamental elements for an effective audit protocol:
Audit preparation
Successful audits start with good preparation. The audit team should research the facility and the company being audited and review any existing documentation such as prior audits, self-assessment questionnaires, local laws, culture and customs, etc. At this stage, you should also scope out how long the audit might take, develop a schedule, ensure that you have an adequate number of appropriately trained auditors, and that each has been given an assignment appropriate to their skill areas. The audit team should meet to discuss their plan and schedule, as well as when to notify the supplier. In some cases, your team may choose to conduct an unannounced audit, but in my experience it is best to give the facilities at least two weeks’ notice so that they can have the staff and records in place for your team. In some cases, the facility management may either “clean up” their operation or even falsify documents before the auditors arrive on site. It is important to ensure that your audit team is trained to detect falsified documents, interview people, and inspect management systems to try to get as close as possible to the real-world conditions at the facility.
Selecting the right audit team is also essential to a good audit. Because auditing is tedious and time-consuming work, most companies will use a third-party auditing firm to perform their supplier audits. The typical auditor from these firms is young and inexperienced. Regardless of what your auditing firm may tell you about their auditors’ experience, in practice I have found that it was vital that all of the contract auditors were trained and tested on our company’s specific audit protocol before they were permitted to conduct audits. Also, I considered it a best practice to have one of my company’s employees supervise each and every audit in person. Not only is it good to get first-hand knowledge of your suppliers’ facilities, but the supplier realizes that your company is serious about the process and is likely to take it more seriously. In addition, having an employee on-site will lessen the chance of any corruption of the auditors.
Corruption in auditing (such as bribing auditors or falsifying records) is real and widespread. To avoid this, make sure that you conduct background checks on your auditors and have other checks in place to ensure that they are not taking bribes. In addition to monitoring your auditors’ ethics, your team should be on the lookout for fraudulent documentation. For example, your auditors should compare the supplier’s work records against your company’s production schedule and you might discover that the workers have been working “off the books.”
The opening meeting
When your team first arrives on the site, they should start off the audit with an opening meeting with the facility management. This meeting is where your team will lay out why you are there, run through the process and schedule, and, most importantly, state that the audit is an important part of your overall business partnership. You should seek to lessen the inherent tension from an audit experience by letting the facility managers know that the results are opportunities for improvement, and not a litmus test for continuation of business (there are exceptions to this if the findings are truly egregious, but even in these cases, suppliers typically have an opportunity to correct problems). The meeting should include time for the supplier’s facility management to present their programs and results as well as orient your team to the site. Tactical details should be discussed, such as where the audit team will set up, the audit schedule, and who will be available to help the team in each area.
The audit usually begins with a facility tour to get a good orientation of the facility and to understand where any safety hazards may exist. After the tour, the team should split into groups. For example, your labor auditors might go with the HR manager to review records and select workers for interviews, while your health and safety auditor might meet with the facility safety team for a detailed inspection.
Interviewing workers is a particularly sensitive task. Your team should prepare in advance to make sure that you have the appropriate language skills and/or translators on the team. Sort through the records yourself to make sure that the workers are selected at random. To the extent feasible, conduct the interviews anonymously in a confidential space without the facility management present. Since it is next to impossible to completely protect worker identities, make sure that the facility managers and the workers know that retaliation will not be permitted and is a zero-tolerance violation that could result in loss of business. You might also hand out a hotline number for the workers to use if they feel that they were pressured as a result of the interview. Make sure that you select contract workers for interviews as well as workers directly employed by the supplier. Contract workers are often treated differently and may be obligated by an illegal bond.
The audit team should meet to compare notes, findings, and scores at least daily during the audit. Many times, the overall picture does not become clear until the team has had a chance to discuss the issues as a group. These meetings can also lead the team down different pathways based on the results. Make sure that these meetings are confidential, and include only the audit team (you may want to conduct these at your hotel) and do not share any findings with facility management before the end of the audit. Your hosts will likely pressure you for this information, but it is best to keep the information confidential until the team has a chance to discuss and verify the results. In my experience, initial findings are not always accurate and should be verified by further digging. The exception to this rule is if your team turns up a situation that might be an imminent threat to health, safety, or the environment or could result in serious criminal liability. Your audit procedure should define these circumstances and the appropriate procedures for immediate notification.
Closing meeting
After the audit, you should hold a closing meeting with the supplier’s top management to present the preliminary findings of the audit. Emphasize the preliminary nature of the findings and give the facility managers time on the agenda to react and possibly refute any audit findings that they consider inaccurate. In cases where findings are in dispute, ask the facility managers to follow up after the meeting with the data or information needed to resolve the finding. In my experience, these meetings can be tense, especially if the findings are serious. Make sure that you are well prepared for the closing meeting (this might mean dropping out of other auditing tasks) and ensure that you fully understand the basis for the most serious audit findings.
Your lead auditor should open and close the session with the context of the audit (e.g., a partnership based on mutual expectation of continuous improvement) and process for follow-up on the findings (e.g., all findings should be resolved within 90 days – with shorter time periods for more severe findings). Next, outline the schedule for the draft audit report, how long the supplier’s team will have to comment on the report, the final audit report, the corrective action plan, remediation report, and a follow-up visit. Have each of your auditors walk though their findings in succession and allow the facility management time to respond to your presentation. Make sure that the most senior manager from the facility is present for this meeting and physically signs a document saying that he or she received the results.
After the audit
A couple of weeks after the audit send the draft report to your supplier for review. After the supplier’s review, issue a final audit report and request that your supplier provide a corrective action plan to address any deficiencies in the report. By asking the supplier to propose the corrective actions, it forces them to assume responsibility for the results of the audit.
The audit cycle is closed when all corrective actions are resolved. You should set out a definitive schedule for when the supplier will submit documentation of closure for each finding (as discussed above, you should set a shorter schedule for closure of the more serious findings). After closure, schedule a quick verification visit to check whether the corrective actions were completed appropriately. In practice, verification visits can generate even more findings, which can start a new cycle. Depending on the results of the verification audit, you can issue an audit “closure letter” to document the results of the audit. The closure letter should also set out the expectations for future audits: for example, if the audit and closure process did not go well, you would likely want to audit the facility again within a year, otherwise you might look at a longer schedule.
With the amount of detail and effort that can go into an auditing program, it is not surprising that these programs make up the bulk of supplier responsibility programs. As stated above, however, these programs are necessary but not sufficient. By limiting your actions to compliance, you run the risk of permanently assuming responsibility for your supplier’s compliance performance. In other words, the cycle of auditing and corrective actions takes over from the supplier’s own responsibility to responsibly manage their facilities. To avoid this, your program should apply the elements below in balance with auditing and compliance actions.
Program element 2: Business integration
A theme repeated throughout this book is that corporate responsibility is often considered an add-on to the primary functions of the business. If your supplier responsibility program is relegated to a niche that is considered “odd” or less important than product quality, engineering, or other business issues, your suppliers will pick up on this and your program will likely suffer. It is critical that the most senior procurement managers within your company visibly support the supplier responsibility program.
The most effective way to ensure that you have support for supplier responsibility issues is to integrate the program into the standard business processes between your company and the suppliers. There are three important business processes to integrate with your supplier responsibility program: supplier selection; supplier business reviews; and supplier termination.
Supplier selection
The most opportune time to inject responsibility into the customer/supplier relationship is during the “courtship phase.” When a supplier is working to get your company’s business, it will be particularly attuned to customer needs. The trick is to get responsibility elements integrated into this process. Often, there is a high degree of confidentiality surrounding these negotiations because they can be material to one or both companies. It is not realistic to expect that the corporate responsibility department will be included in all of these negotiations, but below are a few tips for integrating your program into the supplier selection process.
An effective and efficient strategy is to train the people involved in supplier selection to ensure that responsibility criteria are part of the initial screening process. For example, you might ask for supplier responsibility terms to be included in the standard request for proposal document and contract template for new supplier agreements. Another good step is to ask the prospective supplier to complete a self-assessment questionnaire. Your team can assess the results and/or train the people in your purchasing department to spot any concerns and alert you. Depending on the situation, you may also want to conduct a baseline audit of new suppliers before your company starts doing business with them. Some companies do this as a standard procedure; others use pre-engagement audits only when there are significant risk factors.
A standard business practice in most customer–supplier relationships is the supplier business review (SBR). Often these are conducted quarterly and referred to as quarterly business reviews (QBR). In my experience, the SBR can be far more effective than auditing at driving performance improvements. The reason why SBR meetings are an effective process to evaluate supplier performance across a broad range of issues is that the outcome has a direct impact on future business awards.
SBR meetings consist of a series of “grades” from each of the major functions that interact with the supplier. For example, the engineering group may rate their experiences over the last quarter on a scale of 1 to 100, as will the quality department and procurement, etc. As the grades are discussed, the specific issues behind the grades are discussed to identify deficiencies and drive improvements. Typically, at the beginning and/or the end of the meeting, the grades are aggregated into an overall assessment of the supplier’s performance. In most instances, these meetings will involve very senior people from both companies so that each group gets a full understanding of the issues in the business relationship.
Including supplier responsibility as one of the graded areas that are discussed at the SBR meeting is so effective because it makes it clear to the supplier that responsibility is a fundamental part of the business relationship. This process also exposes senior managers from both companies to responsibility issues, which raises awareness and increases the likelihood of action.
If you are able to inject responsibility issues into the SBR process, there are a couple of tips that will make this opportunity far more successful. First, establish a series of key performance indicators (KPIs) (see Chapter 4 under the section “Measure the right things”). I have found that it is most effective to ask the suppliers to submit the KPI data outside of the audit process discussed above. This gives the supplier a chance to show what it is doing right, rather than focusing on the problems discovered in an audit. In addition, if you collect KPIs on a quarterly or semiannual basis, it results in a more timely representation of actual facility conditions.
Once you have defined your KPIs and have data coming in from your suppliers on a regular basis, use this information as an objective part of your grades in the SBR meetings. The KPIs should be one part of your overall grade along with audit results and other topics. I like to hold an SBR preparation session with each supplier to dive into the details around an established agenda of issues. This session will give you the information you need to formulate a grade for the formal SBR meeting.
There are two important aspects of using KPIs in an SBR process:
• Selecting the right KPIs. Select indicators that give you the best sense of the overall health of the supplier’s facilities without measuring every item in the code. Items such as the numbers of workers exceeding 60hrs/week, the number of workers working longer than seven days without a day of rest, the worker injury and illness rates, and environmental emissions, incidents or violations are all good examples of metrics to get a handle on the inner workings of supplier facilities
• Trends and comparisons. The most effective uses of KPI information are trending and comparisons. Trending means that you simply track the supplier’s performance on each indicator over time (e.g., quarter-over-quarter performance). Comparisons look at how the supplier is performing compared with competing suppliers. In my experience, comparisons with competing suppliers are perhaps one of the most effective means to drive improvements. It is advisable to keep the names of other suppliers in the category confidential when you are making comparisons
Supplier termination
It is rare that a supplier is terminated solely because of corporate responsibility issues. In fact, it is most likely that a combination of factors that have built up over time lead to the decision to switch suppliers. Nonetheless, it is important that responsibility criteria are represented in this process. Again, inclusion in the termination process makes it abundantly clear to your suppliers that responsibility is a critical part of the business relationship. In some cases, termination of the supplier can become a major motivational force if other suppliers recognize that their performance on responsibility issues can be pivotal to their entire business relationship – in other words, actions speak louder than words.
A common misperception is that suppliers are automatically terminated for serious code of conduct violations. In my experience, this is the rare exception and frankly not a wise choice. When a serious violation is discovered – child labor for example – it is far preferable if the supplier fixes the problem, rather than simply ending the business relationship. Ending the relationship leaves the problem unresolved and may even make conditions worse. By working with suppliers to resolve serious issues, the buying company can use their economic influence to sustainably improve conditions. For example, if underage workers are found, the resolution should include returning children to their parents and ensuring that there are management systems in place to prevent more children from being hired. This is a much better outcome than pulling away. Leaving these problems unaddressed means that the supplier may do nothing to resolve the underlying issues and they may worsen.
Program element 3: Capacity building
The Chinese proverb: “give a man a fish and you feed him for a day, teach a man to fish and you feed him for a lifetime” applies to this program element. Capacity building is a term borrowed from international development that is defined as: “Understanding the obstacles that inhibit people from realizing their developmental goals while enhancing the abilities that will allow them to achieve measurable and sustainable results.”
This is a very appropriate definition because the basic idea is to enable your suppliers with the essential capabilities and self-sustaining systems so that they will be able to independently comply with the code of conduct.
Some people in your company may object to this part of the program because it goes one step too far in getting involved in your suppliers’ business. Companies like Nike and Gap that have been working on supplier responsibility for some time, however, understand that it is far more cost-efficient and effective to ensure that suppliers have the basic capacity to achieve compliance than fall into an endless cycle of audits and corrective actions.
For example, one capability gap found in some factories I have audited was that the management could not identify a trained professional with responsibility for environmental compliance or worker health and safety. Without a professional in charge of these important issues, it is almost guaranteed that there will be violations and perhaps serious mishaps. Another example is when the rank-and-file workers have not been trained on their basic rights or how to appropriately raise a grievance.
Start by identifying the gaps in your supplier’s capabilities by reviewing audit reports (specifically the management systems element of the reports). Once you understand the gaps, your capability-building plan could be to persuade your supplier to hire a skilled professional in a critical position or to provide additional training for their employees. For example, an often-used capability-building solution is to ensure that assembly-line supervisors are trained in the appropriate techniques to work with their subordinates in a respectful way and the workers are trained on the workplace standards as well as their rights and remedies.
Program element 4: Communications and stakeholder relations
The aim of this program element is to explain your overall supplier responsibility program to the outside world and, in turn, understand their perspectives. It can be very difficult to communicate about supplier responsibility matters. Not only are customer–supplier relationships typically confidential, but the types of issue discovered in supplier audits can also be very sensitive. There are often non-disclosure agreements (NDAs) between customers and suppliers that make the situation even more complex. Nonetheless, it is critical for your program’s credibility to communicate results external to your company. Without this kind of communication, the default assumption will be that your company has done nothing to manage supplier responsibility, heightening the risk of becoming a target for activist campaigns. In addition, transparency has other benefits: the act of pulling all the data together for a public report becomes a program review and quality check. In every report I have ever been involved with, we found significant areas for improvement by looking at the patterns in the data.
To report supplier responsibility publicly and still protect confidentiality, most companies will aggregate their findings into categories. For example, companies may report the number or percentage of violations in each category of their code. Reporting data this way provides significant information without revealing supplier names or associating violations with individual suppliers. A few leading companies, such as Hewlett-Packard, have taken the step of identifying all of their major suppliers. But even these leaders have not published which of their suppliers have committed specific code violations.
If reporting is a one-way form of communication about your programs, then stakeholder engagement is a two-way dialogue. As mentioned earlier in this book, many companies get a wake-up call on supplier responsibility issues from activist groups that use the press or shareholder proxies to shine a light on poor practices. I have called this the “2x4 effect” as a metaphor for the “whack” that is felt when your company is the target of a public relations campaign. Whether you have suffered through a “whack” or you are simply building a solid program, it is wise to build relationships with the stakeholders who are following your company and who are most likely to comment on your performance.
There are two old phrases that I have used over my career that fit this area. First, “Keep your friends close and your enemies closer,” which was attributed to Sun-Tzu, a Chinese general and military strategist. The other phrase that works well for stakeholder engagement is a quote from President Lyndon Johnson, who commented about his political opponents, “It is preferable to have them inside the tent and pissing out than outside the tent and pissing in.”
Whichever phrase you identify with, the meaning is the same: get to know the people or groups who are most likely to be critical about your program. Directly reaching out and taking the time to sit down (face-to-face is best) to talk about your progress and their concerns will pay off in several ways.
No, you will not eliminate their criticism. If you enter these kinds of discussion with that as a goal, you may become bitter and frustrated. By definition, activist groups conduct “name and shame” public relations campaigns to raise awareness. Instead of trying to eliminate criticism, your expectation should be to build understanding, common ground, open communication, and good relationships. By opening communications and building relationships, you will be better able to anticipate activist concerns and take steps to address them before they end up in newspaper headlines. You will also be able to communicate all of the actions you are taking to improve performance and, hopefully, build some credibility and trust. In addition, if you enter these discussions with an open mind, you may learn something that will improve your program. Finally, with stakeholder relationships based on credibility and trust, it is less likely that your critics will attack you in the press, or they will at least give you a heads up before they do.
Communications and stakeholder relations will be discussed in detail in Chapter 8. For the specific area of supplier responsibility, though, it is essential for you to identify the stakeholders who are tracking these issues for your company and proactively engage them in the implementation and planning for your program.
Conclusion
After reading the chapter, you should have a high-level understanding of how to construct and operate a supplier responsibility program. As with the rest of the book, the information is deliberately designed to give you an overview of the tips and tricks that work in practice. But, like the disclaimer on a diet plan, “your results may vary.” There are infinite variables that will affect how you apply this information, with the big ones being your company’s culture and your position in the company. Keeping this situational element in mind, however, you should be able to pick and choose from these concepts to compete for a position in supplier responsibility and instantly add value.
One broader philosophical thought to close this chapter: With globalization opening up access to cheap labor and lax environmental regulations around the world, many pundits believe that there is now a “race to the bottom.” The classic paradigm is that business will seek the most expedient way to make a profit and, in doing so, likely cause harm to the environment and/or abuse workers.
The field of supplier responsibility turns this concept on its head. Instead of a race to the bottom, we are seeing a race to the top. Companies are increasingly judged and compete on the basis of social and environmental responsibility. Government is not driving this, since most regulations don’t even apply when business is done in other countries. These improvements are being accomplished because activists and media have been successful in shining a light on poor supply chain practices and linking these to major brands. Now, companies around the world are focused on the social and environmental practices of their suppliers as never before and are driving improvements throughout the global supply chain.
When I ran the Apple supplier responsibility program the company was criticized for trying to impose Western values on other cultures. You may encounter similar criticisms about your program being “political correctness run amok.” This is complete hogwash. The Apple code, and every other code of conduct that I have ever reviewed, is based on well-established international standards and guidelines. These are not capricious musings about utopian business operations. Codes of conduct and their implementation are one of the best forms of corporate responsibility. Holding an entire supply chain accountable to a set of basic expectations can, and does, have significant and measurable positive benefits to people and our planet.
Supplier responsibility programs are ultimately about creating a supply chain that treats people with respect and dignity and values the environment. Without question, the ability to drive tangible improvements for workers and the environment through supplier responsibility programs has been a highlight of my career. With the very real incentive of billions of dollars of business on the line, the motto for these programs could be: “our dollars, our values.”