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by Louise Jamison & Hilary Murdoch, Impactt
Limited Executive Summary Companies are under increasing
pressure to tackle the issues of working conditions in the organisations that
make up their supply chains. This pressure is coming from various sources.
These include the general public as people's awareness of these issues and expectations
of companies' responsibilities rise. It is also coming from investors as socially
responsible investment becomes more mainstream. Managing supply chain issues is
seen as one indicator of how well a company is run. The media are also becoming
more interested in stories about malpractice, as are campaigning groups as they
target new sectors and become more skilled at harnessing public opinion. This
pressure on companies is also becoming more sophisticated. Not only are protagonists
highlighting poor working conditions, but are also turning the spotlight on other
corporate purchasing practices. Public exposure of poor labour standards
in some factories and other establishments, often located in developing countries,
can inadvertently undermine progress on establishing ethical trade and good labour
practices. Companies that are taking these issues seriously are at various
stages of the process. Some are getting to know their supply chain, developing
and communicating their code of conduct or implementing their policy through monitoring
suppliers and encouraging progress. Others are building capacity for suppliers,
factory managers and local organisations or undertaking collaborative projects
with other companies, non-governmental organisations (NGOs) and multi-stakeholder
groups. This publication outlines the actions and decisions required at each of
the above stages. Codes and Compliance There has been a proliferation
of purchasing codes in recent years, but there has also been a convergence of
content. Many companies have based their codes on the principles set out in the
International Labour Organisation (ILO) Conventions and United Nations (UN) Universal
Declaration of Human Rights. Codes are useful in clarifying a company's commitment
and expectations, as well as raising the awareness of suppliers. However, there
is still a tension between setting standards that are high enough to be credible
without becoming unrealistic. Having a code is not enough to make change happen;
the effectiveness of a code depends on how well it is implemented and communicated. Companies
tend to use a combination of a strict compliance approach for some issues or some
suppliers and a continuous improvement approach in other areas. The continuous
improvement approach encourages open discussion of issues and requires step by
step improvements over time. Individual companies put different emphasis on strict
and continuous compliance. Limits of audits Audits are still
the main tool used by companies to monitor supplier performance. However, there
is a growing consensus that auditing alone does not improve labour standards.
In some situations, it may even have a negative effect on the life of workers.
Audits can stimulate dishonesty if suppliers are forced to provide the 'right'
answer or face termination of contracts. This trend towards concealment is a serious
barrier to improving labour standards. Another limitation is the recognition that
audits may not find all of the problems, especially hidden problems of discrimination
and harassment. In addition, audits are largely inappropriate for informal or
flexible workers and often do not reach beyond the first tier of suppliers. If
companies fail to follow up on audits, then few sustained improvements will be
made on the ground. Other approaches A number of new methods
have emerged that can lead to greater and more sustained progress. Some purchasers
are working with their suppliers to build capacity and commitment by providing
training and encouraging ownership of improvements at the factory level. Examining
corporate purchasing practices - to reduce the potential tension between commercial
interests and ethical commitments - is one area that has recently become prominent
and still requires investigation and development. The case studies included
in this publication illustrate the benefits of collaborative projects. Working
with local organisations enables a company to build their understanding of the
local situation and find appropriate solutions. Joining forces with other companies
can help to achieve more ambitious projects and can provide the benefits of shared
cost, risk, expertise and learning. Challenges The future challenges
for companies engaged in ethical supply chain management include: - Aligning
commercial and ethical agendas by examining purchasing practices
- Building
suppliers' capacity to manage the issues for themselves
- Engaging with
local governments and organisations to widen the impact of activities
In
the light of growing awareness of the limitations of audits, companies are faced
with the challenge of: - Improving the impact of audits by focusing on
continuous improvement
- Providing effective follow up
- Finding appropriate
approaches for informal and 'flexible' workers
- Boosting the quality of
audits through staff training and increasing the use of confidential worker interviews
The
underlying challenge is for companies to regain the trust of their suppliers and
the general public. To do this, they must develop credible ethical supply chain
management programmes that work towards making genuine improvements to the life
of workers in their supply chain.
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