The Ethical Supply Chain

I recently returned from a trip to Hong Kong and China, where I had the opportunity to visit some of the factories that produce our goods. In today's economy, supply chains are global behemoths, with companies balancing, among other things, cost, quality, speed, trade preferences, technical capability, product assortment and "social and environmental compliance."

Obviously, it's impossible to maximize all the different variables, which is why companies also seek to diversify their sourcing base. You don't want to be beholden to one country and/or factory for all your goods. If anything happens to that country/factory, your company would find itself up the proverbial creek without a paddle.

My job is to help maximize the last dimension I mentioned in the opening paragraph: "social and environmental compliance." In my and other industries, "social compliance" is a common term. Many people are surprised to hear that most any western company with a global supply chain has a "compliance" organization. The tricky part for stakeholders is to understand what authority that "compliance" team has and how they approach this work.

Some companies take a "checklist" approach to compliance where they have a list of important attributes for their contract factories to follow. Typically, this includes a no child labor provision, no corporal punishment and paying workers. These companies are minimizing the risk that's inherent in sourcing from developing countries.

Other companies encourage their contract factories to "own" social responsibility and work with them to provide management and worker training. They focus on building socially responsible practices into factories' management systems and seek collaborative partnerships with local civil society organizations to keep all parties honest.

Not surprisingly, more companies follow the former model than the latter.

I had the chance to only visit three factories during my trip to Asia and I was pleased to see that they were all pretty good from a social and environmental perspective. Two factories had pretty robust programs where they self-monitor for social and environmental issues. They had stated philosophical approaches to social responsibility and one had even developed a set of standards that it hoped would be stricter than local law or any of its customers.

In thinking through my own company's approach, we definitely fall between the two extremes I describe above. By no means are we doing the bare minimum, hoping that social and environmental risks will never rear their ugly heads. But we haven't evolved to the point where we are actively building management systems in place for factories to embrace and own social responsibility. It's a journey that takes time and an evolution that requires resources.

I'm lucky that the executives I work with "get it" and support me in my efforts to elevate the company's ethical sourcing efforts. Would I consider my company a leader in the ethical supply chain? Not yet, but if I have anything to do with it, we'll get there.