The Obligatory Year-End Post

Apologies to my handful of loyal readers (Hi mom!) for not posting in so long! Being in retail, every part of the business heats up as we enter the Holiday period. Add to that all the typical “year end” business (budgets, next year’s goals, etc.) and the annoying tendency for all CSR events and conferences to be scheduled in Q4, it’s been tough to keep up.

But today I find myself on a plane (yet again, but this time for an extended holiday break) with some time to reflect. It’s been a full year for me – one that marked a significant amount of change, opportunity and accomplishment. I do feel like I’m laying the groundwork for some very exciting and challenging work ahead, but I want to acknowledge some of 2010’s highlights.

Net Impact – The 2010 Annual Conference in Ann Arbor, MI was simply incredible. From inspirational keynote speeches by Gary Hirshberg to Majora Carter, this year’s content was top-notch and continues to move me to continue in CSR. And as a Net Impact board member, I’m privy to some exciting information that I truly believe will help launch this organization to the next level. Liz Maw is an exceptional leader and I am thrilled to be part of the team. Everyone should stay tuned to what Net Impact has in store and make an effort to attend the 2011 conference in Portland, OR – the first to be held in a convention center!

HERproject – Our partnership with HERproject has already proven to be one of the most fulfilling initiatives I’ve had the privilege to work on. Attending the kick-off meeting at a factory in Vietnam this fall was an uplifting experience and I’m so excited to see the positive impact I know this project will have on the lives of the women workers in our supply chain.

Playing Professor – I had the chance to speak to an undergraduate business class on CSR at UC Berkeley and left inspired by our next generation of business leaders. These students certainly didn’t hold back any tough questions and weren’t afraid to dig deeper when I gave unsatisfactory answers! These kinds of events not only keep me on my toes, but also help me understand the shifting expectations on companies’ CSR strategies.

Engaging our Executives – Much has been made of the need to engage a company’s executives to gain “buy in” for CSR strategies, so I was glad to have the opportunity to spend half a day with some key executives and CSR experts. The rich dialogue helped to inform our CSR strategy and helped me understand where this work can connect more significantly to our business objectives.

Engaging our Employees – I was invited to speak at our quarterly all-employee meeting last week, something that’s usually reserved for our senior-most executives. Despite my nerves (A live audience of 800, while being simulcast to offices around the country – with our C-level executives seated in the front row!), I managed to make it through the presentation without fainting or falling. And since the presentation, so many employees have reached out to say how proud they feel, working for a company that invests in our CSR initiatives.

Wool Farming – I never thought my job would take me to visiting wool farms in Australia, but learning about more sustainable wool practices was definitely an eye-opening experience. This education helped to turn our company around on a critical issue and allowed us to take a leadership position on a topic that previously had been a challenge for us to fully understand.

It’s been a busy year and I’ve been a mediocre blogger, but I’m looking for more great things to come in 2011. I’ll probably add being a more prolific blogger to my list of New Year’s resolutions, but until then, I’m going to enjoy the holiday break and I hope you all do, too!

Sustainable Wool Farming

Or ... who'd have ever thought my career would put me in such close proximity to sheep?

A few weeks ago, I went to Australia and visited several wool farms that practice sustainable land management. I learned all about the dangers of over-grazing, how both summer and winter native grasses help sustain food supply throughout the year, breeding techniques that eliminate the need for certain chemical treatments, the benefits of combining a flock of sheep with a flock of cattle (or a few alpaca!), natural ways to reduce soil erosion and that you don't call paddocks "fields."

In contrast to one of the farms we visited, the neighboring field used conventional techniques, including chemical pesticides and infrequent paddock rotation. The differences in the two fields was staggering. One was lush, with knee-high grasses and the other had only little shrubs and very short grasses.

The visits were very interesting and I learned a lot more than I ever expected to. My visit was initially to explore animal welfare issues in the wool industry, but took a truly educational turn once I had the chance to meet with farmers who are committed to improving the land they inherited from their fathers.

Coming into the trip, I didn't realize that the farms were family-run businesses, often passed down through several generations of farmers. At each farm, we were warmly greeted by the farmer, his wife and their adorable children. Over coffee or tea, we discussed issues like sustainable farming, wool prices, yarn quality and animal welfare. Then, we'd have a chance to actually see the paddocks, the sheep and field conditions.

The people I had the fortune to meet were so welcoming and open and generous that I feel very lucky to have spent time with them. For each of the three farms I've visited, it's clearly a family affair with wives and kids contributing to the overall well-being of the farm. It's actually a very idyllic lifestyle and one that's much simpler than the faster-paced city life I'm used to.

When we discuss wool and garments at work, we really don't discuss the human element of the farmers who toil away day after day and whose entire livelihoods depend on raising high quality sheep. We also don't get the chance to see how sustainable farming techniques can help replenish a countryside that has been exploited for generations before - to see how a new way of thinking is turning the land back to a lush, grassy landscape. And we certainly cannot see how much the farmers truly care for their flock and how animal welfare is an important element of how they run their business.

Health Enables Returns

Thursday was one of those days that reminds me why I love my job. I spent the day in a factory outside of Ho Chi Minh and we kicked off a new initiative with the factory: HERproject. An initiative of BSR, HERproject uses a factory-based peer-education model to improve women's health outcomes.

Essentially, factories invest in health education so that female factory workers gain a better understanding of reproductive health, nutrition and sexually transmitted diseases, among other health issues. In turn, factories experience lower absenteeism rates, reduced turnover and higher productivity, thanks to healthier workers.  And investing in women has impact beyond just those who experience the health training. Women take what they learn, apply it to their families and help to uplift entire communities.

I spent the day with factory management, BSR staff, representatives from our buying agent and the local Vietnamese NGO that will be delivering HERproject training and we discussed the plan for the upcoming year. It was simply one of those meetings where everyone walks away brimming with hope and excited for the possibilities.

After the meeting, we had a chance to tour the factory, meet some of the workers who would be participating and discuss additional outstanding issues. The factory tour also proved illuminating because it is a very well-run and organized facility.  It's one of the nicest factories I've ever visited, so I'm glad we've chosen a high-performing partner to launch this initiative with.

My company is proud to invest in this project and I feel lucky that I got to participate in the kick off.  In addition to this facility in Vietnam, one factory in Bangladesh is also implementing HERproject with our sponsorship. As we monitor the performance of these projects, I'm hopeful that we will be able to demonstrate both health benefits and business benefits so that we can continue to launch similar initiatives with other high-performing garment factories in our supply chain.

Moving Beyond Social Compliance

Most companies, even if they do not have a "CSR department" have a program in place to monitor social compliance in their global supply chains. For these companies, it is important to protect their brands' reputations by ensuring that the factories manufacturing their goods, often in developing countries, respect workers' rights, pay legal wages and abide by environmental legislation. It's also often from these departments that companies develop a more holistic CSR strategy.

I've spent the past two days in Ho Chi Minh City at the Better Work Vietnam International Buyers' Forum.  The Better Work program is described as:

"... a unique partnership between the International Labour Organization (ILO) and the International Finance Corporation (IFC).  It unites the expertise of the ILO in labor standards with that of the IFC in private sector development."

That's not a very telling description, but basically it's an effort to develop a sustainable, industry-wide mechanism to promote stronger industrial relations and good working conditions for garment factories in targeted countries (Vietnam, Cambodia, Jordan, Haiti).

Today, apparel retailers have different codes of conduct that they expect their contract factories to adhere to as a condition for doing business. To ensure that these factories are upholding the expectations expressed in these different codes of conduct, retailers employ auditors (either company employees or third-party audit firms) to visit factories and check conditions against their respective codes. With many retailers sharing the same factories, you can imagine that factories are visited dozens of times each year by auditors and out of each visit comes a list of "corrective action plans" for the factory to implement in order to remain in good compliance with retailers' codes.

This approach creates an environment where factories seek to solve specific problems in preparation for the next audit, but they may not take the time to understand root causes of non-compliance. Instead of understanding why they're unable to control overtime hours, factories may look for short-term solutions in order to "pass" the next audit.

The Better Work program seeks to shift the dialogue away from "auditing" and "monitoring" to truly finding long-term, sustainable solutions to poor factory working conditions.  In addition to conducting factory assessments (similar to a typical audit, but much more detailed and thorough), Better Work provides factories with consulting services and training (both for management and workers) in order to build factories' capabilities to manage working conditions and industrial relations.

Furthermore, retailers that subscribe to the Better Work program, agree to stop auditing factories and rely instead upon the Better Work assessments for insight into factory working conditions. This alleviates the factories from repetitive auditing and the International Labor Organization provides a credible approach that provides companies with the confidence that factories are being held to internationally accepted labor standards.

To me, it's a win-win situation, but these past two days have highlighted some challenges to broader adoption of this approach. Companies have had social compliance audit programs in place for decades and some are unwilling to let go of their own programs. People who represent companies and auditors have a vested interest in seeing the current environment prevail (They may fear for their jobs.), so they're not necessarily interested in promoting an industry-wide practice. Companies insist that their standards are stricter than the ILO standards and are unwilling to compromise on some points in order to support the Better Work framework.

The Better Work program has its work cut out for them, but I'm hopeful that retailers will embrace this approach more fully and the industry can move beyond the never-ending cycle of social compliance audits toward an internationally accepted, industry-wide system that focuses on the most important goal: improving the lives of garment workers.

The Independent, Third-party Factory Audit

We employ a third-party social compliance audit firm to conduct social and environmental audits of our factories. In some cases, the purpose of these audits is to check our primary auditor's performance and in others, we rely entirely on these third-party audits. Through using a third-party audit firm, we aim to introduce a neutral party to avoid conflicts of interest and to ensure that we bring in an impartial perspective that does not have a financial stake in our relationship with the supplier.

On Friday, I accompanied our third-party audit firm for a shadow audit in China. It was the first time I'd visited a factory with a neutral party (instead of a company-appointed representative or a company employee) and it proved to be fairly educational.

From the outset, the tone of the visit was very different. Usually, auditors have a pre-existing relationship with factory management. The auditors have been to the factory before, they've worked together over the years and it's a collegial, if not friendly, relationship. With a third-party audit firm that has no previous relationship, the visit has a much less friendly tone.  It's strictly professional and both sides clearly are assessing each other throughout the visit.

The factory staff seemed much more nervous than on other audits I've shadowed. It could have been because this was the first time we had ever asked the factory to be audited, or it could have been my presence, representing a customer. Whatever the case, the entire day took on a much more formal environment than I was used to.

When it came time for lunch, the factory management team offered to take us to lunch, but our audit firm steadfastly refused. Typically, I will break bread with the factory managers to build our relationship and to discuss matters like production levels, hiring challenges, compliance issues, etc. in a more casual setting. Our audit firm has a policy to have lunch on its own, again to avoid any conflicts of interest.

And in the closing meeting, when we typically discuss next steps, corrective action plans and timing for implementation, we ended up pointing out the violations we'd found and leaving it at that.  We cannot guarantee that the audit firm will return to ensure that the corrective action plans have been implemented. In some cases, companies will send their own representatives to ensure follow-up. In this case, we could only say what we'd found and the conversation never turned to remediation or true improvement.

Friday's visit really highlighted for me some of the shortcomings of the third-party audit system. I still believe they play an important part of any social compliance program, but to rely completely on them would probably not truly work toward improving factory workplace conditions.

Our CSR Summit

Earlier this week, we hosted a CSR brainstorming session to help three of our C-level executives understand some possibilities of infusing our brand with a more "socially conscious" angle. We invited in several CSR experts and a few CSR practitioners from other consumer-facing companies.

Prior to the event, I spent several weeks trying to convince people from my network to spend a few hours on the Tuesday morning after Labor Day with us in New York City. Understandably, people didn't commit to flying across the country for our meeting, but we did manage to get some strong representation from the New York area.

I also spent time in healthy debate with a marketing VP, whose role is to ensure that we project the appropriate brand image to external guests, including the type of food we have catered, the vases of white hydrangeas placed throughout the room and the color of the foam core (silver or white) we were allowed to use behind flip charts! She wanted bottled water, I insisted we get pitchers. She wanted to use a beautiful trash receptacle, I suggested recycling bins. In the end, since I'm not based in the New York office, she got her way. Despite saying she'd honor some of my sustainability requests, our meeting had bottled water and no recycling (among other things). As expected, several of our CSR guests commented on the "opportunities" to host a more sustainable meeting.

But the meeting itself went better than expected. We had a very robust dialogue, surfaced some exciting possibilities and I think everyone in attendance felt inspired by our brand and its potential connections to the planet and to communities.

The problem we have now is how do we take these ideas and this momentum and bring it to life? My job is to continue to push this work forward, but we don't have the appropriate resources to accomplish everything we discussed. Our Chief Supply Chain Officer pledged that he would debrief with his executive peers and our CEO to get a better sense of priority and I hope we'll then be able to work on a strategic plan to put some of this work into action!

Instead of Stating the Case Against, How About Re-defining the Case For?

Warning: I’m on the defensive.

Yesterday’s Wall Street Journal ran an article called “The Case Against Corporate Social Responsibility” that purported CSR as dangerous for society because it presumes companies are wrong to take on social welfare issues. These issues, the article argues, belong under the purview of government or civil society.

Since I work in CSR, it should come as no surprise that I find this argument flawed. I agree that social welfare issues fall under the jurisdiction of governments and civil society, but why is self-regulation a bad thing? In some cases, companies that self-regulate can set an example for how governments can introduce effective and practical government regulation. In others, CSR as self-regulation is in direct response to the concerns of civil society – the exact response that this article argues is “irrelevant” for companies to pursue. And yet if companies ignore these concerns, they expose themselves to risk - risk that can have a material impact on company operations and profitability.

I’m also troubled by the presumption that pursuing private profits or public interests has to be mutually exclusive. It’s not a zero-sum game and companies that want to be profitable often have to take into account how public interests impact their operations. At the risk of sounding like a cliché, there really are win-win situations.

But you’ll probably be surprised to hear that I actually agree with a lot that the article posits. The author describes a few examples of cases where company interests are aligned with public interest: fast-food chains expanding into healthier food markets, the development of fuel-efficient automobiles. The article characterizes these examples as cases where positive social impact is a by-product of a company singularly pursuing profit. In my mind, these are great examples of how managing CSR strategically has led to more innovation, market capture for companies and greater shareholder value.

It’s my opinion that companies can manage CSR strategically in order to become better-run enterprises, in order to recognize emerging risks and stimulate innovation in order to stay competitive in a dynamic marketplace. These are not concepts that are at odds. It’s only when companies mis-manage CSR or don’t seek alignment between CSR efforts and overall company strategy that they seem to sacrifice profits for social well-being or vice-versa.

I don’t know many CSR managers who advocate for companies to abandon their profit motives in order to chase the “greater good.” We all know that we’re working for companies with responsibility to shareholders. Our work aims to find the impacts our companies’ core business competencies and operations have on society and the environment and either mitigate these impacts or transform them from potentially destructive to productive. This approach does not require sacrifice – just a slightly more enlightened view of the interplay between business and society.