Chapter Three: Risky Business


Chapter Three: Risky Business

Overview

The complexity of a company s supply chain and the relative ownership of responsibility at each phase vary enormously between corporations and industries. Accordingly, the amount of control a buying company has over its suppliers, and the relative risk that social and environmental violations on their part poses to that company, depends on many factors, including industry focus, the number of suppliers, the complexity of its supply chain, and even the relative importance of the buying company in its marketplace .

Obviously, these supply chain risks are most acute in manufacturing and distribution companies, but many of the same principles apply to service organizations as well. Certainly, every company has a supply chain that involves some form of social or environmental impact. Obviously, if a corporation s processes, purchases, and services are so benign that they have little impact on the environment, a company needs to be much less concerned than those that are involved with manufacturing, extraction, or distribution of goods, and are obviously in the forefront of events. But even if an organization deals purely in services, it will still purchase paper that comes from forests or is recycled, serve coffee that is harvested by low-paid workers, or select computers with electronic components that are produced in Asian factories. Every company is today expected to deal fairly and legally with employees , and may still face business partner or domestic supplier issues concerning fair pay, employee rights, or ethical practices.

After all, taken to its extreme, the supply chain even in a service organization creates a responsibility bond between the company and all of the organizations worldwide with which they have a business relationship. In fact, one of the defining tenets of globalization is the interrelationship between economic entities (companies, banks, markets) worldwide. One of the most effective, if ethically questionable, approaches to stopping animal testing, for example, has been pursued against Huntingdon Life Sciences, the UK laboratory and drug-testing company that has been targeted by animal rights activists after a damning television report alleged cruelty and indifference to laboratory animals. Although HLS was forced to de-list from the London Stock Exchange and relocate to the United States under a different name , animal rights activists have now extended their harassment as far as Seattle where in 2002 they attacked the company offices of Marsh & McLennan because they had reputedly acted as HLS s insurance brokerage. Although roundly condemned for these secondary targeting tactics, the actions highlight the extent to which activists can push responsibility down the extended supply chain.

In fact, even in its more traditional sense, a modern supply chain goes well beyond just manufacturing or purchasing of a product. The modern, global supply chain extends from raw materials through to the point where a product is either discarded or recycled by the customer. This dirt to dirt process includes, either directly or through a network of suppliers and distributors , some aspect of extracting materials or growing produce, purchasing, transportation, production and assembly, storage, and delivery. It will also involve product safety for the lifetime of the product, and sometimes disposal when the product s use is at an end.