Chapter Seven: The Corporate Ethics and Risk Management Framework

Overview

Reflecting the importance of ethical behavior, this process should be sponsored and endorsed by all company leaders , should involve the board in a way that guarantees that members are both informed and independent, and ideally , should be lead by a new and important role ” the company s Chief Ethics and Risk Officer. The framework should be built on traditional value statements and the types of internationally recognized codes of conduct that we discuss in Chapter Eight, but should move beyond passive efforts and involve a formal system for identifying and reacting to potential supplier social and environmental issues.

In fact, although most of the Corporate Social Responsibility debate (at least in Europe) is today focused on how to monitor and verify company and supplier performance, monitoring and reporting are only the end result of a much more important processs ” or framework ” that needs to be initiated, not in the supplier organization, but in the buying organization itself. The key features of this ethical and risk management corporate framework include:

• A corporate value statement and aspirational code of conduct

• A strong business case

• The selection and adoption of internationally accepted social and environmental performance standards

• Measurable and verifiable indicators of performance

• A program to build awareness and support

• A supplier program that includes education, training, and communications activities, and monitoring and auditing of supplier performance

• A SEAAR-based reporting structure

• Supporting IT systems

Finally, in order to leverage new knowledge and information management systems and techniques, a company needs to develop its Research and Analysis Capabilities, in order to capture, organize, and distribute information gleaned from sources external to the company ” the Internet, government agencies, suppliers, NGOs ” concerning local political, cultural, and legal concerns. This helps company leaders not only understand what potential problem areas or incidents are arising in the supply chain and what the company is doing to deal with those issues, but more generally to monitor the company s reputation in the media, relevant political, cultural, or legislative changes, or NGO actions launched against the company.

Today, the modern company should be collecting information concerning their corporate reputation and risk from a wide variety of sources, including:

• Current and proposed legislation in all operating and sales areas

• Leading and expected industry social and environmental practices

• The adoption of standards by competitors and by the industry

• Trade union positions and concerns

• Press, NGO, and activist positions concerning the company or competition

• The social and environmental records of individual suppliers

• Customer expectations and concerns with regard to product safety, packaging, and disposability

This systematic scanning and prioritizing exercise should be repeated or reviewed every year or two, suggests GEMI, because EHS regulations, liability concepts, market preferences, competitor positioning, and information are rapidly evolving. ^{[1 ]}

^{[1 ]} New Paths to Business Value, the Global Environmental Management Initiative at www.gemi.org/newpath.pdf., p. 20. The Global Environmental Management Initiative (GEMI) is a non-profit organization of leading companies dedicated to fostering environmental, health, and safety excellence, and corporate citizenship worldwide. Through the collaborative efforts of its members, GEMI also promotes a worldwide business ethic for environmental, health, and safety management and sustainable development through example and leadership. The guidance included in this [footnoted] document is based on the professional judgment of the individual collaborators listed in the acknowledgements. The ideas in the document are those of the individual collaborators and not necessarily their organizations. Neither GEMI nor its consultants are responsible for any form of damage that may result from the application of the guidance contained in this document. This document [footnoted] has been produced by GEMI and is solely the property of the organization. This document may not be reproduced or translated without express written permission of GEMI, except for use by member companies or for strictly educational purposes.