Supply Chain Imperative, The: How to Ensure Ethical Behavior in Your Global Suppliers - page 43


One of the most important groups in the field of labor rights, of course, is the International Labor Organization, an agency of the United Nations and a strong advocate of labor standards and principles worldwide. Originally established to help cope with the crisis of labor conditions ( injustice, hardship and privation ) in 1919 following World War I, the ILO became the UN s first specialized agency in 1946. In 1998 they adopted the Declaration of Fundamental Principles and Rights at work, which today sets the standard for employment rights throughout the world.

ILO principles and recommendations cover a broad range of laborrelated issues such as the right to organize, freedom of association, equality of opportunity, and worker health and safety rights, including elimination of forced or compulsory labor and abolition of child labor. Although primarily a forum for national governments , they also provide technical assistance to member nations and provide an inspection service for investigating human rights and labor violations. [1 ]

[1 ] See

The UN Global Compact

The United Nations Global Compact was launched in April 2000 as a coordinating forum for UN agencies, NGOs, and the global business community with a goal of helping member organizations complete joint initiatives and gather to discuss global issues. Focused on improving environmental and employment standards in developing countries , the Compact is based upon nine principles that businesses should follow:

  1. Support and respect the protection of internationally proclaimed human rights.

  2. Make sure they are not complicit in human rights abuses .

  3. Uphold the freedom of association and the effective recognition of the right to collective bargaining.

  4. Eliminate all forms of forced and compulsory labor.

  5. Effect the abolition of child labor.

  6. Eliminate discrimination in respect of employment and occupation .

  7. Support a precautionary approach to environmental challenges.

  8. Undertake initiatives to promote greater environmental responsibility.

  9. Encourage the development and diffusion of environmentally friendly technologies. [2 ]

Although admirable in its intentions, as with most of these aspirational initiatives, signing up to the Compact merely asserts that signatory companies agree with these principles, and there are no mechanisms to ensure that companies adhere to high social and environmental standards. Critics argue that the Compact, although valuable as a discussion forum and for publicizing key principles, nonetheless suffers from two key weaknesses. First, there is no attempt to require companies that join the Compact to demonstrate ” through audits or any other mechanism ” that they actually are adhering to any of these principles.

Given the structure of the compact, says Oliver Williams, director of the University of Notre Dame Center for Ethics and Religious Values in Business, it is quite possible for a company with a poor record in labor or the environment to highlight another area of corporate citizenship in its annual report where its record is superlative. The general public will only receive the information about a company that the company chooses to report. [3 ]

The second weakness of the Compact is that the principles are worded at such a high level, and the choice of words allows such flexibility, that it would be impossible to hold member companies to any auditable standard even if they did require proof of good behavior.

Spokesmen for the Compact explain that they do not wish to provide an enforcement mechanism, or become entangled in assessing the performance of companies. They instead see the Compact as merely a moral framework that also provides a useful forum for companies to gather and discuss issues. That is all right, as far as it goes, but the problem with this approach is obvious. Without any inspection or enforcement mechanisms for membership, the Compact provides little in the way of teeth to their conviction that companies should adhere to these standards. What is worse , of course, this type of approach leaves the Compact open to abuse by companies that sign up to the forum as part of a public relations strategy, even while blatantly ignoring those principles throughout their supply chain.

Still, aware of these issues, the Compact has encouraged (but not required) member companies to also participate in the Global Reporting Initiative (see Chapter Sixteen), hoping that the GRI process would provide the needed inspection and enforcement services, allowing the Compact to remain above the fray. Whatever its limitations, the Compact nonetheless has provided much-needed endorsement and publicity for social and environmental performance and reporting, and there are now around 500 signatory companies participating from around the world.

Oddly, considering the undemanding nature of the Compact, very few U.S. companies have chosen to participate. This may be a reflection of fears of litigation, as U.S. companies are uniquely wary of signing up to what might be interpreted as a contract that governs their conduct ” particularly with regard to human rights. Given the elasticity of the phrasing in the principles, it is hard to imagine any company worrying about a genuine legal risk, but it is apparent that many U.S. companies are avoiding the Compact for some reason.

More likely, say skeptics, companies simply don t want to be accused of hypocrisy if caught out violating these principles by NGOs. There are reasons to be wary for companies that don t have a good understanding of the activities within their supply chain, warns Jim Kartalia, President of Entegra. Once a company becomes a signatory, he explains, their reputation risk has jumped through the roof, because as signatories they are saying they want to be a good corporate citizen. If they don t then have the systems to help them know where they are succeeding or failing, they risk looking hypocritical ” and the media is going to tear them apart. [4 ]

The CERES Principles

Created by a coalition of U.S. environmental groups and the socially responsible investment community, the 10 CERES principles cover the gamut of sustainability issues, including reduction and disposal of wastes, energy conservation, the creation of safe products, company transparency, reporting, and management commitment. In many ways, the CERES coalition is a good example of the new pressures that are being brought to bear on today s corporations. Leveraging shareholder authority, the coalition uses shareholder resolution to push companies toward endorsing these environmental principles, with the expectation that CERES signatories will publish public reports on their progress in these areas.

CSR Europe

CSR Europe was created in 1995 by the former president of the European Commission, Jacques Delors, and is a networking forum and think tank covering a broad range of corporate social responsibility issues. Its membership includes 16 national government partners , and 59 corporations, for which CSR Europe provides information through publications , benchmarking standards, and leading practice tools and techniques. Their goal is to provide a forum that brings together governmental policy makers , investors, businesses, NGOs, labor unions, and academics , and as with similar forums, they have a set of aspirational principles that define their purpose. According to their guidelines, organizations should:

  • Conduct business responsibly by contributing to the economic health and sustainable development of the communities in which we operate .

  • Offer our employees healthy and safe working conditions, ensure fair compensation, good communication as well as equal opportunity for employment and development.

  • Offer quality, safe products and services at competitive prices, meet customers needs promptly and accurately and work responsibly with our business partners.

  • Minimize the negative impacts our activities can have on the environment and its resources, while striving to provide our customers with products and services that take sustainable consumption into account.

  • Be accountable to key stakeholders through dialogue and transparency regarding the economic, social and environmental impacts of our business activities.

  • Operate a good governance structure and uphold the highest standards in business ethics.

­ Provide a fair return to our shareholders while fulfilling the above principles. [5 ]

[2 ] The Global Compact: Corporate Leadership in the World Economy, Global Compact Office, The United Nations, January 2001.

[3 ] Oliver Williams, Major U.S. Companies Doubt Global Compact Credentials, Business Day, April 22, 2003 at,3523,1330151-6096-0,00.html.

[4 ] Interview with Jim Kartalia, January 23, 2003.

[5 ]