The Gradient Index

The Gradient Index

In an attempt to provide investors and consumers with information concerning how well companies are performing in social and environmental activities, the Institute for Social and Ethical AccountAbility has also launched the Gradient Index, which uses four areas for rating and ranking organizations. These criteria and standards are expected to be endorsed by the NGO community in the near future. The four areas are:

  • Corporate Understanding. ˜Understanding focuses on indications that a company truly understands the broad area of supply chain labor standards. Such indicators will include: corporate commitments to International Labour Organisation Core Conventions; membership of multi-stakeholder initiatives that contribute to organizational understanding (e.g., ETI, FLA, SAI); and the existence of senior representatives at an executive and nonexecutive level responsible for ensuring the organization s awareness of supply chain labor issues.

  • Policy. ˜Policy examines companies explicit commitment to upholding rights identified by ILO Core Conventions. These conventions form the internationally accepted boundaries for corporate responsibility in this area and should guide corporate activity.

  • Management Systems. ˜Management Systems assesses the processes and structures at operating levels that help to ensure labor policies are implemented and that labor standards are likely to be upheld. These will include: the existence of performance incentives that support good labor practice within buying teams ; the existence of performance incentives that support good labor practices for supply factory managers; the provision of funds or specialist advice to assist current or prospective suppliers with improving employment conditions; the communication of policies to sub-contractors and buying teams. Over time, further indicators will deepen understanding in areas such as: job-specific training to relevant business units (e.g. QA, buying etc); the inclusion of supply chain labor considerations in risk assessments; the inclusion of labor considerations in stock management and the inclusion of labor considerations in sales forecasting procedures.

  • Performance and Monitoring. Lastly ˜Performance and Monitoring seeks evidence on the existence and quality of monitoring mechanisms for evaluating the impact of policies and management systems on supply chain labor standards. These indicators will include: the provision of a whistle -blowing mechanism for contracted workers; the extent of monitoring using internal, independent and trade union/NGO expertise; the existence/extent of monitoring beyond immediate suppliers. Projected future Performance and Monitoring indicators include: the quality of remediation procedures for compliance failures; the quality of monitoring; the quality of mechanisms for identifying high-risk facilities. [18 ]

[18 ] Moving Up the Learning Curve ” Corporate Management of Supply Chain Labour Standards, Sustainability at

Selecting a Standard

There are several approaches to adopting standards a company can take, depending on the results of the business case for action, and an analysis of the areas where a company is vulnerable, or alternatively, wishes to be very progressive. After all, if the company has particularly good environmental practices that are coordinated and enforced with its various suppliers, it may be of a great benefit, both in terms of publicity and also in finding additional productivity improvements, to gain certification in ISO 14001. Alternatively, some companies prefer to begin with the adoption of a high level aspirational code, and then apply industry specific codes, related directly to their immediate needs, before moving toward the broader impact codes such as SA 8000. There are any number of approaches that companies are taking.

  • ICA Ahold, the Scandinavian grocery retail group , has a multistep supplier program in place, with the ultimate goal of gaining SA 8000 certification at its foreign supplier sites. The company begins by training its buyers in manufacturingrelated ethical and human rights issues and providing buyers with the skills and confidence necessary to raise these key issues with their suppliers. The company surveys its international suppliers concerning their policies and working conditions, and then helps them with improvement programs. We use our influence, where possible, and work with suppliers to systematically improve the social, environmental and ethical quality of their products and services, particularly those sold under Ahold brand names . [19 ]

  • Chiquita, a member of the Ethical Trading Initiative, has certified 100 percent of its company-owned farms in Latin America (though not its contractor farms) under the Rainforest Alliance s Better Banana Project, and has a joint agreement on labor rights with several trade unions, including the International Union of Foodworkers (IUF) and COLSIBA, the union representing banana harvesters in Latin America. They are now working toward site certification in SA 8000. [20]

  • H&M s suppliers contractually guarantee not to use certain hazardous or environmentally dangerous chemicals in production, including chemicals that are restricted by national laws (if any nation in which they sell restricts a chemical, H&M uses that same restriction in all other countries ), and those that the company has voluntarily chosen to include (particularly substances that might cause skin irritation or allersregularly performed on the finished clothes to ensure that there are no banned chemicals in the materials. Approximately 30,000 chemical-related tests were performed in 2002, either by H&M or by a third-party laboratory. [21 ]

[19 ] Sustainable Supply Chain, Ahold Web site at

[20] Chiquita Joins Ethical Trading Initiative, PR Newswire, May 3, 2002.

[21 ] H&M s Social Responsibility Report, pp. 28 “ 30 at .