With this tormented history, by 2003 it was becoming obvious to all parties involved that what was required to ensure that developing world suppliers did not exploit their workers or the environment and that high-profile companies could avoid relentless criticism for those activities was for companies to take a standardized approach to judging supplier performance, to be independently verified and reported in an easily comparable, and readable format. This combined approach to supply chain monitoring and reporting is still referred to by many names ” sustainability reporting, CSR, nonfinancial performance assessment, or triple-bottom-line accounting ” but the movement is not nearly as indistinct or amorphous as the variety of names implies. Probably the most accurate title is social and ethical accounting, auditing, and reporting (SEAAR).
A consensus around this reporting framework has begun to grow rapidly, particularly in Europe. So rapidly in fact, that the Pricewaterhouse-Coopers Reputation Assurance practice has predicted several key trends that reflect this consensus, which include:
Within the next 10 years , the valuation methods used by Wall Street analysts will include new metrics ” such as social performance and intellectual capital ” to assess more accurately the net worth of a company.
Within the next 5 years, 70 percent of North American and European companies will assign Board responsibility for areas of reputation and social responsibility.
Within the next 10 years, the majority of global multinationals will publish a broader range of key nonfinancial information alongside financial data, covering areas such as environment, diversity, community development, and anti-corruption.
The future credibility of audits will depend on the audit firm s ability to review and give opinions on nonfinancial performance, inevitably in conjunction with non-audit professionals, including nongovernmental organizations. [27 ]
There are many obvious benefits to this monitoring and reporting framework. A standardized approach ensures that suppliers share certification among the various buyers , each beginning to demand that they adhere to the respective buying company s independent requirements. Certification itself will be more meaningful, because it will incorporate leading practices and concepts, as will company reports to analysts and concerned investors.
Possibly most important of all, a standardized approach to reporting is beginning to bring benefits to purchasing companies themselves . Without accurate information on policies and performance, the media up until now has been left free to simply accept at times sensationalizing corporate misbehavior. Only third-party verification based on a standardized reporting process can provide companies with a strong defense when wrongly accused. Of course, accurate reporting also means that companies will no longer have wiggle room against accusations of poor employment or environmental practices, and therefore it will become even more imperative that they actually do begin to apply these codes of conduct ” and monitor supplier performance ” much more effectively.
[27 ] Alison Maitland, Truants, Nerds and Supersonics, The Financial Times, November 18, 2002.