Lacking Strategic Focus or Coordination

Why have companies, on the whole, been so slow in developing a more coordinated company-wide program for ensuring an ethical supply chain? There are many reasons.

First, despite the growing number of supplier- related incidents, many companies have no resources specifically allocated to dealing with overseas supplier relations. Even strategic sourcing exercises are often completed in a cursory way, or, too often, not done at all, as harried purchasing staff deal with minute-to-minute changes to orders, missed delivery, or quality control issues. The Director of Procurement, quite understandably, still sees his/her role almost entirely as focusing on ensuring low price and high quality goods, and an uninterrupted supply chain ” a full-time job in most companies. In short, despite the traditional assumption that the responsibility for supplier management falls within the procurement function, far too often strategic sourcing and supplier qualifications ” let alone supplier inspection ” remains a low priority. In many ways, this simply reflects the former separate roles of the pre-1990s supply chain revolution, where planning, warehousing, logistics, manufacturing, and procurement were all separate departments, with unique incentive programs and targets.

Consider, for example, the many separate, but related, initiatives that exist in the typical company:

• The Environmental Health and Safety group ” usually focused exclusively on corporate office and domestic operations compliance issues ” sees its role as monitoring compliance to U.S. laws, not monitoring the social and environmental performance of overseas suppliers.

• Sales staff want high quality goods available at all times for customers, and have less concern about inventory levels, carrying costs, or supplier behavior (unless their customers are requiring, as is increasingly the case, the company to explain and verify its position concerning poor supplier behavior).

• Operations ” warehousing, logistics, assembly ” want to contain costs, and purchasing wants to negotiate with suppliers to provide goods on time and at a good price ” but don t want to assume the role of EHS policeman with those suppliers and have little time for organizing detailed interviews or inspections.

• Corporate affairs knows little of operational issues, but is concerned with communicating a strong corporate responsibility message.

• Human resources is more concerned with benefits and EOE issues than with administering foreign supplier site inspections for employment violations.

In short, there is often not one single corporate group that has been given responsibility for ensuring that suppliers in the extended supply chain adhere to standards of environmental health and safety. In many ways it is just the age-old problem of no one knowing who is responsible.

I don t think that the output is the true value of [SEAAR] reporting, says Stephanie Meyer of Stratos. The real value is the process and how that can help you to move toward a better understanding of all of the impacts in the organization. What I am hearing from clients , she says, is that [a CSR project] is often one of the first times that they have had a truly cross-functional team pull together [in this area]. And it is by necessity, because they realize that they need to talk to ˜so-and-so in purchasing, and ˜so-and-so down the hall for this piece, or for that piece. It is the first time that a lot of these people are talking, and if you can get them together and working on a team in this area, they can look for other opportunities for synergy . . . that is what really helps them to understand that they can operate in a better, more effective way . . . and makes them more open for looking at some of these broader organizational strategies for improvement. ^{[3 ]}

At present, most companies are not managing risks in their supply chain in a systematic way, agrees Teresa Fabian of Pricewaterhouse Coopers. While some companies [for example] have excellent systems for ensuring they are sourcing from sustainable forests, they may not have considered the issue of poor workplace conditions and vice versa. ^{[4 ]}

Not only do most companies lack strategic focus when it comes to an ethical supply chain policy, but as we have seen, many companies simply don t see overseas supplier management as part of their responsibility at all. Often company leaders still see outsourced or overseas contract operations as outside their sphere of control or responsibility, to be left with Corporate Affairs staff to smooth the ruffled feathers of NGOs or the press. As we have seen, however, supplier issues have become too important for companies simply to ignore, or to approach in an uncoordinated or haphazard manner any more.

^{[3 ]} Interview, September 2, 2003.

^{[4 ]} Teresa Fabien, Supply Chain Management in an Era of Social and Environmental Accountability, Sustainable Development International, Edition 1, p. 29, from the Sustainable Development Commission at www.sustdev.org/journals/edition.02/download/sdi2_1_5.pdf.