Activities Necessary to Monitor and Manage the Ethical Supply Chain

What does this trend toward responsibility sharing along an extended supply chain mean to the modern company? For one thing, it means that the social and environmental supply chain issues need to be given much higher priority in the organization. It also means new organizational structures, and dedicated resources. Consider, for example, the number and variety of duties and activities that now need to be done as a unique operational process in order to ensure ethical behavior and strong risk management in a typical company:

• Policy Creation and Ongoing Risk Assessment. Someone in the organization needs to be responsible for the initial and ongoing creation of a corporate ethical supply chain policy, including a value statement, appropriate codes of conduct, and a framework for analyzing and reacting to supply chain risks. In order to make that policy reflect reality, someone will need to be responsible for an analysis of the socioeconomic impacts and the relative risks that the company faces, by country, by contractors, and by product. These policy advisors will also need to be involved in the planning and oversight of ongoing or planned projects, particularly focusing on the expectations of other stakeholders such as the local community, the government, activists, or business partners .

• Managing the Supplier Program. This effort, going well beyond a strategic sourcing regime , requires incorporating social and environmental selection and monitoring criteria into an ongoing supplier evaluation program. It will also require resources to create and maintain education programs, to draw up and negotiate relevant contracts, and to collect performance information through a variety of sources, including internal systems that can record historical performance data, and through both written and in-person surveys. And because of the need for verification, a modern supplier program will need to move beyond the simple by-mail surveys of the past, requiring much greater levels of contact and collaboration with overseas suppliers. The process will also need to incorporate oftenoverlooked sources of risk such as waste and recycling vendors .

• Document Management. Establishing a central database of audit information is critical, both in terms of effective management and in providing legitimate , verifiable information to investors and NGOs. This involves systems for collecting information, for data management and data mining, and for historical data retention and analysis. It may also require supporting or overseeing a program for supplier data retention ” not an easy thing to enforce among suppliers in developing countries unfamiliar with collecting performance data, and often unwilling to admit, much less record, faults or failures.

• Training and Education. A supplier program also requires an ongoing-program of education and training for both company and supplier employees that covers company policy, the organization s process for risk and supplier assessment, social and environmental performance codes and expectations, and the reporting process.

• Communication. A strong communication program is necessary, both internally concerning policies and resources, and externally to corporate stakeholders: NGOs, pressure groups, the media, and investment and consumer groups. Someone knowledgeable about the company ethics policies, supplier evaluation program, and the reporting process will need to create a credible communications program for NGOs, investors, and government agencies that will adequately explain the value and legitimacy of the company s ethical supply chain process. Much of that communication will need to be person-to-person , keeping open channels with various stakeholders ” NGOs, investment analysts, and the press.

• Gaining Internal Commitment and Corporate Alignment. The process also requires a very important change in management effort in order to communicate the business case for supplier management and SEAAR to leaders throughout the organization, and to gain the endorsement and active participation of senior corporate executives in creating policy and regularly monitoring risk issues when they arise. Someone ” with both political clout and sufficient tact ” will need to make certain that mid- and lower-level managers are aligned and support these policies actively. At the heart of this process will be creating and explaining the case for action ” something that will be made much easier if a credible business case for policies can be made and convincingly argued.

• Complete the Reporting Process. Finally, the process will require special and dedicated resources not only to manage the supplier program, but to collect accurate data and to develop the publishable corporate SEAAR report. This will also mean surveying and selecting the most appropriate standards and reporting processes among the many that exist today, and coordinating information collection and sharing among quality and other standards projects ongoing in the company. And, of course, someone has to actually write the report in a complete, accurate, and coherent way.