Chapter Seventeen: Systems to Monitor and Audit Social and Environmental Performance Within the Supply Chain

Overview

As with any new supply chain development, as the SEAAR movement has grown, a variety of software tools and consultancies have emerged that perform various functions for companies that are interested in monitoring and reporting on the activities within their supply chain. These include data collection and management, decision support, risk analysis, and reputation scanning capabilities.

Many of these systems already exist, in whole or in part, within companies, although at this point they are seldom focused on the monitoring or certification of overseas suppliers. Environmental Health and Safety systems (EHS), for example, are commonly used in manufacturing companies to help manage company compliance with U.S. law. Enterprise Resource Planning (ERP) systems, now the backbone and nerve center of the modern company, have strong procurement, sourcing, and supplier management offerings. Supply Chain Management systems are also integrating with ERP and EHS programs to help companies track hazardous materials and domestic supplier performance, and to automatically update the system with changing regulatory requirements.

Beyond refocusing these traditional supply chain systems, however, as standards such as ISO 14001 and SA 8000 have become more accepted, other supporting software has emerged to help a company assess its readiness and implement and manage these standards among their suppliers on a global basis.

This is a promising sign, because as we have seen with important productivity initiatives in the past ” business process reengineering, ERP, advanced planning and scheduling, customer resource management ” new ideas often really only take off in the United States when the combined effect of new IT productivity tools (and the drive by software companies to sell them) begins to gather pace and to capture the interest of consultancies, the business press, and ultimately, company managers.

There are four principal areas where information technology is making global supplier management easier and more efficient. The first, Supply Chain Environmental Management Systems (SCEM), have traditionally provided applications for managing environmental compliance issues ” EHS ” for companies and suppliers in domestic operations. Increasingly, these SCEM and EHS systems are evolving to take on greater emphasis in several important areas. First, they are beginning to shift their focus away from simple compliance and toward quality improvement ” providing applications that help companies achieve greater cost savings through better monitoring and improving environmental waste management and energy efficiency. Second, reflecting the global trend toward outsourcing, instead of a singular focus on local operations, these systems are beginning to evolve toward a greater focus on overseas supplier management. Accordingly, they are also beginning to add on to their existing human resource and safety modules specialized labor modules that can help a company monitor more basic labor issues, such as working conditions, child labor, and living wage.

A second important IT growth area is Supplier Relationship Management software (SRM). Usually Internet based, these programs allow suppliers around the world to log on to a company portal and provide required social and environmental performance information. These SRM tools promise to facilitate total global sourcing of materials, and help companies to manage their entire supply chain by monitoring criteria such as social and environmental performance, standards certification, and quality and delivery performance of suppliers worldwide.

Third, there have recently emerged a number of more sophisticated Risk and Incident Management Systems that help a company to continuously scan its supply chain for potential risks, and then to deal with those risks in a focused and coordinated way using knowledge management techniques and incident management software.

Finally, new Standards-specific implementation software has been developed specifically for implementing, managing, and assessing compliance with standards such as SA 8000 or ISO 14001.

These systems provide companies with a means for moving away from collecting all supplier- related information manually, which means that information concerning working hours, wages , underage employment, safety records, incident or accident reports , environmental damage, fines , or audit results can all be collected electronically , integrated according to logical relationships, and pro-vided to any party that needs the information, worldwide and simultaneously . This information itself can often be used to create collaborative improvement programs that can help a supplier not only comply with legal and ethical requirements, but actually improve its productivity and efficiency. It also can be used to sense and respond to risks within the supply chain ” ethical violations, use of dangerous materials, poor environmental policy ” before those risks become full-blown incidents. Finally, information collected on social and environmental policies can be used for the formal audit and reporting process that so many companies are now adopting as part of the SEAAR movement.