Category Archives: CSR

Societal Damnation #48: Worker’s Rights

Now, you’re probably wondering why this is a damnation. Worker’s rights are a good thing, and if one is ethical, there’s absolutely nothing wrong with them or respecting them. The problem is, not everyone is ethical, especially in the corporate world. One has to remember that 1% of the population are psychopaths (with enduring antisocial behaviour, diminished empathy and remorse, and disinhibited or bold behaviour), and that the top four professions that attract psychopaths are

  1. CEO
  2. Lawyer
  3. Media / Publicist / PR / Marketer
  4. Salesperson

and four of the five jobs that every company relies on. You can’t have a company without an incorporation, and laws are so convoluted in most places that you pretty much need a lawyer. Plus, once you get big, you’re gonna get sued. A company needs a leader. A company has to sell something to survive, and it has to advertise that something. The only other must is that it must keep its books and pay its taxes (Finance). In a nutshell, your company is evil. The only real question is “how evil”. Skim a bit off the top evil? Steal from sick grandmas evil? Drown the kittens evil? Or sell guns on the mass market to a guerrilla group planning a coup and a mass genocide evil? (Google knows this. Why do you think it’s motto is “don’t be evil”? It knows that, especially with the power it holds, without a constant, conscious, effort to not be evil it wouldn’t take much to fall down that slippery slope and become the most evil weapon of the most evil empire on the planet as it has access to more data than even the NSA.)

In a nutshell, regardless of the talk they talk, or the walk they walk when they are looking, these psychopaths don’t care about respecting worker’s rights beyond what is absolutely mandated under law (as they don’t want to get sued or fined as that tarnishes the brand imaged which, for most companies these days, is their biggest asset and, thus, their biggest money maker).

Now, this wouldn’t be a problem if every country had good worker’s rights laws and agencies that insured those laws were enforced, but we know that, outside of the prosperous first world nations, there is a lack of worker’s rights laws, if there are any laws at all. In some countries, it’s not uncommon for employers to force employees to work 12 hours a day, in unsafe working conditions with insufficient access to clean water, without any protective gear, under the constant fear of immediate dismissal without recourse if they don’t hit high productivity targets for wages less than what an acceptable minimum wage would be if there was one. If working conditions were good across the board, employees had access to the help and services they need, and employees were generally happy, you wouldn’t see headlines like this Headline from the Huffington Post in 2011 that said Apple Manufacturer Foxconn Makes Employees Sign ‘No Suicide’ pact, which, of course, followed headlines like Foxconn worker plunges to death at China plant, which were numerous as at least 20 employees attempted suicide in 2010 and 2011 at Foxconn, as chronicled on the Foxconn Suicides Wikipedia page.

And while we might want to pretend the companies we buy from are socially responsible and only buy from companies that are themselves socially responsible, that’s not always the case. (We shouldn’t have to enact anti-human trafficking laws in the supply chain in this day and age, but California and the UK just did because we still have to!) If the companies we bought from really were socially responsible, we wouldn’t have seen the headline that More than 100 die in garment factory fire, the deadliest in Bangladesh’s history or Death toll from Bangladesh building collapse climbs above 400 as no one would have working in these buildings to begin with if these companies were socially responsible and respected the rights of a worker to work in safe working conditions.

And making sure your suppliers respect workers rights, so you don’t get a media black eye and a tarnished brand, is not so easy. You can’t schedule an audit — they’ll clean up the plant, instruct the workers who are the most subservient on what to say, send any they don’t trust home, reduce numbers to those they have sufficient safety gear for, and even bring in a doctor for a day to show you they care about employee health. The next day, the doctor is gone, the facilities are dirty and crowded, and it’s back to business abusing employees as usual. Now, if they know you might show up for random audits, they’ll employ one or more tricks to make it look like they’re better than they are, which might include misdirection or outsourcing.  We’ll tackle misdirection first.

If the supplier is big enough and serves enough big customers, they will need multiple plants and locations. A cunning supplier subject to, or afraid of, random audits will designate one plant as the “customer” plant for *every* customer, and in that one plant they will be sure to spend extra time making sure it is clean, uncrowded, and safe. They won’t get much done in that plant, because the whole point will be to make sure it always looks good for a surprise visit. Meanwhile, their other plants will be overcrowded in squalor conditions to keep their overall cost low.

Smaller, cunning, suppliers, who can’t afford extra factories, or don’t want the headaches of having to appear responsible at all times due to the threat of constant, random audits will instead outsource the more dangerous, dirty, or workforce heavy task to a sub-supplier who they claim will meet the requirements you place on them for fair worker treatment but who, in essence, do not come anywhere close.

It’s a management nightmare with the constant risk that a bad media circus could erupt at any time.  It’s pure damnation as you will do your best but still get blamed when a scheming supplier does its worst.

Environmental Damnation 15: Waste, RoHS, & WEEE

Waste is bad, and legislation that requires waste to be minimized, dangerous chemicals and compounds to be avoided, and products to be properly recycled and reclaimed and safely disposed of is good. But it’s not good for your supply chain if new legislation comes into effect faster than you can react.

While all products should be designed with recycling and reclamation in mind, it takes time to identify new designs that use safer materials, build new production lines, and get the products to market. And while efforts should currently be in progress to redesign each and every product that contains a substance restricted in at least one major market, sometimes a design does not yet exist that uses an alternative chemical or compound and a more restrictive or new legislation could threaten a major product line.

This is becoming more likely by the day. While the US might not be as advanced as the EU in terms of environmental legislation, some states, like California (which just sent “a bumper crop of environmental legislation” [nrdc.org] to the Governor) are making a push and it won’t be long before it’s even harder to get products approved in some states than it is in the EU. Furthermore, as noted by SI in the past, when even countries like India and China (through the initial Order 39 in 2006 and the updated version in 2012) are considering more restrictive Environmental Legislation (which can be thought of as their own version of RoHS – the Restriction of Hazardous Substances Directive, one can be sure it won’t be long before this type of legislation become the norm and not the exception.

And while there is a lot one can do to prepare for the coming reality, it all takes time, money, and preparation.

First of all, one needs to make sure the organization has a good bill of materials system in place that tracks each and every compound and chemical that is used in each and every product produced, imported, and exported.

Then, one needs state of the art trade document management systems that properly completes all of the necessary import and export documents to make sure that, provided the goods are compliant, they are not held up or confiscated at the border.

Finally, one needs to implement a good online collaborative design solution that will allow all parties within the company and its partners to design, and produce, alternative products that are compliant with the relative legislation where the company wishes to produce the product or import it for sale.

And while all of these systems are systems that the company should have in place regardless of current or expected legislation, it requires time to identify the right systems, implement the systems, and learn to use the systems to their maximum potential.

American Bar Association to Fortune 500: Clean Up Your Supply Chain


Today’s guest post is from Dick Locke, President of Global Supply Training Company, author of the classic book on Global Supply Management, and a seasoned expert with international experience in Supply Management (having run global supply chains from around the globe).

The Minneapolis Star Tribune published an article titled “Bar Association Warns Corporations: Clean up supply chains.” The author says that the president of the American Bar Association will be sending a letter to the CEOs of all the Fortune 500 companies. He goes on to say that the letter will ask the CEOs to “commit to ending human-rights abuses in their supply chains.”

Chris Johnson, who heads the American Bar Association’s (ABA) business section’s supply-chain initiative makes some provocative statements in the article:

  • “Regulation is increasing. Litigation is increasing. It’s astounding to me that companies don’t get out ahead of this. It’s a time bomb.”
  • “Companies remain reactive and not pre-emptive in handling possible human-rights abuses in their supply chains.”
  • “Why would you want to wait to have your products found in the rubble along with 1,100 bodies of dead workers?”
That last statement was about the April 2013 collapse of Rana Plaza in Bangladesh. More than 1100 clothing workers died when the multistory factory building collapsed. Investigators found several European and U.S. companies’ products in the wreckage.

This was a tragedy for the workers, their families, and their communities. It is an ongoing embarrassment to the purchasing profession. Some of the companies involved had no idea their product was being produced in a manifestly unsafe building.

 Collapsed Rana Plaza

I believe it’s also a wakeup call. There are signs that the clothing industry is banding together to change their purchasing practices on an industry-wide basis to improve their supplier selection techniques.

The article focuses on human rights violations going on in company supply chains. Those violations can involve coerced labor of adults and children, any kind of labor by children, safety issues, wage and hour violations and a host of other issues. Here are two issues many of you are facing now:

  • Is your company a retailer or manufacturer? Do you sell more than $100 million per year? Do you do business in California? If so, is your company making a public statement on its web site about what it is doing to remove coerced labor from its supply chain? If it isn’t, it’s violating California law.
  • Do you work for a publicly held US company? Do your company report to the SEC about the origin of any tin, tungsten, tantalum or gold in the products you sell? It needs to or it’s in violation of Federal law. If you have any electronics in your products, you have one or more of those metals. That’s the obvious example. Here’s a list of 22 other products that contain the metals.

However, a good Supply Chain Social Responsibility (S)CSR program needs to go beyond just following the law. I was surprised to find that U.S. law allows children as young as 12 to work on farms. Does your company have a cafeteria or food vending machines? If so, you probably have 12 year olds working in your supply chain. And it’s legal. It’s just not ethical.

Social Responsibility goes beyond labor issues. It includes prevention of giving and receiving bribes. It includes treatment of animals. It includes preserving the environment. The last topic applies to every organization that buys paper, for example. That’s just about everyone. Does your paper supplier use sustainable forestry techniques?

Want to learn more about what’s involved and how to develop and execute an (S)CSR program? While I don’t usually plug my own work quite so blatantly, Next Level Purchasing’s “Exemplary Supply Chain Social Responsibility” is the only training course I have found that goes into this topic in great detail. In eight on line training hours, on your own schedule, you will get a thorough and practical understanding of the issues and the solutions. To build on Chris Johnson’s statements (above), it’s much better to be preemptive when there’s a threat of time bombs.

Thanks, Dick!

Dilemma or Not, Buyers Still Must Take Ethics into Account

In a recent post over on Spend Matters UK, Andrew Cox asked whether “aggressive buyers are stupid or guilty of segmentation errors”. In this post, the author chimed into the debate over supplier bullying, initiated by Peter Smith over the continued extension of unreasonable payment terms by 2 Sisters and Sainsbury’s, continuing the unsavoury Tesco tradition. According to Mr. Cox, food companies should not be condemned as ‘unethical’ just for extending payment terms as ethical standards are a contested concept.

While I agree that what is unethical for some is just fine for others, as per the example provided in the post, one would think that there are some positions that just about everyone with a conscious could agree upon, just like the vast majority of people in modern society believe that murder is wrong. In the debate, Peter Smith is condemning the act of a supplier unnecessarily extending payment times to the point where a company could risk bankruptcy. I would hope that this would be a situation that most people could agree is simply not ethical.

But this is not the only time when ethics should be taken into account. Ethics should also be taken into account when choosing a supplier. When choosing a supplier, fair labour standards should be considered. Now, while what is fair is always a subject of debate, it should not be a subject of debate that a fair supplier

  • follows all health, safety, and minimum wage standards of the country or countries they operate in
  • if there are no such standards, the supplier does not unnecessarily expose its workers to risk, does not maintain conditions that threaten its workers’ health, and/or does not pay its workers less than a living wage in the country that is being sourced from (as defined by the World Economic Forum, etc.)
  • does not unnecessarily harm the environment

And while it might be difficult if there are no standards to determine that conditions are sufficiently healthy or safe, that the wages paid are suitable, or that the supply is not unnecessarily harming the environment, there are points when it becomes obvious. Just like delaying supplier payments 180 days or more is ridiculous, so is choosing a supplier that houses its workers in buildings that should be condemned (which are doomed to collapse like Rana Plaza), that allows workers into a mine without adequate safety gear, that uses wide-spread clear-cutting that will clearly harm the local environment, or that pays its workers so little that they can’t afford to keep a roof over their head and eat. If we can’t agree that if the majority of the population, and in particular, the majority of the population that defines our customer base, would consider the supplier and its practices unethical that we should too, then do we even deserve to call ourselves professionals? Every professional organization worth it’s salt has a code of conduct, and most of these have an ethics clause that say we will adhere to the ethics of the industry we work in and the society we live in. If the majority of society condemns an action or a state of affairs, and, in the country we operate or sell in has laws that condemn an action or a state of affairs, how can we claim there is any debate whatsoever from an ethical perspective in regards to a supplier that takes that action or maintains that state of affairs?

Grocery Retailers Waste So Much Food It Should Be Criminal!

Approximately 1/3rd of all food is wasted in North America. (See 2013’s Thanksgiving Post.) For years, I’ve been struggling to figure out why. It’s well known that the biggest offenders are

  1. processors in developing countries who (due to financial, managerial, and technical constraints) struggle to properly store, cool, and process the food on-time to preserve it.
  2. restaurants, who discard as much food as they discard other waste (Source SI)
  3. retailers, who through bad forecasting, order too much and then spoiled food goes in the dumpster

But it is not well known that retailers intentionally over-order and waste food just to make sure their produce section looks nice (Source Spend Matters “eating the cost of wasted food and sometimes thats ok waste matters part 6”). And that is definitely NOT OK! Never, ever, ever! Not when over 13% of the world’s population is undernourished (Source: KFF and Wikipedia) and 15% of Americans, that’s right, 15% of Americans are considered “food insecure” and experience hunger in their households. (Source: FAO Washington “the new face of hunger: why are people malnourished in the richest country on earth”)

In other words, the produce that is being wasted by retailers as an “acceptable loss” might be enough to counter a sizeable portion of the undernourishment problem in America — and that’s not counting the waste by restaurants and food processors! There’s no excuse for this. Not only are people going hungry, but we’re paying more for our retailers’ stupidity.

Why do they do this? According to Spend Matters, retailers believe that having a good-looking produce section that is fully stocked with fresh products is essential to get customers in a store. And that having more products than needed rather than running out tends to be better for business. While both of these statements are true, this doesn’t mean that a store has to considerably over-order to avoid stock out or waste food.

Not only has computing power increased dramatically since the pentium was released twenty years ago, which allows large amounts of historical data to be processed on the Procurement Manager’s workstation, but so has the accuracy of demand prediction models which can very accurately predict demand for any product at any time of the year, and even take into account the impact of sales, market shortages, and market recalls. A 1% buffer in these models is more than plenty to prevent stock-outs 99% of the time if these models are properly applied on enough data.

Furthermore, the standard practice of marking the produce down 50% when it starts to rot in hopes in that it will sell before it is unconsumable is stupid. When you see rotting tomatoes, moldy oranges, or squishy cucumbers, you’re not even going to buy them for 75% off. Stores have to smarten up and do two things.

  1. Mark produce down when it’s shelf-life gets down to 72 hours or less.
    Considering we also have very accurate models of shelf life under given situations, this isn’t hard to do.
  2. Donate produce with a shelf-life of less than 48 hours to a local shelter on a nightly basis.At this point, the store is taking a 75%+ write-off anyway and it knows it. It would be much better to donate the food, and get a charitable donation tax credit, when the food can still be safely used than throw the food in the waste bin. Especially since the retailer could use this to get a brand boost if it advertises that it donates X$ in food each year to the local food bank.

    No consumer expects every item to be in stock every time they go to the store with the never-ending stream of supply disruptions we experience these days, so the game has to change. And no consumer wants food to go to waste if people in their own city are starving! It’s not about the most fresh produce, but the most responsibility — and these days, a little goes a long way and the first store or chain in a region to capitalize on this is going to get a big brand boost.

And if you are a eco-nut who wants to protest something, here’s a cause. Protest grocery stores that build waste, or shrink, into their model without making sure that such food doesn’t end up in the dumpster. While some sustainability problems aren’t easily addressed, this one is.