Category Archives: Corporate Social Responsibility

Lessons from Walmart on corporate social responsibility

Walmart has taken some huge steps over the last few years to position itself as a socially responsible corporation, and recent stories suggest how difficult it can be to choose a virtuous path.

We know that Walmart was part of an effort to address the horrible tragedies in the garment factories of Bangladesh. The company hired a firm to audit the conditions at its supplier factories, and it recently posted on its website the reports on 75 different factories.  That’s a remarkable act of transparency that puts some weight behind the company’s commitment to changing conditions in the garment factories. Women’s Wear Daily described the action as the first among retailers in the Alliance for Bangladesh Worker Safety.

Countering that positive note, however were the claims from a European consortium of clothing companies that the Alliance was not doing enough because it was simply offering loans to make factory improvements while European firms were making outright grants. The Europeans called it essentially a case of the Walmart and other American companies riding on their coat-tails. Here’s The New York Times coverage.

The situation suggests why it’s so difficult for many corporate leaders to launch and maintain socially responsible initiatives. You try to do the right thing to get a controversy behind you, and it only raises expectations. The discussion doesn’t end, it merely changes focus. The lesson here is that the reasons for corporate social responsibility have to go deeper than scoring PR points. The scrutiny doesn’t stop when you announce a plan to “do right,” it only intensifies.

Supply Chain as Marketing Message

We have talked a lot about how important supply management has become to advance the strategies of the overall enterprise, and here’s a case in point. Hotels now routinely promote their onsite recycling and energy conservation initiatives to guests. (e.g. “Please hang up your towel in the bathroom so we don’t have to wash it after one use.”) However, a San Diego Courtyard Marriott has taken that a big step further by promoting the sustainability of its supply chain. Here’s the release from the Courtyard San Diego Rancho Bernardo.
By promoting it with a news release, the hotel clearly calculates that one of the returns it expects to get from its supply chain decisions is more guests and more top line revenue.
The situation does raise issues about what the standards are for calling a purchase “sustainable.” When the term is being used as a selling point, there is always a temptation to relax the standards. But that’s an ongoing question. The message today is that the supply management isn’t always about lower costs — it’s also a driver of higher revenue.

What will it take in Bangladesh?

Nine more garment factory workers died in a recent fire in Bangladesh, reminding us that conditions in the industry are still challenging. According to some reports, the factory may be associated with several major retailers.
Two different clothing industry alliances have formed to address the safety of Bangladesh garment factories. This tragedy underscores the urgency of the situation. If retail companies are hoping they can regain consumer confidence by simply announcing a program, with only weak commitments for implementation, they could be badly mistaken. It’s way to soon to expect any results from the alliances’ efforts, but the clock is ticking.
Meanwhile, it’s interesting to see that some organizations are proposing to collect information directly from workers as a way of monitoring compliance to safety rules. The posted a report on those approaches. If reliable information direct from the factory floor becomes available, it would be a powerful tool to ensure compliance to safety and other work-related standards. The challenge there will be generating information that is, in fact, reliable and relevant. We use online survey tools in our consulting and professional development practice, and it takes careful thought and significant effort to design and implement those tools. It’s not a simple solution, but certainly an approach worth watching.

From Carrot Skins Come Chicken Wings

Here’s an extreme example of recycling in the food supply chain. Several New York City restaurants are sending some of their kitchen scraps to an Amish chicken farm in Pennsylvania. Chickens of a breed imported from France eat the kitchen scraps, and when their day comes, are slaughtered and shipped to those restaurants to be served to customers.

Of course, feeding table scraps to your domestic chickens is not exactly a new idea in many rural parts of the world, but when four-star chefs do it, the idea sounds like an innovation.

Here’s the story in the New York Times.

OK, so technically it’s not recycling. And the driving force seems to be taste, not sustainability, as the participating chefs are raving about the flavorful meat from the pampered poultry. Someone ought to run a total cost analysis, though. The restaurant would have to get a break in its waste removal costs because of the diversion of the kitchen scraps. The chickens are still fed soybean pellets to supplement the scraps, but not as much as they would without the recycling program, so there’s some savings there.

Perhaps the same truck delivering the chickens returns to the farm full of fresh scraps. There might be value there if the trucks had been returning to the farm empty. Nevertheless, it does seem that the transportation costs of shuttling between a Pennsylvania farm and Manhattan kitchen would prevent the program from being a value AND flavor win. You certainly can’t blame them from thinking outside the coop, though.

Possibly the next step has to be roosters on the roof, pecking in the sedum turf. Or “Central Park Free Range Fowl.” What do you think?

Unilever Reports on Its Sustainability Challenge

There are plenty of companies that are adopting sustainability policies, but not many that are taking the challenge to the same commitment as Unilever, as it is described in this op-ed written by its vice president of sustainable living.
Jonathon Atwood writes that the company in 2010 adopted a 10-year sustainable living plan that calls for “doubling of the size of the company, while reducing our environmental footprint and increasing our positive social impact.” One of the goals is to source 100% of its agricultural raw materials sustainably. Two years into the program, Atwood says its working. “Brands that made sustainable living central to their product innovation and brand purpose are increasing sales.” At the same time he claims the program is saving money and reducing risks.
These are noble, but ambitious claims. How far do you think your organization is willing to go to meet sustainability targets?  How do you even define them?
Atwood says one metric Unilever uses is waste-to-landfill, and it has hit zero percent at its headquarters and R&D facilities. Food for thought from a major food processing company.

Walmart, A Leader in Offshoring, Now Champions Re-Shoring

Walmart may be a giant corporation, but give it credit for being nimble enough to respond to a changing world around it. It wasn’t all that long ago that Walmart was leading the way offshore, with the leverage of its huge purchasing power and aggressive purchasing strategies that drove suppliers to manufacture in low cost countries.But times change, so Walmart is now committing to a $50 billion increase in purchases of U.S.-made products, and it recently attracted nearly 1,500 high level executives and government leaders to its U.S. Manufacturing Summit. GE Chairman and CEO Jeffrey Immelt used the occasion to announce that GE will begin manufacturing high efficiency light bulbs for Walmart in a U.S. facility, bringing back 150 jobs from overseas.
When you consider that the jobs coming home are counted in the hundreds, while the U.S. manufacturing jobs that went offshore over the last few decades number in the hundreds of thousands, these actions could be written off as more about PR than substance.
On the other hand, when Walmart decided to “go green” and promote compact florescent bulbs in its stores, it signaled that energy consciousness had gone mainstream. It may be the same for re-shoring. Walmart has likely looked at its supply chain and decided that in a total cost analysis, the gap between sourcing locally and sourcing offshore has narrowed for some products it sells. I’d guess that Walmart calculated the marketing value of re-shoring offsets that gap for about $50 billion of the items it sells. And that’s how it came up with a $50 billion commitment.
So I would not discount Walmart’s actions as simply marketing stunts, nor applaud them as truly patriotic gestures. There may be elements of both of those, but there’s also likely some very businesslike sourcing calculations.

U.S. Court Upholds Conflict Minerals Rules

The logic of the rules is uncertain; the process to publish them took forever; the cost of them is debatable; and their effects may be largely unintended. Nonetheless, the SEC conflict mineral rules mandated by the Dodd-Frank Act are still moving forward — propelled by a favorable ruling by a U.S. District Court judge. Here is the coverage from Reuters on the ruling.

To remind us all — the SEC rules require public manufacturing companies to try to trace the sources of any tantalum, tin, tungsten or gold in their products, and to disclose whether or not they think any of those minerals came from the Democratic Republic of the Congo (DRC). The idea is that public disclosure will pressure companies to source someplace else, because mining those minerals has helped fund DRC militant groups with a history of human rights abuses.

A consortium of business groups fought the rules on First Amendment grounds, among other arguments, and are now considering an appeal. In some ways, though, actions by Apple and other technology companies that use those minerals have already moved beyond the scope of the rules because they faced pressure from customers and investors.

And while the rules may be flawed, their intent is consistent with the ISM principles on corporate social responsibility in the supply chain. On the issue of human rights, ISM has these standards:
* Ensure and uphold human rights internally and through the supply chain.
* Respect and support protections explicitly set forth in internationally proclaimed human rights principles, declarations and documents.

Clothing Retailers Create Alliances to Improve Garment Worker Safety

Last week, seventy-five organizations, primarily European retailers and trade unions announced they have signed an agreement to improve factory safety conditions in Bangladesh. Two days later, seventeen North American retail companies announced they are joining forces with the same intent.

Both alliances, of course, are responses to the more than 1,000 workers who were killed this year when one of the many Bangladesh garment factories collapsed. A fire last year killed more than 100.

Both groups pledge safety audits, support for common safety standards, worker training and financial support to help factory owners invest in safer facilities. According to media reports, the European pact includes legally binding provisions that most American retailers balked at, which led to the two different approaches to the issue.

Only three U.S. companies signed the European pact: Abercrombie and Fitch, PVH, (the parent company of Calvin Klein and Tommy Hilfiger), and Sean John.

According to the U.S.-centric group called the Alliance for Bangladesh Worker Safety, signatories include:  Canadian Tire Corporation, Limited; Carter’s Inc.; The Children’s Place Retail Stores Inc.; Gap Inc.; Hudson’s Bay Company; IFG Corp.; J.C. Penney Company Inc.; The Jones Group Inc.; Kohl’s Department Stores; L. L. Bean Inc.; Macy’s; Nordstrom Inc.; Public Clothing Company; Sears Holdings Corporation; Target Corporation; VF Corporation; and Wal-Mart Stores Inc.

Setting aside comparisons about how effective each approach will be, it is still remarkable how many organizations are responding to the situation. As they implement policies, good guides for them are the Institute for Supply Management (ISM) Principles of Sustainability and Social Responsibility. These principles are practitioner-driven and carefully crafted to ensure application within the supply professionals’ company and through the supply base. Companies following guidance for health and safety, human rights, and labor rights principles will have gone a long way toward protecting workers throughout the supply chain.

Scrutiny in the Food Chain

It’s easy to let ourselves think that every transaction is an ethical one, but the fact is that there is constant pressure to bend the rules.

Here are two examples from the food industry that show what can happen when suppliers engage in “any means necessary” to get a contract. The double whammy of these ethical lapses is that buying organizations were not only paying more than they should, but they were also receiving food that had not passed quality tests.

From the FBI, news of sentencing in a racketeering and price fixing case involving tomatoes.

FBI Release — Sentencing in SK Foods case.

In the second case, a former president and CEO of Peanut Corporation of America and others have been indicted for selling peanuts contaminated with salmonella.

Food Safety Monitor — Peanut Executives Indicted



Like it or not, you “own” your entire supply chain

Wal-Mart, Sears and Disney have all moved quickly to distance themselves from the fire in a garment factory in Bangladesh that killed 112 people — after reporters found items with their logos and other evidence of business relationships in the charred rubble of the building. Associated Press reports that all three companies claimed they had tried to sever ties with Tazreen Fashions Ltd. before the tragedy, and that any production there had been “unauthorized.”
Two important items to note:
1. The unspoken assumption in the coverage is that consumer companies are essentially responsible for their entire supply chain — no matter how far it is from U.S. jurisdictions. Tazreen may have been a tier-three supplier, but no matter to the media. If the smoking sweatshirt has a Wal-Mart label — reporters demand a response from Wal-Mart.
2. In their rapid responses, all three companies appeared to accept that premise as they distanced themselves from the factory and its owner. In fact, according to their statements, they recognized the risk at some level and had tried to sever the relationship before the incident. In a world where communications have such a broad and rapid reach — that’s the only prudent approach. Like it or not, it’s best to know your product’s entire supply chain – from its beginnings as raw material to the time it hangs in a customer’s closet — and be prepared to manage risks of any kind throughout it.