Sean Ansett
Managing Partner, At Stake Advisors

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Companies with global supply chains face significant challenges in order to ensure that their suppliers make safe and quality products and that they are produced on time and at competitive prices. In addition, stakeholders increasingly expect companies and their business partners to respect and implement national and international labor and environmental standards in their workplaces. This challenge becomes even greater when companies source suppliers from countries without adequate government enforcement.

While the policing model of the past has made some positive improvements, it has been relatively unsuccessful at identifying the core issues. This has created a duplication of efforts, contributed to a proliferation of codes of conduct that create confusion, and has largely been an ineffective use of resources.

Adding to the dilemmas are some unanswered questions including: How will competing companies in the growing economies of Brazil, Russia, India and China manage their supply chains in relation to international labor standards? Do consumers see the value of investing in supply chains and, if so, are they willing to potentially pay more?

Today’s leading companies and multi-stakeholder initiatives are changing tack and beginning to focus their efforts on five areas:

• Improving management systems
• Developing effective complaint mechanisms and workplace remediation platforms
• Evaluating internal purchasing practices to determine how their own actions may negatively impact the workplace
• Increasing supply chain transparency
• Creating incentives for their buyers and suppliers based on social and environmental performance criteria

This shift in approach requires collaboration from a broad set of stakeholders because no one sector can effectively achieve this alone.

There are no silver bullets. Companies should learn from the hard lessons of the past, avoid the pitfalls that others have experienced and consider targeting resources on building internal capacity to work in partnership with NGOs, trade unions, multilaterals, peer companies and industry and trade associations to tackle these complex issues together. Moreover, companies and their stakeholders should collectively engage governments and encourage them to enforce their laws in order to make decent work a reality and to create a level playing field for multinational companies and for those suppliers competing for their business.