Partnering with the wrong supplier can cost companies millions. In the electronics supply chain, if a supplier misses a shipment date, entire manufacturing lines can be left idle. The impact of such an event can be measured by productivity losses, hourly wages, per-unit prices of the delayed parts, and so on. But what if your supplier mistreats employees? How do you measure the damages of misconduct?
This is a very real problem in the electronics supply chain. Apple Inc. (Nasdaq: AAPL) has faced criticism for partnering with Foxconn Electronics Inc. Workers at the Asian EMS services provider have allegedly killed themselves because of mistreatment. The charges have tainted Apple's brand, if not its bottom line.
Risk management assessments are one way companies gauge the impact of intangibles such as a damaged reputation. This month, a group of companies are launching a method for assessing the risks associated with labor and human rights factors in the supply chain. The alliance, which includes watchdog agencies, investment groups, and manufacturers, has drawn up a list of key performance indicators (KPIs) that will be used for benchmarking.
Jon Lukomnik, executive director of the Investor Responsibility Research Center Institute, which funded the initiative, said in a press release:
Investors remain concerned about the labor and human rights risks of the companies they own. And companies know that public concern can inflict deep corporate reputational damage, result in boycotts or product recalls, and ultimately damage the bottom line. The IRRC Institute is involved with this labor and human rights KPI project to provide investors and companies with a method to objectively assess a significant risk factor that has commanded the concern and attention of many of the world’s largest corporations and investors.
A 2009 Harvard Law School research report looked at more than 2,500 global companies, including some with market capitalizations of more than $10 billion. It found that roughly 28 percent of the companies had labor and human rights policies covering their global supply chains. The near majority of European companies had such policies, the report said, with the United States and Asia lagging far behind.
According to the press release, the KPIs that are being tested include:
Code of Conduct -- issues such as child labor, freedom of association, health and safety
Supplier and Managers Training on Code of Conduct
Corporate Commitment to Code of Conduct
Suppliers with Confidential Reporting Channels for Worker Grievances
Suppliers Monitored At Least Annually for Code Compliance
Suppliers Subject to Independent Verification by External Monitors
Sourcing Countries in Which Company Consults with Civil Society Groups
Percentage of Successful Remediations of Code Violations
Readers--28 percent is indeed far from ideal, but I think that many organizations have their own workers' rights practices that are not reflected in this data. Having a standard may not only help expand the adoption of better practices, but also provide better data. Based on my experience in the electronics industry, I'd say more than 28% of companies have some sort of standards in place.
Only 28% ? . There are so many things that should be done in that direction. It is very sadness to still having bad working - conditions in nowadays. And something that I cannot get it. Why the developing technologies doesn't go together with the improvement in the working conditions ?
@Ariella, I agree with you. If they are saying that only 28% have policies and the majority of European companies have them, then that would mean the majority of the 72% are American and Asian who don't have policies. This does not bode well if you are a large American company with a global presence.
The only way companies can help these workers is to threaten to cut off the stream of money going to the business partners who don't have human rights policies.
There is always a lot of talks of Worker rights. But nobody thinks of those poor guys in the middle managment. Those production line supervisors, those middle level executives.
These middle level staff is under pressure from both sides -
on one side the workers( in the organised sector) will work as per the rules and guidelines of Worker rights.
On the other side the top managment gives them agrresive production targets.
In order to satisfy the top managment , these middle managment staff many times get themselves overburdened, take on the additional work load of their workers on their shoulders , work much more than their stipulated duty hours to meet the deadlines and are constantly under a mental stress.
Barbara, systems and supporting guidelines may be well defined, but unless and until the employees are not adherent to such systems, it may not be fruitful. This is true with all rating scales, including CMMI/ISO etc. In such situations employees are forced to adherent to the defined lines, but in most of the situation I think they are neglecting the work environment and extra efforts taken by employees in order to make sure the well defined systems are in line.
A 2009 Harvard Law School research report looked at more than 2,500 global companies, including some with market capitalizations of more than $10 billion. It found that roughly 28 percent of the companies had labor and human rights policies covering their global supply chains. The near majority of European companies had such policies, the report said, with the United States and Asia lagging far behind.
Pur another way, though, this means that 72% had no such policies. So I wonder about the "majority of European companies" here. Does that mean that the majority of these 28% were European? It would be difficult to account for a majority overall when you have to exclude 72% of the compnaies.
Five stars from me, So true. I believe that also in the Europe the code of conduct doesn't work in efficient way and new methods of "audits" for working conditions must be invented.
If you want to solve this kind of problem must consider any of negatively opinion maybe occur in the working environment and not to take action only when majorities of the reviews are bad.
Apple must stop the cooperation with the Foxconn Electronics Inc because of the fact that workers killed themselves because of mistreatment.
It is nice to have guide and process for workers. But more important is its implementation and satisfaction for one and all in organization. Many a time process is there, but people use many loop holes to bypass the subtle complexity of this. I wonder how to have a system which provides real satisfaction to workers.
Worker's rights in the United States are mostly influenced by the at-will employment rule by which "an employment relationship could be terminated by either party at any time without a reason." That is what employers use to take advantage of. As for the Asia, this is mostly due to the ruling powers ideologies. But in both cases, things will have to change in order for them to comply with the international labour regulations
EBN Dialogue enables and encourages you to participate in live chats with notable leaders and luminaries. Not only editors and journalists, but the entire EBN community is able to comment and ask questions. Listed below are upcoming and archived chats.
Archived Dialogues
Thailand Stages a Comeback Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Euro-Crisis: What It Means for High-Tech Firms Join EBN Editor in Chief Bolaji Ojo and Contributing Editor Jennifer Baljko on Thursday, July 12, at 10:00 a.m. EDT for a Live Chat on high-tech and Europe's economic difficulties.
Microsoft Surface: Potential Winners & Losers What are the implications for the electronics industry supply chain of Microsoft Corp.'s decision to launch its own tablet PC? Join industry veteran and EE Times' systems and OEM expert Rick Merritt on Tuesday, July 3, at 12:00 pm EDT for a Live Chat on this subject.
Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Peter Drucker famously said "Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window." Yet in the razor's-edge world of electronics—with a lean supply chain and just-in-time demands—the need to know the future is vital.
While no one really can accurately predict the future, we can take guidance from another Drucker saying which is the best way to predict the future is to create it.
You've heard the saying "the No. 1 supply chain risk is your people." That hasn't always been the case. But today's complex global supply chain requires a new type of multitalented employee. It's one who understands, finance, marketing, economics, is savvy with technology, graceful with relationships and can think analytically.
Where are these people? Are universities properly preparing the next generation supply chain professionals? How do train your existing workforce for these new, demanding positions?
Brian Fuller, editor-in-chief of EBN, will lead a 60-minute Avnet Velocity panel discussion that will ask and answer these and other questions swirling around today's supply-chain talent challenges.
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