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After Supply Chain Transparency Comes What? Social Responsibility, Apparently

Electronic components without hazardous materials? Check. Factories that recycle water and reduce the carbon footprint? Check. Cargo protected against terrorist plots? Check. Confirmation that my supply chain and supply chain partners do not engage in slave labor or human trafficking? Huh? Yup. That could be a new job for high-tech supply chain executives, too.

Although this last issue is something many companies have had to confront as the public becomes more aware of these practices, a bill recently approved by the California Senate and Assembly and awaiting Gov. Arnold Schwarzenegger’s approval or veto puts it back on the radar.

If signed, about 3,200 global companies — predominately retailers and manufacturers — with revenues of more than $100 million would be required to publicly disclose on their Website policies they have in place to ensure that their supply chains are free of slavery and human trafficking activities.

Regardless of the specific outcome of this one bill and the effect it could have on the global electronics industry, companies can’t ignore the bright red warning flag being waved: Consumers want businesses to prove they are good citizens.

As noted in a recent column by Elizabeth Moss Kanter in the Harvard Business Review , companies and executives will be held accountable for how they instill end-to-end responsibility into their supply chains and how their actions affect society’s well-being over the long term.

Apparently, in a trend gaining greater momentum every year, consumers, environmentalists, and government regulators have lost tolerance for finger-pointing blame tactics and demand corporate stewardship.

Of course, it’s reasonable to expect companies to be responsible entities. Boardroom decisions clearly influence more than one company’s bottom line. Companies should monitor how their operations hurt or help the world, and take a leadership position in fixing potentially harmful shortcomings.

I do wonder, though, how the electronics supply chain will keep pace with the amount of social change that appears to be surfacing worldwide. These shifts, which will come to life through grassroots activism, newly adopted laws, or collective business resourcefulness, could push supply chain limits even further and, undoubtedly, make the entire process more complex.

Perhaps, a way to manage this lies in further evolving already-deployed end-to-end supply chain transparency tools. Not long ago, many companies latched on to the idea of end-to-end supply chain transparency: the profound need to know exactly which products were in the pipeline (from suppliers’ suppliers to customers’ customers) at any given moment.

To achieve this, companies spent fortunes on IT systems designed to link global business partners and time-critical information in a dynamic way. Logically, the theory held that companies would analyze this data and use it to better manage uncertain supply and demand fluctuations, control inventory letters, and boost their supply chain’s responsiveness to changing market conditions.

Maybe it’s a stretch, but if, hypothetically, all this supply chain information now resides somewhere and follow-the-sun productivity conversations are the norm, couldn’t supply chain executives extend those capabilities to be more socially conscious? I don’t know the answer to that question. But, I’d like to think that those million-dollar systems could do more than shuffle parts from one facility to another.

What do you think? What’s your company doing to influence end-to-end supply chain responsibility?

20 comments on “After Supply Chain Transparency Comes What? Social Responsibility, Apparently

  1. bolaji ojo
    October 1, 2010

    Having a finger to the wind can be criticised in politics but in business it should be a part of corporate strategy. Any company that waits until regulators tell it to be alert to its responsibilities to the external society has already fouled up. Most high-tech products, including those meant for industrial applications and manufacturing equipment, will eventually touch the general public at some time.

    Companies must therefore be alert to the meeting points between their products and the rest of society. I am aware many of the top high-tech companies engage actively with the communities around them and also impress social responsibility on their suppliers. Several companies come to mind here and they are among the biggest in the industry. It seems the larger companies can afford the cost of “social responsibility” but how about smaller enterprises?

  2. tioluwa
    October 1, 2010

    Reall this is a bigger problem with small companies and small companies make up the larger number. These companies are struggling to get their foot in the market, trying to cut costs as much as possible and maximise profit. in this kind of situtation, social responsbilities hardly come to mind, rather, even staffs get over worked and under paid.

    When it's all about business and nothing more, these kind of problems come up but when but the managers, and workers know their in whatever they do to make a difference and create value first and of course money in the process, no matter how small or big the company, social responsibilities come naturally

  3. Barbara Jorgensen
    October 1, 2010

    Even large companies have problems following the contents of every component in the supply chain. When it comes to vouching for the amount of a substance in a component, large, global distributors, for example, may have to certify that to the best of their knowledge a shipment is substance- (lead, mercury, etc.) free. These companies developed systems dedicated to the sole purpose of tracking such data to assure RoHS compliance. It's hard to imagine what kind of challenges small electronics companies face.

  4. Eldredge
    October 3, 2010

    Corporate social responsibility is a good thing, but is it always effective or beneficial to require it through legislation? Does this benefit the corporations that can create the best website, rather than practically addressing the real issue?

  5. sandhu233
    October 3, 2010

    Gone are the times when corporations used to wait for regulations to be put in place that forced better practices in terms of social responsibilities, etc. The response of the corporations to move to trans fat free foods was not a result of legislations or regulations, but a clear response to externalities !!

     

    As bigger corporations are better equipped to respond to these externalities, and use the good intentions behind corporate social responsibility as a marketing vehicle, smaller companies will have no choice but to follow or even take a lead in such initiatives.

  6. Hawk
    October 3, 2010

    Often companies are forced to pick between immediate profit and long-term viability depending upon whether they are publicly owned or privately owned. The article did not address this. Are public companies more inclined to respect “social responsibility” than private companies? I think so. Size also matter. A big or multinational company has to deal with numerous publics across various countries with various regulators, audiences, suppliers, customers and who knows who else, it must naturally respond to all of these groups.

    A smaller company may feel less obligated to comply with numerous and what may be clearly ill-defined expectations from the community. It's easy to determine which of the written “social” regulations a company must comply with. The answer is simple. All of them. However, how does a company, big-, small- or medium-size decide which of the unwritten, non-legislated rules of society it must comply with? There is a cost to “social responsibility” and the decision of what to pay and how much to pay is an important one. Rules and regulations may be onerous but at least company executives would know what's expected of them. It's wrong to expect companies to comply with our unwritten expectations.

  7. Violet
    October 3, 2010

    How right you are. Would be like telling a football team to make a play and then changing your mind 20 times over in the midst of the play! Your point is quite valid in that companies must adhere to the laws of all of the nations they operate or sell in, not just the US. I do wonder though, had it been any other state in the United States trying to pass that bill – would it have passed, or come as close to passing as it is?

  8. Barbara Jorgensen
    October 4, 2010

    The flip side of the legislative issue–whether a company should be forced to comply vs. voluntarily do the right thing–is enforcement. Although I haven't read the law, what body will enforce compliance? What is the burden of proof? If companies are required to disclose their sources of material, how do enforcers prove otherwise?

    Any feedback appreciated–thanks!

  9. tioluwa
    October 4, 2010

    A phrase from the post states that “Consumers want businesses to prove they are good citizens”

    I wonder what we really want to be as business people?

    Just Good business people,

    or Good citizens as well

    Now is it possible to be both and still make the kind of profits some companies are making? cheap labor has helped economies like china develop (it even contributed to India being able to meet up with its deadline for the commonwealth games, with Children joining the work force along with their parents)

    For those who meet all standards, is it doing just enough to meet the standards and nothing more, or is it living a lifestyle of responsibility to humanity and the environment as we do business and make money?

    I think that is the question to be asking.

  10. Jennifer Baljko
    October 4, 2010

    I also wonder what is the cost of social responsibility for all companies, small or large. How do companies translate consumer loyalty into revenue or profit margin calculations, for instance? I'm curious to see if companies will share their formula for assessing social responsibility trade-offs, and what immediate and long-term rewards have been generated by making social responsibility part of the overall strategy.

    On the flip side, I have a hard time imagining all consumers consistently hold all companies socially responsible. Consumers may buy organic vegetables grown a 100-miles from their house, but drive a gas guzzling SUV to the local's farmers market while following the directions of a GPS system imported from China. Consumers are a fickle lot. How do companies know when and if they will be win or lose customers to social-change fluctations? Are they developing tools to manage consumer sensitivity? Pray tell.

     

  11. Jennifer Baljko
    October 4, 2010

    Thanks Tioluwa. Your point about small enterprises trudging along to both break into the market and maximize profits is spot on as is your observation of companies that see the value proposition in this.

    But, if may speak feely, what would happen if a collective of small electronics enterprises made social responsibility a cornerstone of their operations, could they shift the market dynamics and create momentum in another way? While I can respect the laundry list of things big and small companies have to do on a daily, weekly, and quarterly basis to keep stakeholders (in whatever form they come in) happy, I sometimes wonder if many companies pile on excuses about a lack of money, time, or resources  instead of testing the waters with bold initiatives. Do most companies just bide their time until someone with a bigger stick  comes along and forces change?

  12. Jennifer Baljko
    October 4, 2010

    Barbara – You raise a good question? What are small companies doing to creat transparency? Obviously, multi-million dollar IT systems may be out of their reach. But, today, there all sorts of other tools that make communication and transparency easy. Maybe some social networking solutions could be tweaked to provide afforadable and effective options.

  13. Jennifer Baljko
    October 4, 2010

    Eldredge,

    Legislation, unfortunately, is often the thing that typically compels corporate change – that, and bad press. I think we're just getting to the stage where companies and executives care not only about the bottom line, but also can see the impact their products could have on society as a whole. However, simply saying they care isn't enough. Like you say, it has to go beyond the pretty Web site and well-written corporate mission statement, and become an actionable part of everyday business.

  14. Jennifer Baljko
    October 4, 2010

    Sandhu233,

    You're right in saying that external pressure can drive corporate change. If enough people read labels and stop buying trans-fat products, companies will get the message. However, I can't with a 100% certainty that the same model applies to the electronics supply chain. If big customers don't impose changes on suppliers or legislation is not on the table, few would voluntarily opt for making the necessary changes. Case in point – how many chip makers would have removed  the hazardous materials from their products if legislators in Europe,  Japan, and some US states did take a tough stand on that years ago?

  15. Jennifer Baljko
    October 4, 2010

    Hawk,

    You raise a good point. Why are public companies held more accountable than private firms? And, why does the public or legislative bodies seem to hold them accountabie? There is a gap, and it should be addressed. I'm not quite sure how, since private companies are not obligated to present their financials in the same way. I suppose consumer watchdogs would have to take on that responsibility, or internal staff members would have to blow the whistle when their companies commit egregious acts.

    And, yes, legislation, for good or bad, does at least spell out collective social expecations and provide companies with a timeline for changing internal policies or structures.

  16. Barbara Jorgensen
    October 4, 2010

    That's an excellent idea! Many small manufacturers don't have the bodies and/or resources to keep on top of regulations let alone demonstrate their adherence to all of them. I think most organizations want to do the right thing, the caveat is, how much will it cost? Case in point: a small company will not only save $$ but be a better world citizen if it transitions all its facilities over to solid-state lighting. But this means more than just changing lightbulbs, it requires an infrastructure overhaul. A lot of consultants tell me it's a tough sell to get companies to make the investment. Taking the overhaul (or the IT system) out of the compliance equation would eliminate a major barrier.

     

  17. Jennifer Baljko
    October 4, 2010

    Violet

    I agree… measuring sensitivity to worldwide issues is a tough job. Every region has their own hot button issues, and the debate about to educate the global masses about these injustices could last for weeks, months, even. Obviously, things come in waves and touch the collective consciousness in different ways. Lacking universal legislation, companies have to pick-and-choose what issues they internally can address with their supply chain partners. I would like to know what hot button issues they follow the most, what geography has the most influencing in affecting corporate social responsibility, and how companies engage with community to educate themselves about what's going on.

  18. Jennifer Baljko
    October 4, 2010

    Right, Barbara. Enforcement – that's the  toughest part. A law is only worth the paper it's written on. The real test comes from how well society holds people/corporations accountable for their business choices, operational impact, corporate shortcomings, or delibrate errors.

  19. Jennifer Baljko
    October 4, 2010

    Tioluwa,

    Your question is the $64,000 question, isn't it? Good business people or good citizens? Hmm.. I would vote for a combination of the two.

    In reality, most companies would do the minium to meet the standards. It's too expensive to do more than the minimum in one sweep. Hopefully, though, the minimium standards would be a constantly evolving targeting, advancing in phases as those levels were met; there will always be room for improvement and improvement can come by taking the slower and steadier path. In the world according to me (i.e. if I was queen of the planet, and I had some power to wield in how companies and individuals behaved), I would take a lesson from the social entrepreneur work that's really starting to take hold globally. Across the world, social problems are being addressed, and to some extent solved, with the same entrepreneurial spirit that made (and still keeps) the technology industry great. What can't the electronics industry do for the environmnet, for instance, what it did to the mobile phone or PC this last decade or so? The way I see it, there can be a balance between profit generation and positive, empowering social shifts.

  20. Ashu001
    October 10, 2010

    Dear Friends,

    My first question is how does a State which struggles to make ends meet year after year after year,throw more obstacles in the path of existing businesses?? When logic would dictate that California needs to do the most to reduce Regulation(thereby attract companies to California and reduce the huge unemployment problem in that state).

    For more details on this,please see below link on how companies are ditching California in record numbers…

    http://nevadanewsandviews.com/2010/08/25/companies-fleeing-california-for-utah-over-confiscatory-tax-rate/

    I am not saying this current law is a bad law-It makes sense but when it comes to choosing between  Going Hungry & eating Two square meals and being labelled as so-called Slave Labor,most people in the developing world  would choose to do whatever it takes to get Two square meals in front of them.

    Remember,not all countries have generous Foodstamp subsidies & unemployment insurance like the United.States has(Its a different matter that America can't afford them either,but that's a topic for another blog…),

    or the other completely idiotic rule passed by California's legislature  which states that Gasoline Prices in California would rise to over USD 10/Gallon(yes the Legislature passed this law too..) over next 5-7 years(through “Gradual” increases in Gasoline Taxes) ,the idea being that it will help pay for Public transportation improvements.The politicians in that bankrupt state can't even lie properly now.They are doing it just to ensure that they keep the Public sector Unions (who are on bloated salaries and pensions)on their side…

    Regards

    Ashish.

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