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Three Big Supply Chain Trends for 2011, Part 1

I was impressed when the historian Simon Schama published a book in 2008 entitled The American Future, which was in fact an entertaining yet authoritative look at the American past. In a similar vein, we might expect to see the 2011 trends of sustainable supply chains in the seeds sown in 2010.

A good place to start is with three thorny issues where tensions were building and no resolution was achieved: the unresolved attitude of Chinese companies to sustainable supply chains; the tension between product and corporate sustainability focus; and the inability to integrate social and environmental criteria in a coherent manner.

In 2010 more than 46 companies in the electronics sector had listed their brands on the Website, Electronics – Tool for Accountable Supply Chains (E-TASC), launched in 2007. This online database permits companies to invite their suppliers to measure their performance on environmental, social, and governance issues using an online questionnaire, scorecard, and various capability-building resources, and to share this data confidentially with their customers.

Only four of the full subscriber brands were Chinese, whereas the majority of the 1,700 of their suppliers were from the region. Three of those brands listed in the last year, so the trend may be improving. In matters of sustainable supply chains, China’s 2010 legacy was a passive one.

Why might this change in 2011? The fallout from incidents like the factory suicides at {complink 2125|Foxconn Electronics Inc.} is still being evaluated, and change will continue to follow at company and industry levels. But this alone will not be enough to change the attitude of China towards the bottom line of sustainability, for several reasons. First, China is driven more by opportunity than risk (arguably, its less well known brands are also less exposed to the effects of reputational risk). Second, many brands don’t know where to turn for alternatives. And finally, China is unwilling to kow-tow to Western norms without question.

China’s brands may however start to be more attentive to risk as their global exposure grows, mirroring those of companies in neighboring Taiwan, including {complink 38|Acer Inc.} and {complink 500|AsusTek Computer Inc.} Competition may also increase. One of the most popular discussion threads in industry social media in 2010 following the Foxconn incident was: Does anyone know a good alternative EMS to the usual ones in China? Of course, there are alternatives. However it would be naïve to think that other destinations do not often share China’s exposure to complex social and environmental challenges.

But perhaps the most significant driver of change will be governance. In 2010 the Global Reporting Initiative expanded its Chinese operations on grounds of rebalancing governance and sustainable supply chain initiatives. Organizations like E-TASC would do well to follow suit. Only by having a real seat at the table and taking an active role will China become a full and constructive player in the world of sustainable supply chains.

In the second and concluding part of this series, I will explore more of the supply chain challenges left over from 2010 that will affect manufacturers in 2011, including tensions in the system arising from conflicts among countries and the need to develop a sustainable environmental culture.

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