Wal-Mart to go far and wide?

On Monday the Financial Times topped with a story on Wal-Mart, which is starting a pilot with thirty companies in seven product categories to get them “to measure and report their green house gas emissions, in the biggest move to disclose emission from businesses.” Wal-Mart wants to be able to compare suppliers based on their emissions efficiency, and they draw a direct line from reducing emissions, to reducing energy use and thus cost among their suppliers. Eventually the retailer wants to role out the program to 68,000 suppliers.

It seems that the main supply chain initiatives fall into one of two categories: either they go far down the value chain of a product, from the base of the pyramid to the top, completely disclosing on a product; or they go wide, casting a wide net and engaging many direct suppliers of the company and dispersing the initiative across more suppliers, but not as deep.

The article is interesting because it lists efforts by Coca-Cola (also part of Wal-Mart’s pilot),Cadbury Schweppes and Kimberly-Clark trying to do the former, measuring the carbon footprint of certain products, whereas the Wal-Mart initiative and currently also the GRI/GTZ “Transparency in the supply chain” project do the latter, engaging first tier suppliers.

Looking at this division, it is interesting to see that brand name companies are looking to make certain identifiable products stand out as completely transparent, whereas retailers lean more towards being “generally responsible” and engage with their direct suppliers, which, of course, are quite often said brand name companies.

Regardless of preference or relative incentives, however, it is important to choose the right approach for what you want to measure. As far as emissions go, it makes sense to go as far down the supply chain as possible: the big emissions are usually at the bottom of the value chain! EarthNews’s Michael Burnham rightly remarks that “To reduce its indirect emissions of carbon dioxide and other Earth-warming gases, Wal-Mart may have to influence companies several layers deep into its supply chain.”

You can start by going far or wide but to really measure emissions in a significant way it will be relevant to end up doing both.

Should Adidas do what Reebok did?

 

In 2002 Reebok, the sportswear company purchased by Adidas last year, experimented with the setting up of worker’s unions in China. They were carefully applauded by some but also criticized for interfering so heavily in their suppliers affairs in order to “appear good”.

 

Recently, Peter Lee, a labor activist, investigated one of these factories five years on, just before the unions reps were due for reelection. The report reflects some of the disappointment among workers with the union, which only seems to organize social events and barely represents the workers. The union will likely not hold an election but instead appoint new members itself, including the unpopular union leader.

Stephen Frost, writing for Hong Kong based CSR Asia Weekly cites this report, openly asking whether it could really be expected that anything else but this would happen. Worker’s unions should be worker owned, not externally implemented or demanded.

Of Reebok’s role he says, somewhat harshly perhaps, that Reebok’s Chinese Trade Union Experiment is yet another example in a long line of examples that demonstrate how workers’ aspirations are repackaged into forms that suit external agendas.” What can a company do in environment were organizing an independent labor union is already difficult, if not impossible?

He answers that the new client Adidas should do everything within its power to make decent work possible, such as ensuring decent workplace conditions and place orders in such a way that the factory can actually comply with local labor law.  This would allow somewhat normalized relations where industrial action doesn’t automatically entail missing a very tight order deadline.

I would tend to agree with this. A union should be independent and not set up under the auspices of a client. This, of course does not stop the necessity of an enabling environment, and a clear picture of the issue suppliers and their workers are facing. Arguing along the lines of Oxfam’s Offside! Report that transparency is key in this respect.

More and more brand companies are releasing their lists of suppliers, but “Transparency does not, however, end with the release of supplier addresses”, companies will still be asked about their sustainable supply chain management efforts. People will want to know about the actual improvements being realized for workers, or indeed, what improvements workers can realize for themselves, through unions. I think that getting this type of information and presenting it is part of what a supplier sustainability report can do, on its own, or as part of the brand company’s communication efforts.

Make “doing the right thing” concrete: Report!

With the recent recalls of toys and other products made in China (Mattel issued its third recall last week), the “made in China” brand is taking a hit. In a column in Ethical Corporation Magazine by Chandran Nair he rightly asks: “why is this so surprising?”. Chinese manufacturing thrives on low prices and often low quality, producing for US and European companies. Pressure for lower prices are an invitation to cut corners.

His main argument is that despite outrage in the West there is clearly a shared responsibility between the government and buying companies: “outsourcing responsibility doesn’t work”, to quote the title of the column.

In the case of lead paint in toys and loose magnets, the flaw was caught relatively easily: it was something that could be tested on the products themselves. What about economic, social and environmental issues which are also under pressure due to a similar mentality?

Mr. Nair perceives that “[t]he situation presents challenges with a strong moral core that rests on individuals and companies doing the right thing.” The solution he presents is the extension of Nike-style full disclosure of suppliers: “Such lists invite partnerships that pave the way for full, open co-operation on labour, environment and business issues.”

In many sectors such transparency is very feasible. To add a specific step to Mr. Nair’s train of thought: sustainability reporting by suppliers could be a great tool to start dialogue and partnerships. This will benefit not just product quality and safety, but will also start to address the social and environmental issues very concretely.

“Doing the right thing” is premised on knowing what’s right. A reporting process is a way to find out and plan and communicate how to move forward.

Read Chandran Nair’s full column here:

http://www.ethicalcorp.com/content.asp?ContentID=5359

Foodmiles taking off

The Dutch newspaper Trouw ran an article today stating that the French supermarket company Casino will start informing its customers about the foodmiles (or kilometers) of their house brand through labels (Trouw, September 4th 2007). The labels will be color coded and the recyclability of the packaging will be stated as well. They expect to have all of their 3000 products labeled by end of 2008 and have already taken action on some products: a cod filet that traveled 27.000 (!) kilometers before arriving at the store was taken out of the range. I haven’t been able to find any confirmation of this initiative in other news sources.

Several other supermarket chains and retailers are exploring similar schemes, Tesco announced an initiative to start reporting the carbon footprint of the 70.000 products they carry back in January (The Guardian January 29th 2007), but have not implemented it yet due to the complexity of the measurement. Another illustration:Timberland, the US shoe brand, has looked into reporting the carbon footprint of their products. The difficulty they encountered was that they’d have to measure all the way down to the cows, which the real base of their supply chain and the largest contributor to the carbon footprint (Environmental Leader, March 28^th 2007). One advantage Casino has is that they own their own distributor, Easydis.

With these labeling initiatives care should be taken to distinguish between foodmiles, being the distance a product (including all the separate components) traveled and the carbon footprint, which takes into account emissions of a particular mode of transport as well as the bulk and weight of the product. Laudable as they are in providing some much need transparency for consumers, the way in which such a label is implemented and what it will cover will be something to keep a sharp eye on once the system is in place.

These initiatives are a sure sign that green consumption is on the rise and major players see it as having great market potential, with Tesco accompanying their January 19^th announcement with a £ 500 million (€ 740 million) pledge to turn “the fringe green lobby into a mass consumer movement” (The Independent, January 19^th). And, coincidentally, today is the annual Dutch “Sustainable Tuesday”, a reference to the 3^rd Tuesday in September when the cabinet budget for the year is traditionally announced. The theme? Putting Sustainable Consumption on the Menu.