One of the premises of the Transparency in the supply chain project is that MNEs partner up with their suppliers to assist them in making their reports. The MNE buyers, as experienced reporters, one of the main stakeholders and important client are seen as ideal candidates to fulfill this role.
Whereas the 90’s saw a huge wave of outsourcing, of operations and risk, we are currently seeing something of a reverse trend. Companies are integrating again. They’re not internalizing the tasks they rid themselves of, but they are increasingly only sourcing them to a tighter circle of trust suppliers and subcontractors and communicate with them more intensively.
Conceptually the project is based on this trend among leading companies to consolidate their chains and communicate with them more intensively. Sustainability performance is becoming more important for an MNE to communicate on, so it aught to become more important for its suppliers to communicate on as well.
To pick one example from our project, the Otto Group, has buying houses in Bangladesh, Hong Kong and Istanbul. There are people responsible for CSR in these offices and they work closely with Systain, the sustainable business consultant also involved in the project, which itself was formerly part of the Otto Group.
This consolidation is more than just a longer term commitment to certain suppliers. In another example, Nike’s Hannah Jones points out that they had sourced from the soccer ball factory in Pakistan for ten years before they terminated the contract when they found violations. Genuinely engaging with the supplier and trying to build some openness and trust in the relationship can work for both the buyer and the supplier.
The trust built up between key suppliers and Otto is part of what convinced some of these small companies to join in the project in the first place and they are starting to recognize its value along the way!
October 19, 2007 at 11:41 pm
I agree Joris, we are going to see a large increase in supply-chain reporting in the next 1-2 years, and that will be instigated by the buyer companies.
There were several instances of large scale recalls in 2007, including Menu Foods, Colgate-Palomolive and Mattel (being the most infamous). The impacts of these recalls are still being felt, and I recently read that the Menu Foods recall has already cost the company $55 Million and that is only over an eight month period.
Incidents such as these will no doubt bring more attention to the issue of supply-chain reporting as suppliers will be held to higher and higher levels of accountability and need to build the case for why buyers should contract from them rather than their competitors.
Cheers,
Stephen Albinati
http://zumer.wordpress.com
October 22, 2007 at 3:23 pm
In supply chain reporting, I think the goal should be - as stated in the initial blog - to define the boundary wider and include indicators of suppliers in a sustainability report of the buyer company as well.
But what I’m missing till now in GRI is, how supplier reporting can be handled in the phase until suppliers indicators can be integrated. For example: what is the economic effect in supplier regions, what standards are used, do suppliers receive technical assistance, how many (independent) audits have been made on supplier sites, what were the problems found, what were the corrective actions etc. (as for ex Nike or Adidas do in their reports).
The trajectory now taken of GRI - to foster the proper reporting of suppliers - means also a little giving the responsibility further down the chain. And is also very difficult for big companies with so many suppliers. There are some good examples of companies to overcome this bridge to the long term goal mentioned at the beginning. But until then, other indicators would be helpful.
Best wishes,
Piera