Reports of unethical findings in supply chains are aplenty

Unethical allegations

In Ethical Corporation's new briefing, Rajesh Chhabara, our Asia Editor, states “It’s a familiar picture. Dirty Clothes, a report in April 2010 by the National Labour Committee, a US-based rights group, accused a Wal-Mart and JC Penney supplier in Jordan of human trafficking and abuse of young women migrant workers from Bangladesh, Sri Lanka and India.”

Are supply chain scorecards helping?

Traditional supply chain scorecards have made a significant impact in areas such as strengthening the rule of law and ethical norms, but have under-performed in areas such as worker awareness and temporary worker inclusion.



How can this scorecard/audit approach be improved?

Success in prevention

Sustainability professionals and consumers alike are applauding pro-active measures taken by companies such as P&G and Wal-Mart.

The UN Global Compact hosts a website on common human rights dilemmas. Through case studies, the UN hopes to educate and encourage discussion within companies.

The UN also recognises leaders, recently recommending an M&S supplier in Sri Lanka, the Brandix Group’s ‘Green factory’ as a model of sustainable production.

P&G recently introduced their supplier code.

Wal-Mart made headlines with the introduction of their sustainability index and supplier assessments this year.

More and more companies are realising faster change by openly working with suppliers to address ethical challenges.

Further reading

Recent supply chain allegations have been published by watchdog organisations such as War on Want, an Australian television company, and major newspapers such as the The Guardian, and reports of garment worker deaths due to a fire in a factory in Bangladesh.

Each of the companies featured in these reports now devote significant attention to factory conditions and preventative measures.

Read more in our Briefing on Supply Chains.

Fair trade for developed countries

Farmer Direct, a Canadian farmer-owned cooperative, is the first organisation to receive certification for a fair trade scheme that has been adapted to the needs of developed countries.

Why fair trade in developed countries?

Two farmers who have helped formalise the fairDeal explain the needs of workers and farmers in developed countries.

"People usually associate fair trade with coffee, sugar, bananas and other crops from the global south, but fair wages to farm workers and fair prices to farmers are just as much a concern in industrialized nations like Canada and the United States," explains Murray Horkoff a Farmer Direct Coop farmer-owner. "Now organic consumers can purchase fairly traded, flax, wheat, beans, hemp, peas, lentils and other crops grown in the Northern Hemisphere," adds Horkoff.

"Most of society is unaware that farm workers in many states and provinces are not protected under Federal, State or Provincial Labour laws. Since farm workers have no recourse under law they are often exploited. Therefore, organic consumers are now demanding organic foods that are fairly traded," states Keith Neu another Farmer Direct Coop farmer-owner. "We are proud to be able to offer certified organic, fairly traded food to these families."

About the fairDeal

Along with fair prices to farmers and living wages to farm workers the fairDeal, an organic industry supply chain non-profit and product seal, was founded to incorporate fair trade, pay equity and other additional ethical standards into organic agriculture.

The fairDeal is a nonprofit organisation that was developed through the collective efforts of a number of organisations in Canada and the US including the Agricultural Justice Project, RAFI and Farmer Direct Co-operative.

Farms are independently certified through Quality Certification Services, an independent auditing company with a long history of organic certification across North America.

For more information on the fairDeal is available on the Farmer Direct Coop website.

Companies look beyond performance, and now measure impacts

Our analysts have been conducting in-depth analysis on companies are now measuring more than just performance and outputs. Leading companies wish to understand the true impact of their business on local communities, and communicate it to their stakeholders.

Our upcoming report focuses on an area of sustainability that is not well-understood by companies: how to measure socio-economic impacts.

Initial findings suggest that corporate communication and reputation-building needs are driving this interest in socio-economic impacts.



Find out more

On the 14th of July, the London Centre for Corporate Governance & Ethics and Ethical Corporation will be hosting a free roundtable debate on this topic. In August, a free summary of this report will be available here.

CEOs are more optimistic about sustainability than sustainability managers

In a United Nations Global Compact (UNGC) and Accenture study of 766 CEOs 93% believe that sustainability will be critical to their future success and 81% said that sustainability issues had become part of their company’s strategy and operations.

That's good news, but is it all talk?

Well, not necessarily.

78% of the CEOs say the downturn has actually raised the importance of sustainability - a term which has also come to incorporate the reliable provision of a company's products and services to communities. According to CEOs, sustainability is just good business, and it is being recognized as a source of cost efficiencies and revenue growth.

Consumer trust again emerges as the much-discussed driving factor. 72% of those surveyed said that "brand, trust and reputation" was a primary factor.

According to the study, consumers have become the most influential stakeholder - a title previously reserved for employees. 58% of the CEOs selected consumers as the stakeholders with the greatest influence, while 45% selected employees.

Government is the third most important stakeholder, selected by 45% of CEOs.

The most affirming news is that 54% of the CEOs surveyed think sustainability will be fully integrated into business worldwide within the decade, but 80% say it will happen within 15 years.

This view contrasts with the often pessimistic discussions that have emerged among sustainability managers at Ethical Corporation events. Perhaps top management is more committed than we think.

Read more about how companies are actually integrating sustainability at www.ethicalcorp.com/csr.

Instant news service on corruption launched

Thomson Reuters, the well-known providers of instant information on global disasters, has today launched a similiar service on corruption.

TrustLaw is described as a global hub for free legal assistance and anti-corruption news and information.

Watch this site as its content develops. It may prove to be a rich source of country corruption information, case study analysis, updates on global anti-corruption conventions and free legal advice.

When will sustainability rankings become more accurate?

Macleans recently published a list of the 50 most socially responsible companies with a strong presence in Canada.

Among the leaders are Adidas Group, Ballard Power Systems Inc., BCE Inc., BMO Bank of Montreal and BMW.

Some of their CSR practices are worth sharing. However, there are a number of critiques on their methodology. This is commonly the case with corporate ranking schemes.

Yes, it is good to recognise socially and environmentally productive activities. But it is time that we stop labelling a giant corporation as an overall sustainable leader based on a few activities.

It’s time we start rewarding companies that have embedded sustainable practices into their company’s strategy, operations and culture. At a minimum, let’s put a company’s praise into context.

Does such a ranking of ‘embeddedness’ exist?

Water Footprinting versus Water Life Cycle Analysis

Water is the new environmental issue being discussed by businesses.

This does not mean that we can manage it in the same way we manage carbon emissions. Why? Well, because water is also a social and political issue.

So, how should companies measure water use, and use the findings to inform business strategy?

One camp supports the adaptation of Life Cycle Assessments (LCAs) to water

LCAs now have a standardised approach to measuring greenhouse gas emissions at the product level.

Advocates of LCA purport that we should not reinvent the wheel, and simply adapt this widely-accepted method to water.

Additional benefits of LCA for water include:
1. Quantifies impact and results in an absolute volume-based figure for which the method is more robust and incontestable
2. Allows stakeholders to benchmark competitors, and compare products irrespective of their industry or location
3. Focuses on direct impact only
4. Benefit from globally accepted method used for carbon that has clear timelines and budget estimates

In the other corner is water footprinting

Proponents for footprinting include organisations such as WWF and the Water Footprint Network.

Benefits of the water footprinting methodology include:
1. More inclusive as it includes direct and indirect water use along the value chain
2. Captures the full impact picture including type of water use, location, timing, temporal and local scarcity dimensions of water
3. Provides basis for local impact assessment and formulation of sustainable water use strategy

Here is an overview of the results of a recent water footprinting exercise, presented by WWF UK's Director of Corporate Partnerships at the 2010 Climate Change Summit.


These methodologies are not mutually exclusive. Hypothetically, a company could measure it's water LCA, and follow-up with a longer-term footprinting in order to place the findings into context, looking throughout the entire supply chain.

Read more about corporate water strategies at www.ethicalcorp.com/water.