BE-02-02 Supply Chain Management

Coal Power Plant, photo by Bruno D Rodrigues, http://flickr.com/photos/davipt/164341428/ (Creative Commons Attribution-Noncommercial-Share Alike 2.0 Generic). Coal Power Plant
Photo By Bruno D Rodrigues (CC)

This is lesson four of six on business ethics.

Here are links to the other five:

Lesson 01-01, Lesson 01-02

Lesson 02-01, Lesson 02-02

Lesson 03-01, Lesson 03-02

INTRODUCTION

Supply chain refers to the system of purchasing, production, and distribution involved in bringing a product or service from supplier to customer. Even though a company may not be directly in charge of carrying out all of these tasks, it often takes the blame if its suppliers put the health and safety of workers at risk or do damage to the environment.

Over the last two decades, corporate scandals have filled newspaper headlines, criticizing companies such as Nike and IKEA for their use of sweatshop labor and the electronics industry for its carbon footprint.

As a result, companies have begun implementing codes of conduct for their suppliers, and a number of initiatives have been developed to measure, monitor, and report on conditions at all levels of the supply chain.

What impact do supply chains have on business performance and the bottom line? What are the costs and benefits of supply chain management, and how can they be distributed among the brand, its factories, and workers? What is the role of governments, international institutions, media, and consumers in promoting ethical supply chain management?

INSTRUCTOR PREPARATION NEEDED

Familiarity with readings and understanding of the ethical and business considerations involved in supply chain management. 

LESSON PLAN

A. In-Class Assignment
Do: Discuss

Students should be asked in advance to follow the supply chain of something they own (e.g. laptop, t-shirt, food product). They should take note and discuss in class the following questions:

I. How easily were you able to find information related to the brand's suppliers?

II. Does the company have its own code of conduct or adhere to any initiatives regarding supply chain management?

III. How does the brand monitor and assess components of its supply chain? Is auditing information available to the public?

IV. With the information you were able to find, would you consider the brand to be ethical?

V. Comparing with the information found by your classmates, would you continue to buy from that brand? Why or why not?

B. Assignments to Be Completed in Advance
Watch:
Bob Corcoran, "GE and Doing Business in China," Workshop for Ethics in Business (May 16, 2008)

As part of a panel on business, politics, and civil society during the 2008 Beijing Olympics, Corcoran discusses GE's supplier code of conduct, the audit process, and how easy it is to spread false reports.

Read:
Cody Sisco and Joyce Wong, "Internal Alignment: An Essential Step to Establishing Sustainable Supply Chains," Business for Social Responsibility (October 2008) [PDF]

This report looks at the successes and challenges encountered by companies trying to implement the "Beyond Monitoring" vision, which is based on four key components: internal alignment between commercial and social objectives of buyers; supplier ownership of labor and environmental conditions; empowering workers to be informed and participatory constituents; and public policy frameworks that foster public-private dialogue, partnerships, and local solutions.

Rajesh Chhabara, "Wages—Working for a living," Ethical Corporation (June 30, 2009)

A living wage remains an elusive dream for millions of workers on production lines around the world. But is it one that brands can turn into reality?

RELATED ETHICS QUESTIONS 

A. Hewlett Packard is one of the first companies to publish a list of its largest suppliers, in a move to make its supply chain more transparent. Since suppliers often provide goods and services to multiple companies, is HP harming its competitiveness by releasing this information? Do companies have legitimate grounds (or even legal requirements) to keep information about suppliers a company secret?

B. Whose responsibility is it to fund the monitoring and reporting aspect of a company's supply chain? If a company pays for its own audit, would you trust the assessment to be balanced and accurate?

C. Improving labor and environmental conditions in overseas workplaces can be a costly and time-intensive process that will not produce immediate results. Does releasing information about its suppliers make a company more or less vulnerable to attacks? Do nonprofits, media, and the public understand business well enough to fairly report on supply chain challenges and expectations?

D. To what extent do cultural factors influence business ethics in developing countries? What are realistic benchmarks for suppliers in developing countries to achieve in the next ten years? What sort of resources will be needed to reduce the number of human rights violations and environmental abuses?

E. Is it fair to blame a company for the actions of its suppliers? What responsibility does a company have to influence the work environment of its suppliers? If a company breaks contracts and refuses to work with unethical suppliers, will less socially minded companies fill the void and prolong abuses?

F. Is sweatshop work better than no work at all? If a company knows that requiring its suppliers to fire underage employees will result in those employees working somewhere else under worse conditions, is enforcing standards still ethical? How can these catch-22s be avoided?

G. How much does the average consumer know about supply chain management? In 1991, Levi Strauss & Company became the first multinational to create a global code of conduct for its suppliers. Does taking the lead in supply chain management improve a company's reputation, influence consumers, and increase shareholder value? Or is it purely reflective of the ethical framework driving a company's individual decision-makers?

H. If a company is operating in a country with a weak rule of law, how much of an impact can factory-based approaches really make? Is there any way for a multinational corporation to impact government regulations regarding workers' freedoms of association, such as the right to join unions? Should companies operate at all in countries with corrupt or repressive regimes?

I. What is the appropriate role for the consumer in influencing a corporation's supplier? If you discovered that one of your favorite brands is using sweatshop labor, what would you do?

ADDITIONAL RESOURCES

Ethical Trading Initiative

The Ethical Trading Initiative is an alliance of companies, trade unions, and voluntary organisations working in partnership to improve the lives of workers across the globe who make or grow consumer goods.

ILOLEX Database of International Labor Standards, International Labour Organization

ILOLEX is a trilingual database containing ILO Conventions and Recommendations, ratification information, comments of the Committee of Experts and the Committee on Freedom of Association, representations, complaints, interpretations, General Surveys, and numerous related documents.

"Leading a sustainable enterprise: Leveraging information and insight to act," IBM Institute for Business Value (June 2009) [PDF]

According to this IBM study, today's organizations should consider developing new sources of operational, supply chain, and customer information to gain new levels of insight for meeting sustainability and corporate social responsibility objectives.

"Losing Out by Aiming Too Low: The Transformational Power of Outsourcing," Deloitte Insights podcast (April 21, 2009)

By focusing narrowly on cost reduction, companies can lose sight of the other important benefits outsourcing can offer. When aligned with a company's overall business strategy, outsourcing can actually be transformational—a catalyst for change that can improve performance and give companies a leg up on their competitors.

Portal for Responsible Supply Chain Management

This website allows practitioners access to hands-on tools and information to further develop their own approach to Corporate Social Responsibility in the Supply Chain.

Social Accountability 8000, Social Acountability International [PDF]

The intent of SA8000 is to provide a standard based on international human rights norms and national labor laws that will protect and empower all personnel within a company's scope of control and influence, who produce products or provide services for that company, including personnel employed by the company itself, as well as by its suppliers/subcontractors, sub-suppliers, and home workers.

Read More: Corporations, Ethics, Globalization, Justice, Business, Ethics, Globalization, Human Rights

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