By Randy Weston
Public demands for more socially- and environmentally-conscious products have made corporate social repsonsibility (CSR) a top priority for many companies. But forward-thinking companies are doing more than just adding "green" products to their mix or giving money to charity. They're integrating social, environmental and economic value into their operations and throughout their extended supply chains.
Lessons in this sustainability transformation were presented at a recent event at the Stanford Graduate School of Business co-sponsored by the Global Supply Chain Mangement Forum, the Center for Social Innovation, and AMR Research, "Collaboration for the Greater Good: Social and Environmental Responsibility in the Global Supply Chain," where companies like Levi Strauss, Nike, and Natura shared their stories.
Collaborate for Maximum Influence
It really does take a village, or an industry, to substantially change socially unacceptable business practices. The strategy has been particularly necessary when it comes to the cultivation of raw materials, which are often too far up the supply chain for many companies, such as in the consumer products (CP) and electronics industries, to control themselves. Whether it's a computer maker trying to ensure metals like tin or tungsten aren't coming from the Democratic Republic of Congo, where mining proceeds are fueling a bloody civil war, or clothing makers attempting to weed out cotton from Uzbekistan, where the government takes children out of school and forces them to work in the cotton fields, being an industry-leading brand often isn't enough to affect change. Companies need to band together, often with nongovernmental orgnaizations (NGOs), to not only create an effective force for change, but also to share the burden and risk among all players.
For example, despite its iconic brand, Levi Strauss constitutes only 1% of the global cotton market, giving it little clout to stop child labor practices or enforce radical change in other ways. Even trying to eliminate Uzbek cotton from its supply chain has proven extremenly difficult, says Michael Kobori, Levi's vice president of social and environmental sustainability. The cotton supply chain is extremely complex, with the raw material traded numerous times before it's bought by a mill. And with Uzbekistan being the No. 3 exporter of cotton in the world, tracing the cotton that speicifcally comes form the Central Asian nation is next to impossible for the brand companies at the opposite end of that supply chain.
The problem needs to be addressed further upstream -- at the cotton-buyer level and at the source itself, where cotton is produced. The Better Cotton Initiative (BCI) was formed to address these issues. Through BCI, Levi linked forces with NGOs and industry heavyweights like Wal-Mart stores, Ikea, Marks & Spencer, H&M, and Tesco to pressure Uzbekistan's government to change its ways and allow monitors into the country to assure compliance.
In the meantime, individual participants are demanding their suppliers stop buying Uzbek cotton, with the most powerful of these orders coming from Walmart. The retail giant did more than just ask its supplier to comply, it demanded they track and report the source of their cotton. As Gertner has seen in other supply chain areas, Walmart's mandates can shake up the entire retail and CP industries. Its reporting mandate is already reverberating throughout the industry and forcing transparency for everyone. Imagine the power an industry can have when it bands together to affect change up and down the supply chain!
The impact doesn't stop at labor practices. By forming industry coalitions, companies can share best practices throughout thier supply chains to improve everyone's lot. For example, the BCI is working directly with farmers around the world to boost farm productivity (by 60%) while reducing chemical and water consumption (by one-third each), showing that social welfare is good for business and great for improving productivity. Companies need to look at the long-term benefit of their decisions, not just the short-term payback, for maximum value.
The cotton example clearly illustrates how social responsibility is a collaborative effort that requires companies to be bold and take the lead. It requires them to join together on a common goal to not only create a more effective force, but to level the playing field for all. Look for more on Levi's story in an upcoming case study.