SupplyChainRep Spread
SupplyChainRep Spread
SupplyChainRep Spread
Sustainability
A Practical Guide for Continuous Improvement
Second Edition
ii Supply Chain Sustainability
The United Nations Global Compact is a call to companies everywhere to voluntarily align their operations
with ten universally accepted principles in the areas of human rights, labor, environment and anti-corruption,
and to take action in support of United Nations goals and issues. The UN Global Compact is a leadership
platform for the development, implementation and disclosure of responsible corporate practices and
policies. Launched in 2000, it is the largest corporate sustainability initiative in the world, with over 8,000
companies and 4,000 non-business signatories based in 160 countries.
www.unglobalcompact.org
BSR works with its global network of more than 250 member companies to build a just and sustainable
world. From its offices in Asia, Europe and North and South America, BSR develops sustainable business
strategies and solutions through consulting, research and cross-sector collaboration. Visit www.bsr.org for
more information about BSR’s more than 20 years of leadership in sustainability.
Disclaimer
The inclusion of company examples in this publication is intended strictly for learning purposes and does not
constitute an endorsement of the individual companies.
Copyright
The material in this publication is copyrighted.
The UN Global Compact encourages the dissemination of the content for educational purposes.
Content from this publication may be used freely without prior permission, provided that clear attribution is
given to UN Global Compact and BSR and that content is not used for commercial purposes.
UN Global Compact revision project team: Anita Househam and Elena Bombis.
The revision of this guide was also made possible thanks to the input of the UN Global Compact Advisory
Group on Supply Chain Sustainability with special contribution from its ad hoc Task Force and the UN Global
Compact staff.
The original guide was written by Cody Sisco, Blythe Chorn and Peder Michael Pruzan-Jorgensen, with
significant editorial input from Cecilie Hultmann, the UN Global Compact Office staff, BSR staff and the UN
Global Compact Advisory Group members in 2010, also listed on Page 4.
Innovation Norway, Nokia and Ford offered their generous support for the development of this guidance in
2010.
Contents
Foreword 2
Georg Kell, Executive Director, UN Global Compact Office
Aron Cramer, President and CEO, BSR
Executive Summary
Practical Steps to Supply Chain Sustainability 5
1. Introduction 7
2. Getting Started on Supply Chain Sustainability 15
Developing the Business Case
Understanding the Landscape
Establishing a Vision
Acknowledgements72
2 Supply Chain Sustainability
Foreword
Since the original launch of Supply Chain Sustainability: A Practical Guide to Continu-
ous Improvement in 2010, companies have continued to extend their commitment
to responsible business practices to their value chains, from subsidiary to suppli-
ers. The business case for supply chain sustainability has evolved significantly.
An increasing amount of companies have realized the crucial importance of
incorporating sustainability requirements into their supply chain programme in
order to secure their own brand value, manage legal, regulatory and reputational
risks as well as foster product innovation and explore new markets. Moreover,
businesses consider the many rewards supply chain sustainability can deliver in
terms of creating more inclusive markets and the contribution they can make to
advance sustainable development in the spirit of the United Nations’ missions.
We hope this publication will continue to further the work of companies in col-
laborating with their suppliers to deliver tangible and lasting benefits to busi-
ness, the environment and societies everywhere.
Georg Kell
Executive Director
UN Global Compact
3
Supply chains continue to be one of the most important levers for business to
create positive impact in the world, with an estimated 80% of global trade pass-
ing through supply chains. By working together, buyers and suppliers in global
supply chains and networks can advance human rights including labor rights,
climate resilience, environmental protection, inclusive economic growth and
ethical business practices.
Since the original guide Supply Chain Sustainability: A Practical Guide for Continuous
Improvement was launched in 2010, supply chain sustainability has become main-
stream for businesses and there have been significant promising developments.
The UN Guiding Principles on Business and Human Rights have clarified busi-
ness’ responsibility for human rights in their own operations and supply chains.
We have seen advances in the way companies work with their suppliers, moving
from focusing heavily on auditing towards using new technologies and collabora-
tive efforts to engage suppliers and workers in a more equitable approach to find
joint solutions. We have seen increasing levels of transparency from companies,
publishing lists of factories, openly reporting on the social and environmental
performance of their supply chains and promoting transparency to their suppli-
ers. We have also seen unprecedented amounts of collaboration among business-
es and stakeholders in efforts to ensure that commodities, such as wood, cotton
and fish, are traceable and sustainable.
BSR continues to work with our global network of 275 member companies and
their supply chain partners around the world to develop, support and implement
supply chain sustainability towards a just and sustainable world. We are proud
to be a part of the launch of this revised guide on the fifteenth anniversary of
the UN Global Compact Ten Principles.
The original version of this guide has helped businesses of all sizes around the
world to understand what supply chain sustainability means and how to imple-
ment practices in their own business, industry and geographic contexts. The
revisions made in this updated version reflect the advancements in the field;
reinforce the core practices that are accepted minimum standards; and underline
the needed areas for improvement.
BSR is very proud to have partnered with the UN Global Compact and we look
forward to continuing to support it and its business participants around the world
to make the vision of the UN Global Compact an even more powerful reality.
Aron Cramer
President and CEO
BSR
4 Supply Chain Sustainability
In 2010, the UN Global Compact established an Advisory Group of UN Global Compact participants and stakehold-
ers to guide its work on supply chain sustainability. The role of the Advisory Group is to provide input to the overall
strategy and work done by the UN Global Compact on the issue of supply chain sustainability and to ensure that the
guidance material developed is robust and addresses the needs of business. In addition to this guide, the Advisory
Group has set up task forces to develop various tools and resources aimed at helping businesses to integrate the UN
Global Compact Ten Principles into supply chain relationships.
The advisory group is chaired by Mr. Mads Øvlisen, Special Advisor to the Global Compact on supply chain sustain-
ability and a former member of the UN Global Compact Board. We would like to thank Mr. Øvlisen and all of the
members of the Advisory Group for their ongoing support to the supply chain sustainability workstream and the re-
vision of this resource (members with an asterisk * have been part of an internal Task Force devoted to the in-depth
revision of this version of the guide):
■■ *Ms. Renata Yourievna Frolova, Head of Responsible Procurement, A.P. Moller Maersk (Denmark)
■■ Ms. Samantha Prates, Head of External Logistic and MRO Purchasing, ArcelorMittal (Luxembourg)
■■ Mr. Jonathan Drimmer, Vice-President and Deputy General Counsel, Barrick Gold (Canada)
■■ Ms. Aysun Sayin, Sustainability Director, Boyner Holding (Turkey)
■■ *Ms. Tara Norton, Director – Advisory Services, BSR (Global)
■■ *Mr. Hugh Jones, Managing Director Advisory, Carbon Trust (Global)
■■ Mr. Juan Antonio Espinosa, Procurement Director, Planning & Control, CEMEX (Mexico)
■■ Mr. Unni Nair, Supply Chain Sustainability Programme Manager, Cisco Systems (USA)
■■ Ms. Nancy Gillis, Senior Manager – Sustainable Supply Chain, Procurement and Supplier
Management, EY (Global)
■■ Ms. Maria Jose Trogolo, Senior Strategic Partnership, Fairtrade International (Global)
■■ Ms. Mary Wroten, Global Purchasing Sr. Manager – Supply Chain Sustainability, Ford Motor Company (USA)
■■ Mr. Indalecio Perez Diaz del Rio, Compliance Manager, Inditex (Spain)
■■ Mr. Ankush Patel, Vice-President and Head of Strategic Business Practice for Sustainability, Infosys Technologies (India)
■■ Ms. Beroz Gazdar, Vice President - Infrastructure Development Sector, Mahindra & Mahindra Limited (India)
■■ Mr. Andy York, Ethical Trading Manager, N Brown Group (UK)
■■ Ms. Hilary Parsons, Public Affairs Manager, Supply Chain, Nestle S.A. (Switzerland)
■■ Mr. Justin Hughes, Managing Consultant, PA Consulting Group (Global)
■■ Dr. Marcia Balisciano, Director of Corporate Responsibility, RELX Group (UK)
■■ Mr. Gustavo Pérez Berlanga, Vice President – CSR, Restaurantes Toks (Mexico)
■■ Ms. Sanda Ojiambo, Head of Corporate Sustainability, Safaricom (Kenya)
■■ *Ms. Jo Webb, Head of Stakeholder Relations, Sedex (UK)
■■ Ms. Jane Hwang, Chief Operating Officer, Social Accountability International (SAI) (Global)
■■ Ms. Rachelle Jackson, Director Sustainability & Innovation, Arche Advisors (USA)
■■ Mr. Ola Ree, Head of Supply Chain Sustainability, Telenor Group (Norway)
■■ *Ms. Monica Bowen-Schrire, Senior Advisor, Corporate Sustainability & Environment, Vattenfall (Sweden)
■■ Dr. Gerhard Prätorius, Head of Coordination CSR and Sustainability, Volkswagen AG (Germany)
Additionally, we would like to thank the following organizations, who were also part of the Advisory Group in 2010
and supported the development of the original guide:
et Norske Veritas (Norway); DiGi Telecommunications Sdn Bhd (Malaysia); Esquel Group of Companies (China); Global
D
Compact Network Spain (Spain); Global Social Compliance Programme (GSCP) (Global); Grupo Pão de Açucar – Companhia
Brasileira de Distribução (Brazil); Hewlett-Packard (USA); Hitachi Ltd. (Japan); Hyundai Motor Company (Republic of Korea);
IKEA (Sweden); Innovation Norway (Norway); Integrated Contract and Supply Solutions – ISCS (United Arab Emirates);
Philips Electronics N.V. (Netherlands); Nokia Corporation (Finland); STR Responsible Sourcing (USA); Takeda Pharmaceuti-
cal Company Limited (Japan); Tata Council for Community Initiatives (TCCI) (India); UBS AG (Switzerland); Unilever (UK).
5
1. Introduction
Purpose and Target Audience sustainability is defined as a company’s This guide focuses on
This guide is intended to help companies of delivery of long term value creation in upstream business
all sizes, both those who are new to and those financial, social, environmental and ethical partners, i.e. relation-
experienced in supply chain sustainability, to terms. This definition encompasses the role of ships with suppli-
apply the UN Global Compact Ten Principles business in addressing environmental, social ers, rather than with
throughout their supply chains and to integrate (human rights and labour) and corporate distributors, consumer
sustainability into their business strategies. It is governance issues, as covered by the UN Global use of products or end
designed for individuals with oversight of and Compact’s Ten Principles. of life issues. A focus
input on corporate sustainability, procurement “Supply chain sustainability” is the on downstream im-
and supply chain priorities and practices. management of environmental, social and pacts of supply chains
Case studies and examples throughout the economic impacts, and the encouragement may be addressed in
guide provide an overview of how companies of good governance practices throughout the future by the UN
have implemented supply chain sustainability the lifecycles of goods and services. Global Compact Office.
programmes. Advanced practices are highlight- The objective of supply chain sustainabil-
ed in gray boxes entitled “On the Horizon”. ity is to create, protect and grow long-term In addition, this guide
environmental, social and economic value for focuses on the ques-
Supply Chain Sustainability Defined all stakeholders involved in bringing products tion of whom compa-
In today’s globalized economy, outsourcing and services to market. Through supply chain nies buy from and how
business operations doesn’t mean outsourcing sustainability, companies protect the long-term they source products,
responsibilities or risks—or that a company’s viability of their business and secure a social rather than what they
responsibility ends once a product is sold. license to operate. buy. In April 2014, The
Leading companies understand that they have UN Global Compact
a role to play throughout the lifecycle of their For the purposes of this document, supply and BSR developed
products and services. Supply chain sustain- chain management professionals are defined A Guide to Traceability:
ability management is key to maintaining the as that group of individuals within a company A Practical Approach
integrity of a brand, ensuring business continu- that have the most direct contact with suppliers to Advance Sustain-
ity and managing operational costs. It is also an and are in charge of the acquisition of direct ability in Global Supply
important aspect of the implementation of the and indirect goods and services from external Chains. Traceability
UN Global Compact principles. sources. We use this expression in the broad- is a useful tool that
est sense, synonymous with other commonly provides information
Working Definitions used terms, such as “procurement,” “buying,” on the components of
For the purposes of this guide, corporate “sourcing” and “purchasing.” products, parts and
materials and helps
verify certain sustain-
Environmental, Social and Economic Impacts ability claims associ-
Exist Throughout Every Stage of Supply Chains.1 ated with products
and commodities.
rtation
Transpo More resources on
traceability and other
Material input At every stage in the related topics may
Recycling lifecycle of specific
be the future focus of
products there are so-
cial and environmental
attention from the UN
Extraction Global Compact Office.
impacts, or externali-
ties, on the environ- https://www.
END OF LIFE manufacturing
ment and on people. unglobalcompact.org/
In addition, gover- library/791
Environment nance, or the account-
Disposal
ability of organizations
to their stakeholders
for their conduct, is
important at every
stage throughout the
Use distribution supply chain.
1
From BSR.
8 Supply Chain Sustainability
About Supply Chain Sustainability & the United Nations Global Compact
The UN Global Compact encourages participants to engage with suppliers about respect for
the Ten Principles and to advance sustainable development objectives as part of their commit-
ment to the UN Global Compact, and, thereby, to spread good corporate sustainability practices
throughout the global business community. As the table below outlines, the Ten Principles are
intricately tied to sustainability in supply chains.
Human Rights Companies have a responsibility to respect human rights. The baseline
responsibility is not to infringe on the rights of others and address any
Principle 1: Businesses should adverse impacts that occur. The Guiding Principles on Business and
support and respect the Human Rights (the Guiding Principles), endorsed by the UN Human
Rights Council in June 2011, provide a globally authoritative standard
protection of internationally for how companies can meet this responsibility. The Guiding Principles
proclaimed human rights; and state that companies should have in place policies and processes
appropriate to their size and circumstances, including a process of
Principle 2: make sure continuous human rights due diligence, to “know and show” that they
that they are not complicit respect human rights. The Guiding Principles provide conceptual
in human rights abuses. clarity and content to the corporate responsibility to respect human
rights described in Principle 1 and 2 of the UN Global Compact. In
other words, the corporate responsibility to respect human rights in
Labour Principle 1 of the UN Global Compact is the same one described in the
Guiding Principles.1 It should also be noted that the Guiding Principles
Principle 3: Businesses should include labour rights in the sphere of human rights for workers.
uphold the freedom of as- Therefore, the responsibility to respect human rights also applies to
Principles 1 to 6 of the UN Global Compact.
sociation and the effective
recognition of the right to Additionally, business can go beyond addressing harm to human rights
collective bargaining; by taking steps to support and promote the realization of human rights
through core business activities, strategic social investment, philan-
Principle 4: the elimination of thropy, public policy engagement, advocacy partnerships as well as
collective actions, and there are good business reasons to do so. They
all forms of forced and com-
should also establish operational-level grievance mechanisms as a key
pulsory labour; support tool to provide access to remedy for the rights-holders.
Principle 5: the effective aboli- Labour conditions in offices, in factories, on farms and at natural
tion of child labour; and resource extraction sites such as mines often fall significantly below
international standards and national regulatory requirements and can
Principle 6: the elimination of lead to serious human rights abuses. In these contexts, businesses
discrimination in respect of should respect international labour standards within their supply
chains, including by ensuring that suppliers respect the rights of
employment and occupation.
freedom of association and the right to collective bargaining, abolishing
forced and child labour and eliminating discrimination.
1
For more information about the relationship between the UN Global Compact’s Human Rights Principles and the Guiding Principles, please read The UN Guiding
Principles on Business and Human Rights: Relationship to UN Global Compact Commitments (UN Global Compact, OHCHR, updated June 2014), available at
https://www.unglobalcompact.org/docs/issues_doc/human_rights/Resources/GPs_GC%20note.pdf.
9
Environment Environmental impacts from supply chains are often severe, par-
ticularly where environmental regulations are lax, price pressures
Principle 7: Businesses are significant and natural resources are (or are perceived to be)
should support a precaution- abundant. These impacts can include toxic waste, water pollution, loss
of biodiversity, deforestation, long term damage to ecosystems, water
ary approach to environmen- scarcity, hazardous air emissions as well as high greenhouse gas
tal challenges; emissions and energy use. Companies should engage with suppliers
to address environmental impacts, by applying the precautionary ap-
Principle 8: undertake initia- proach, promoting greater environmental responsibility and the usage
tives to promote greater of clean technologies.
environmental responsibility;
and
Principle 9: encourage the
development and diffusion
of environmentally friendly
technologies.
Anti-Corruption The significant corruption risks in the supply chain include procure-
ment fraud and third parties who engage in corrupt practices involving
Principle 10: Businesses governments. The direct costs of this corruption are considerable,
should work against corrup- including product quality, but often are dwarfed by indirect costs related
to management time and resources dealing with issues such as legal
tion in all its forms, including
liability and damage to a company’s reputation. Companies that engage
extortion and bribery. their supply chains through meaningful anti-corruption programmes can
improve product quality, reduce fraud and related costs, enhance their
reputations for honest business, improve the environment for business
and create a more sustainable platform for future growth.
2
For more information about the role of the UN Global Compact in the Post-2015 consultations, please read the note The UN Post-2015 Process and How the Global Com-
pact Fits In (UN Global Compact, 2014), available at https://www.unglobalcompact.org/docs/issues_doc/development/UN_Post2015_Process_Global_Compact.pdf.
10 Supply Chain Sustainability
The Women’s Empowerment Principles (WEPs). The Children’s Rights and Business Principles (CRBPs). The CRBPs
Co-developed by the UN Global Compact and UN are the result of the collaboration between UNICEF, the UN Global
Women, the WEPs are a set of Principles for business Compact and Save the Children. They are the first comprehensive set of
offering guidance on how to empower women in the principles to guide companies on the full range of actions they can take
workplace, marketplace and community. Principle 5 to respect and support children’s rights, both within their business and
of the WEPs asks companies to expand relationships throughout their supply chains. Principle 2 of the CRBPs requires busi-
with women-owned/managed businesses, including nesses not to employ or use children in any type of child labour and to en-
small businesses and women entrepreneurs. sure that age-verification mechanisms are also used in the supply chain.
www.weprinciples.org/ www.childrenandbusiness.org/
Caring for Climate (C4C). Caring for Climate is the UN Global Compact,
Child Labour Platform. An initiative coordinated by UN Environment Programme and the secretariat of the UN Framework
the UN Global Compact and the International Labour Convention on Climate Change’s initiative to advance the role of busi-
Organization, the Child Labour Platform is a multi- ness in addressing climate change. It provides a framework for business
sector, multistakeholder forum for sharing experi- leaders to implement practical climate change solutions and help shape
ences and lessons learned in eliminating child labour, public policy. C4C signatories commit to continuously improve energy ef-
particularly in the supply chain. ficiency and usage, reduce the carbon footprint of products, services and
http://www.ilo.org/ipec/Action/CSR/clp/lang--en processes, and build capacity to adapt to climate change in their opera-
/index.htm tions and the supply chain.
www.caringforclimate.org
Human Rights and Labour Working Group Good Practice Notes on Supply Chains
A series of Good Practice Notes on how companies can partner with suppliers, govern-
ments and civil society to promote human rights in supply chains.
http://supply-chain.unglobalcompact.org/
Fighting Corruption in the Supply Chain: A Guide for Customers and Suppliers
Practical guidance and tools for both customers and suppliers to engage in the fight
against corruption. A product of the UN Global Compact 10th Principle Working Group.
Business Drivers
for Supply Chain Sustainability
3
See Value Driver Model (2013, UN Global Compact LEAD, PRI), available at https://www.unglobalcompact.org/docs/issues_doc/Financial_markets/
Value_Driver_Model/VDM_Report.pdf.
16 Supply Chain Sustainability
4
The UN Global Compact Corporate Sustainability Report is available at: https://www.unglobalcompact.org/docs/about_the_gc/Global_Corporate_Sustainability_Report2013.pdf.
19
incorporate into the design of the company’s Engaging stakeholders early and regularly The Importance
supply chain sustainability programme. in the process of designing a programme of Investors and
Companies should seek to understand peers’: can help companies identify relevant stan- Customers as
dards and approaches to sustainable supply Stakeholders in
• Business case for supply chain chain management.5 Some stakeholders are Supply Chain
sustainability knowledgeable about, and sometimes even in- Sustainability
• Understanding of human rights, labour, en- volved in the development of, different codes
Customers and in-
vironment and governance risks, opportu- of conduct and certifications for suppliers.
vestors are increas-
nities and impacts and the resulting supply Examples include the Kimberley Process for
ingly expecting that
chain focus jewelry, Forest Stewardship Council Certifica-
companies under-
• Internal structure for managing supply tion for wood and paper products and the
stand and manage
chain sustainability SA8000 for responsible labour practices across
impacts in their
• Codes of conduct, and the topics included industries. They can help evaluate the cred-
supply chains.
• Use of their code of conduct ibility of different options and identify which
• Approach and programmes to engage might be relevant inputs for the company’s Investors want to
with suppliers programme. ensure that com-
• Metrics to evaluate the success of their Emerging risks and opportunities in sup- panies are aware of
programme ply chains. From customers and employees and are mitigating
• Reporting practices to activists and NGOs, stakeholders are often key risks affecting
the first to identify emerging environmental, their supply chains.
In addition, suppliers themselves can often social, governance and economic impacts in In addition, they are
provide examples of good practices and can the supply chain. Companies who engage interested to know
communicate their needs to customers. Some early and regularly with stakeholders have how companies are
industries have established joint codes of con- the opportunity to take a proactive approach creating value from
duct (see Chapter 3) and undertake aspects to these issues and to partner with stakehold- supply chain sustain-
of collaborative supplier engagement, such ers rather than discovering the issues through ability.
as cooperation to conduct audits and train- a public campaign. Early identification of
Consumers and
ing. Collaborative approaches and industry issues through stakeholder engagement can
business customers
initiatives are covered in detail in Chapter also help companies take early leadership in
are also encour-
8. This information is critical to help avoid comparison to peers.
aging companies
“re-inventing the wheel” of supply chain
to more closely
sustainability.
manage their supply
In developing its initial code of conduct,
Understanding the chains. In particu-
Westpac consulted its Community Con-
Expectations of Stakeholders lar, some consumers
sultative Council, suppliers and NGOs. The
are seeking more
Companies should also invest in identifying company included feedback from organiza-
sustainable prod-
and understanding the expectations of their tions such as the Australian Conservation
ucts, while business
stakeholders including potentially impacted Foundation, Australian Consumers’ Associa-
customers may
individuals and groups, national and local tion, Australian Council of Social Security,
include supply chain
governments, workers’, migrant workers’ Finance Sector Union and Human Rights and
sustainability in
and employers’ organizations and trade Equal Opportunity Commission. The Code was
their supplier selec-
unions, nongovernmental organizations enhanced in 2014 to reflect developments
tion criteria.
(NGOs), advocacy and activist organizations, and lessons learned in Westpac’s own values
academic and issue experts, community and and practices, including carbon management,
specific stakeholder groups, such as women, agribusiness, accessibility and flexibility
children, older and/or disabled workers, practices and indigenous inclusion. The Bank
indigenous groups and minorities as well as recognizes that the Code needs to remain rel-
suppliers themselves. evant and current, and evolve with in consul-
Moreover, companies can also benefit tation with key stakeholders as best practice
from seeking input from customers and becomes the normal expected standard.
investors. Customer and investor demand
is a primary driver for many supply chain
sustainability programmes and insights
from these stakeholders can help shape
programmes and ensure that they create the
maximum return for the company.
5
For a human rights approach on this topic, see Stakeholder Engagement in Human Rights Due Diligence (October 2014, Global Compact Network Germany, Twentyfifty) available at http://www.global-
compact.de/sites/default/files/stakeholderengagement_in_humanrightsduediligence_e_141030_screen.pdf.
20 Supply Chain Sustainability
L’Oreal
“We are committed to building strong and lasting relationships
with our customers and our suppliers, founded on trust and
mutual benefit. We do business with integrity: we respect
the laws of the countries in which we operate and adhere to
good corporate governance practices….We are mindful of our
impact on the natural environment….We are committed to the
respect of human rights. We want to help end the exploitation
of children in the workplace and the use of forced labour…We
actively seek out and favour business partners who share our
values and our ethical commitments.”
Nokia
“At Nokia, we work hard to anticipate risk, demonstrate
company values, enhance our governance practices, increase
employee satisfaction, and look after the environment and
communities where we do business. We expect the companies
in our supplier network to take a similar ethical business
approach and to demonstrate progress and achievements in
these areas as well as in educating and overseeing the prac-
tices of their own suppliers.
Our aim is to ensure that environmental, ethical and health
and safety issues, as well as labour practices, are not separate
add-on features, but are embedded within all our sourcing
processes, including supplier selection and relationship devel-
opment.”
22 Supply Chain Sustainability
23
3. Establishing Sustainability
Expectations for the Supply Chain
As the company begins to solidify its vision to company. Some companies have dedicated
for supply chain sustainability, an important staff to overseeing its correct use, while oth-
next step is to translate expectations into ers assign implementation duties to person-
a clear set of guidelines that will provide nel whose core responsibilities lie in other
direction to suppliers and internal colleagues. functions such as sourcing, quality assurance
At a minimum, the company should expect or production engineering.
suppliers to comply with national laws and
to take proactive measures to avoid environ- Overview of Supplier Code
mental and social harm.6 The expectations on of Conduct
suppliers should be appropriate to their size Codes of conduct are critical to establishing
and circumstances. They should also enable and managing expectations for both customers
the company to be satisfied that its prod- and suppliers. They create a shared foundation
ucts, operations and services are not directly for sustainability from which supply chain
linked to adverse impacts caused by the sup- management professionals, suppliers and
plier. This may require, for example, more other actors can make informed decisions.
formal reporting requirements for suppliers For many companies, a supplier code of
engaged in higher-risk activities. conduct is seen as a natural extension of
corporate values statements to apply to an
increasingly important part of the business
Overview of Engaging Supply Chain and as an affirmation of existing expectations
Management Professionals7 rather than a new set of requirements. As
It is critical for any business implementing such, the supplier code of conduct should be
sustainable supply chain practices to start endorsed by the highest level executive in the
thinking about their own internal approach company by making a public statement of
to supply chain management professionals approval of either the document and/or the
and related functions. importance of the company’s supply chain
This involves first and foremost ensuring sustainability programme.
buy-in from the highest level executive in When developing supplier codes of conduct,
the company, and then creating a sustain- there are a number of international standards
able procurement policy and appropriate due that should also be consulted and referenced.
diligence processes, engaging all supply chain These are outlined in the sections below.
management professionals and related staff
to understand and implement the policies Adopting or Writing
and processes. Ideally, the policy will cover a Supplier Code of Conduct
buying/procurement ethics and describe The UN Global Compact Ten Principles out-
how supply chain management profession- line each of the areas that need to be covered
als within the company should be engaged for a supplier code of conduct to be consid-
to ensure respect of the UN Global Compact ered comprehensive. During the external
principles. It will also be in alignment with landscape review outlined in Chapter 2, many
the supplier code of conduct, as described in companies will find that other companies
the section below. in their industry have already created joint
Finally, depending on how large and com- codes of conduct. These codes are designed
plicated the company structure is, it may be to minimize the burden on suppliers by
helpful to establish internal policies and pro- reducing the number of standards with which
cedures to explain how the supplier code of they must demonstrate compliance. They
conduct should be implemented by staff and are also intended to streamline the process
systems of accountability. The effectiveness of of conducting joint audits of suppliers and
the code depends on successful enforcement to reduce the effort required of companies to
mechanisms, which can vary from company design their own codes.
6
Guiding Principles on Business and Human Rights: Implementing the United Nations “Protect, Respect and Remedy” Framework (Office of the High Commis-
sioner for Human Rights, OHCHR, 2011), available at http://www.ohchr.org/Documents/Publications/GuidingPrinciplesBusinessHR_EN.pdf.
7
See definition on pg. 7.
24 Supply Chain Sustainability
However, there is a risk that joint codes do For the procedural elements of the code
not address all the issue areas of the Global relating to social impacts, companies should
Compact, or will not meet specific concerns refer to the UN Guiding Principles on Busi-
for the business. In this case, businesses ness and Human Rights, which outline the
should still adhere to the joint code, but be policies and processes that all companies,
ready to supplement it with specific policies including suppliers, should have in place
to address those uncovered risks. There is also to ensure that they respect human rights
a risk that adoption of industry codes will be (including labour rights).
the end rather than the beginning of the road For the social substantive elements of the
to improved supply chain sustainability, so code, companies should refer to the UN Dec-
it is important that there is internal commit- laration of Human Rights, the International
ment and resources to integrate the code into Covenants on Civil and Political and Economic,
supplier relationships. Social and Cultural Rights, the International
If there are no joint codes that are compre- Labour Organization’s (ILO) Declaration on
hensive for a certain industry, or a company Fundamental Principles and Rights at Work as
determines that they are not appropriate for well as the Tripartite declaration of principles
their supply chain, there are several princi- concerning multinational enterprises and
ples and initiatives that apply to supply chain social policy (ILO MNE Declaration), which
management that should be referenced. establish common expectations on a broad
Potential Sources
Sample Policy Areas that Align with the UN Global Compact Ten Principles
to Reference:
* This list does not represent a comprehensive record of all existing issues under human rights, labour, environment and anti-corruption standards. Companies may need to consider additional
areas depending on the circumstances.
25
range of issues concerning work, employment, ance, compliance, legal, human resources,
social security, social policy and human rights. finance risk and strategy, diversity and inclu-
Companies should also include anti-discrimi- sion, environment and health and safety
nation policies to promote equal opportunity 5. Consult with the cross functional teams, in
for women, young, older and migrant workers, particular supply chain management profes-
and minority and indigenous groups work- sionals
ing in the supply chain and establish bench- 6. It is strongly encouraged to consider a re-
marks to evaluate their effectiveness as well quirement that suppliers cascade these expec-
as develop specific provisions to protect these tations to their supply base to ensure they are
vulnerable categories of workers. applied throughout the whole supply chain
Environmental topics that are most 7. Consider consulting external credible
relevant will vary by industry, which makes written or online sources, when available, or
dialogue and collaboration critical to identify- refer to the external expertise of recognized
ing which issues are most important to cover professionals
in the code of conduct. The UN Global Com- 8. Include clear expectations for informed
pact’s three Environmental Principles – to workplaces
support a precautionary approach to environ- 9. Include clear expectations around griev-
mental challenges, undertake initiatives to ance mechanisms
promote greater environmental responsibility
and encourage the development and diffu-
sion of environmentally friendly technologies Though products are increasingly delivered
– should form a central part of a company’s online, print publications are still a significant
code of conduct. part of RELX Group’s business, and the com-
With regard to anti-corruption practices,8 it pany purchases a large amount of paper. The
is important to review the relevant legislation company’s challenge was to better understand
both at national and international level for the sustainability of the paper it uses. To ensure
compliance and include in the code common suppliers meet the ethical standards RELX
corruption scenarios, so that suppliers can Group set for its own behavior, the company
identify risks and are prepared to respond began its Socially Responsible Supplier (SRS)
appropriately. It is also important to regularly programme in 2003. The cornerstone is the
assess the content of the code to determine RELX Group Supplier Code of Conduct, which
whether updating and further interpretation incorporates the ten principles of the UN Global
is needed. Compact. Suppliers are asked to sign and
prominently post the Code in their workplaces.
Key steps in development of a code include: It also helps suppliers spread best practice
1. Gain commitment from Board of Directors through their own supply chain by requiring
and high-level executive management. subcontractors to enter into a written commit-
2. Consult with stakeholders, including civil ment that they will uphold the Supplier Code.
society, suppliers and peers RELX Group conducts an annual survey asking
3. Base expectations on existing international suppliers to communicate their performance on
norms of behavior rather than inventing new all elements of the Code and the ten principles,
standards to avoid undermining international not only on key environmental issues but also
law and prevent conflicting expectations for on ensuring they do not use child and involun-
suppliers with multiple buyers tary labour, avoid workplace discrimination and
4. Draft the code with the involvement and promote freedom of association. This data is
support of key company managers from cross complemented by information gathered through
functional teams that are critical for getting PREPS, a shared industry resource for paper
buy-in for effective implementation and sustainability. PREPS fosters positive engage-
enforcement, including supply management, ment with paper suppliers and RELX Group is a
design, marketing, logistics, quality assur- founding member.
8
For detailed discussion of anti-corruption in the supply chain, including model language for a code of conduct, refer to the Global Compact
publication Fighting Corruption in the Supply Chain: A Guide for Customers and Suppliers (UN Global Compact, 2010), available at http://supply-chain.un-
globalcompact.org/ and Stand Together Against Corruption (UN Global Compact, 2013), available at https://www.unglobalcompact.org/docs/issues_doc/
supply_chain/StandTogether.pdf.
26 Supply Chain Sustainability
Sample Supply Supply Chain Mapping products sourced from regions that are com-
Chain Risk Events Companies should start by mapping their monly recognized for sustainability issues
for a Food Com- supply chain to have an understanding of or suppliers whose nature of the business
pany* where their suppliers are capturing that data activity is usually associated with a set of
Child Labour: in a common system and attempting to un- common sustainability risks. Additionally,
Allegations of child la- derstand the relationships further down the companies can identify their largest catego-
bour on farms in supply supply chain. In some instances, regulation ries of procurement spend and categories
chain surface. will compel companies to be able to map that are critical to business operations in
their supply chains to identify their impacts terms of little or no availability of alterna-
Working Hours & further down the chain. tive options and impact of supply chain
Wages: To do this, it is often easiest to start with disruption.
Workers in food pro- a picture of the generic supply chain for the For each area identified, companies
cessing plants strike industry or product/s that the company is sell- should trace the flow of materials and infor-
due to low wages and ing and fill in gaps. A generic product supply mation. The whole supply chain should be
unpaid overtime wages. chain is illustrated in the figure below. considered for this exercise — going back
Corruption: In some industries, many companies cite to raw materials and original suppliers. No
A supplier’s manage- that it is difficult to be able to map their assumptions should be made — it is impor-
ment misuses revenues supply chain much below the first tier. tant to understand the relationships and
or royalties for corrupt However, it is possible to conduct this map- transactions as they actually exist. Category
purposes. ping through shared data systems, category managers and suppliers can provide useful
manager / buyer knowledge and by asking information. In some cases, agents or whole-
Food Safety: suppliers. salers may play key roles.
Processing plants fail to Companies with very large supply chains However a company manages this activ-
properly clean machin- may use different filters to decide which ity, at the end, they should have a map
ery and unintended and areas to map first. In order to ensure they showing where and how the inputs, raw
potentially hazardous address the most problematic sections, best materials, and products and services that
substances end up in practice would require businesses to start they buy are flowing around the world.
product. looking at general high-risk areas, such as
Indigenous People:
Farming is undertaken
on land that is sacred
or otherwise essential generic supply chain stages from
to lives or livelihoods a retailer perspective
of indigenous people,
mainly women, who Supply Chain
are often the primary
gatekeepers of natural
resources and land and
have little negotiation Raw Consumer
Manufacturing/ Transportation/
Materials Packaging Retail Use/ End
power. Processing Storage
of Life
Pollution:
Processing plants fail
to properly treat water
effluents and are not in
compliance with local
regulations.
Supply Chain Prioritization Companies should first assess where are the
With a good understanding of the supply biggest risks to human rights, labour, the envi-
chain map, companies can then identify ronment and ethics in the company’s supply
and prioritize where the most problematic chain. The severity and potential irremediabil-
areas lie, and should focus on the areas that ity of risks to stakeholders should be the driving
present the greatest risk of adverse impact on factor in prioritizing critical elements of the
people, environment and government accord- supply chain, particularly in the area of human
ing to the country, sector, activity or type of rights. Severe risks or risks that may be irreme-
relationship with the supplier. It is very likely diable should be “red flags” in a prioritization.
that the key areas that need addressing are Additionally, other criteria can be consid-
not in the first tier supply chain. For some ered, including but not limited to:
industries, the highest risks may lie in the
specific service they use; for others, it may be • Business Risk: What are the risks in the
a country where they source one of their raw company’s supply chain that could impact
materials. For example, electronics compa- ability to do business and meet the vision
nies are beginning to focus on minerals that set forth for supply chain sustainability?
are extracted from regions affected by social • Risk to Economic Development: What
conflict and where human rights violations are the risks for exclusion of small- and
are present. medium-sized enterprises (SMEs) when
To identify the priorities in the supply introducing code demands, monitoring and
chain, companies should gather informa- auditing schemes?
tion on environmental, social or governance
issues and identify priority areas where risk Both societal and business risk can be
of adverse impact on people, environment influenced by:
and governance is most severe. Actual and • Country/area: Which countries or areas
potential risk areas can be evaluated based do the company’s suppliers operate in,
on the country, sector, nature of the busi- and which of those countries/areas may be
ness activity or type of relationship with the higher risk because of weak rule of law,
supplier. Some of the recommended tools and prevalence of child or forced labour and
resources to identify risks can be found in the other human rights abuse, high levels of
textbox below. corruption, conflict, etc.?
• Supplier reputation and ownership:
What is the past record of performance,
previous audit results, reputation of suppli-
ers and what links, if any, do they have to
Tools and resources governments?
• Spend/leverage: Which suppliers does the
Geographic risks: • International Trade Union Con- company have the highest spend with,
• World Bank Worldwide federation website and reports including direct and indirect spend? For
Governance Indicator • Human Rights Watch website which suppliers does the business repre-
• Amnesty International Commodity-specific risks: sent either a major or a small part of their
Country Reports • Industry & issue-specific re- business? Which suppliers does the com-
• US Department of State ports from various international pany potentially have the most leverage
Country Reports research institutions (e.g. US with? This issue is particularly relevant to
• Human Development Index Dept’ of Labor, Human Rights determining what the company can do in
• Economic Freedom Index Watch, Oxfam, Anti-Slavery response to identified risk.
• Corruption Perceptions Index International) • Category: Which suppliers, including sup-
• Office of the High Commissioner • The Human Rights and pliers for products and processes, are most
for Human Rights website Business Dilemma Forum business critical for the company?
• Business and Human Rights • Tier: Which suppliers sell to the company
Resource Centre Supplier performance: directly, and which are sub-tier suppliers?
• Guardian Sustainable Hub • Supplier self-assessment • Nature of transaction: Does the transac-
• Freedom House website • Audit results tion contribute to increased or decreased
transparency and accountability for condi-
tions in the supply chain? For example,
sub-contracted labour, brokers, agents and
33
Companies should be mindful that these two ability related risks and opportunities for
steps of mapping and prioritization may not each category of the supply chain, based on
be completed within a short timeframe, espe- desk research, as well as input from internal
cially not when conducted for the first time. experts, users and the respective category
Allocation of appropriate resources, both purchase teams. ArcelorMittal has found
internally and externally, will help perform that mapping risks in a method that is both
this task in a more efficient timeframe and robust, but also simple and aligned with
establish a framework that can be replicated the organization’s core risk management
to evaluate additional risk areas. approach, is essential to crystallize the
key priorities to be addressed. The com-
pany chose a 2 x 2 matrix (Impact x Likeli-
ArcelorMittal, a mining company based in hood) for each purchase category and held
Luxembourg, has a USD 50 billion supply workshops with participants from the wider
chain extending from basic raw materials internal workgroups to discuss the chal-
like iron ore to sophisticated downstream lenges as well as opportunities in each of
products and services. The company has these categories. This process will need to
mapped out the most significant sustain- be repeated on a regular basis to ensure the
risk map remains up to date.
Epson, a Japanese technology hardware and equipment company, has organized its suppli-
ers by control level. Suppliers are categorized into five levels depending on their impact on
the company’s CSR initiatives and ability to sustain production.
Expectation Setting
Monitoring, Evaluation, Adopt code of conduct.
Accountability Expectation
Communicate about your
and Learning Setting sustainability expectations to
Monitor and assess the ef- suppliers. Incorporate expec-
fectiveness of programme tations, including the code of
and its impact on people, conduct, into contracts. Es-
environment and governance. tablish clear benchmarks and
Learn from experiences and incentives for consistently
increase accountability to Monitoring, strong performance.
different stakeholders. Evaluation, Risk & Impact
Accountability Assessment Risk & Impact Assessment
Training & Capacity and Learning Map and segment the supply
Building – Partnerships chain. Determine the scope
Collaborate with others to of efforts focusing primarily
build supplier ownership and on areas where there is the
understanding to remediate greatest actual and poten-
instances of non-compliance, tial risk of adverse impact
as well as invest in manage- on people, environment and
ment capabilities for continu- Training & Sustainability governance.
ous improvements. Support Capacity Building – Assessment
suppliers to address the root Performance Sustainability Assessment
Partnerships Performance
causes of poor sustainability
performance. Assess the sustainability
performance of suppliers,
Remediation using different processes for
different needs (e.g., busi-
Collaborate with suppli-
ness relationship potential/
ers to address issues of Remediation actual risk, impact on people,
poor performance. Define
environment and gover-
and incentivize continuous
nance). It can include self-
improvement.
assessments, audits, worker
surveys, etc.
38 Supply Chain Sustainability
Supplementing practices
As due diligence processes evolve, companies are interested in gathering a wider series
of indicators to inform the impact of their programmes. The following tools are some-
times implemented into the traditional audit process:
Better Work is a unique partnership between the International Labour Organization and the
International Finance Corporation which aims to realize the rights of garment workers and for
factories who uphold labour laws and standards to be profitable and productive. The organiza-
tion's strategy involves working with major industry stakeholders and smaller factories at a global
and local level. Better Work supports the establishment of strong relations between managers
and workers who can then take ownership and responsibility for continuously improving working
conditions and eventually competitiveness at the factory. Among its achievements, Better Work has
ensured that migrant workers in Jordan were covered by the same protection and benefits as their
peers, including the right to join a trade union. In 2015, the programme has reached more than one
million workers and is present in factories across Bangladesh, Cambodia, Haiti, Indonesia, Jordan,
Lesotho, Nicaragua and Vietnam.
For more information, read Supporting Worker Empowerment - Including Support for Workers’ Assertion of their Human Rights - in the Supply Chain, the Good Practice
10
Note endorsed by the UN Global Compact Human Rights Working Group, available at https://www.unglobalcompact.org/docs/issues_doc/human_rights/Human_Rights_
Working_Group/WorkerEmpowerment_GPN.pdf.
45
“A sustainable supply
chain benefits our
business by mitigating
risks associated with
producing and delivering
our products and services
to our customers. It also
creates opportunities to
develop closer ties with
suppliers in the long-term
interest of the company.”
– Erik Engstrom, Chief Executive Officer, RELX Group
46 Supply Chain Sustainability
minimum wage levels. H&M aims to scale female workers. HP has brought health
up pay structures to cover certain strategic awareness programs using the HERproject
supplier factories by 2018 and affect around methodology to 27 supplier sites across
850,000 workers. China, Malaysia, Thailand and Mexico since
the programme’s inception in 2007, reach-
ing over 55,000 female migrant workers and
While some companies restrict their engage-
empowering them to take ownership of their
ment to monitoring and remediation, there
health.
are limits to what these processes alone can
• Occupational health and safety (OHS)
achieve. Monitoring is not always the most
training. In 2014, HP partnered with the
effective tool for identifying and dealing with
International Commission on Occupational
the root causes of issues. A growing number
Health (ICOH) and Hong Kong University
of leading companies in supply chain sustain-
to train management from 15 suppliers on
ability are shifting from a pass/fail compliance-
worker stress prevention, mental health
based approach to build supplier ownership
awareness, combustible dust prevention
through the development of management
and Participatory Occupational Safety and
systems. A deeper engagement, based on
Health Intervention (POSHI). POSHI is an
capability building and strategic partnerships,
on-site program that engages workers and
creates an open channel of communication
management in the process of identifying
with suppliers to better understand the issues
and solving OHS issues. Program partici-
they are facing and allow them to incorporate
pants reported that the training enhanced
sustainability into strategic planning while
worker/manager communication.
demonstrating continuous improvement on
their sustainability performance.
CEMEX, a Mexican building materials
company, launched its Supplier Sustain-
Below are some examples of how companies
ability Programme to extend the company’s
have taken steps to enable supplier owner-
commitments, practices and beliefs to their
ship through the development of sustainabil-
suppliers and foster a sustainable, reliable
ity management systems:
network. Since the Supplier Sustainability
Programme was created in 2010, more than
• incorporate evaluation of management sys-
2,100 suppliers in 24 countries have been in-
tems into audit protocols to raise awareness
vited to participate. The programme consists
• provide training and consulting for suppliers
of four key phases:
on sustainability management system design
•• Surveying suppliers against the company’s
• adopt improvement ladders which empha-
sustainability and financial standards
size a continuous improvement approach to
•• Enacting a communication campaign based
sustainability management systems develop-
on the survey results
ment with increasing incentives and reduced
•• Reinforcing awareness of specific policies
auditing.
that incorporate aspects of sustainability
including human rights, labor and antitrust, as
HP believes that investing in the skills and
well as the supplier Code of Conduct, based
awareness of workers and supplier manage-
on CEMEX’s Code of Ethics and the UN Global
ment through capability building is criti-
Compact Ten Principles
cal to achieving lasting solutions to labor
•• Preparing a scorecard to track and incentiv-
issues. HP invests in worker development
and empowers workers to improve social ize suppliers with a record of strong sustain-
and environmental performance at their ability performance.
sites by helping them to develop a broad
skillset. Since the start of the program, HP
has directly reached over 533,200 work- Nestlé India, a food and beverage company,
ers and managers in China, South America established a dedicated supplier develop-
and Southeast Asia. Examples of capability ment department in 2005 to promote sustain-
building programs include: able production and processing of agriculture
• Health education through HERproject. commodities like coffee and chicory, achieve
Business for Social Responsibility’s (BSR) compliance to local regulatory laws, cost
Health Enables Returns (HER) Project savings by localisation of key imports and to
provides basic personal health training to create a wider, more flexible supply base. The
48 Supply Chain Sustainability
When, through appropriate risk assessment, As part of its Cocoa Plan, Nestlé aims
companies identify specific sub-tier suppli- to enable cocoa farmers to run profit-
ers who are responsible for adverse impacts able farms, improve social conditions of
on people, environment or governance, they cocoa-growing communities and ensure a
should take appropriate steps to engage with long term supply of sustainable and good
the supplier and address the issue, using the quality cocoa. Child labour on cocoa farms,
tools described in this chapter. If this ap- especially in Côte d’Ivoire and Ghana, is a
proach is unsuccessful, then the company particular challenge for the whole industry.
should take steps to terminate the relation- In 2011, Nestlé decided to partner with the
ship, either directly or via intermediaries, or, Fair Labor Association (FLA) to address this
if the supplier is critical to the company’s issue. As part of the implementation of its
operations, be able to demonstrate efforts Responsible Sourcing Action Plan, Nestlé
made in addressing the issue in the same started rolling out a Child Labour Monitoring
manner as described in the previous sections and Remediation System (CLMRS) to help
of this chapter. identify specific instances of child labour
(monitoring) and enable the company to
take appropriate measures to address them
In 2012, Restaurantes Toks, a Mexican food (remediation). Together with the Internal
and beverage company, engaged in a pilot Cocoa Initiative (ICI), Nestlé’s implement-
project with their coffee producers in Talquian, ing partner for this project, the company
Chiapas by providing training, capacity build- is seeking to create an environment where
ing and equipment to the farmers. By building child labour is recognized as a serious and
a relationship with and investing in coffee complex issue that can only be addressed
farmers in this community, the company by leveraging each tier of the cocoa supply
ensured an increase in productivity, better chain (tier-1 suppliers, farmer cooperatives,
product quality, tackled the main sustain- farmers, etc.) and through a comprehensive
ability issues, including use of child labour, engagement of governments, NGOs and the
and improved worker conditions, resulting in local communities themselves.
higher salaries for the farmers and a return on
investment for the company that nearly tripled
its initial investment.
Executive Leadership:
Commitment, Oversight and Support
HP’s Supply Chain Responsibility governance system clarifies reporting and responsibility across
relevant HP businesses and functions. All HP businesses sponsor and support the Supply Chain
Responsibility program through the Supply Chain Board, which meets monthly and reports
directly to the HP Executive Council.
11
See: A New Agenda for the Board of Directors: Adoption and Oversight of Corporate Sustainability, which contains inspiration and recommendations for
Boards of Directors on adoption and oversight of corporate sustainability (https://www.unglobalcompact.org/library/303).
53
In addition to supply chain management embedded in, or available to, every team with
professionals, product design, business devel- an impact on the supply chain.
opment, legal, human resources/diversity and
inclusion, finance risk and strategy, logistics, Grupo Los Grobo, an agribusiness company
marketing and sales can all impact supply with operations throughout South America,
chain sustainability. Companies should con- has established a supply chain committee led
sider how to bring together cross-functional by the company’s CEO and coordinated by
representatives, as illustrated in the figure the manager of supplies & outsourcing. Other
below, to get a clear picture of impacts and participants include designated representa-
where they arise in company decision making. tives of each of the areas of the company that
It is important that individual roles and have a strategic relationship with suppliers
responsibilities within the business are speci- (outsourcing for commodity production ser-
fied so that individuals can assume respon- vices, logistics, agricultural inputs, etc.). This
sibility for implementing and meeting the committee is responsible for establishing and
vision and milestones set out by executives. setting objectives and goals through the design
These objectives should be backed by incen- of a strategic plan. Objectives are checked and,
tives and consequences. if necessary, set every year. The results are
Sustainable supply chain personnel should analyzed and a new strategic plan is formulat-
also provide input to strategic planning pro- ed. One of the latest things to be incorporated
cesses in functions throughout the company. in strategic planning is the use of the ONUDI
To build sustainability into decision making “supplier development platform”. This commit-
processes, sustainability expertise should be tee interacts with more than 5,000 small and
medium sized supply companies.
Finance Finance
Human Human
Resources Resources
Legal Legal
Supply Supply
Management Management
Design
Design
development development
Production Production
logistics logistics
marketing marketing
Su
s
sales sales
ta
in
ab
ili
ty
Sustainability
12
From BSR.
55
7. Industry Collaboration
and Multi-Stakeholder Partnerships
Industry collaboration and multi-stakeholder For suppliers that work with multiple
partnerships are important tools for advanc- customers with their own codes, each may
ing the company’s supply chain sustainabil- have its own unique approach for supplier
ity objectives, particularly for issues that are engagement and monitoring. This can cre-
too challenging and complex to tackle alone. ate a significant burden for suppliers that
In addition, collaboration can increase the can divert resources from compliance and
impact and overall efficiency of supply chain continuous improvement.
sustainability efforts by extending the com-
pany’s reach and leverage, pooling resources, For this reason, many groups have come
reducing duplication and avoiding conflict- together to create a shared code of conduct,
ing messages. which participating companies may or may
There are risks and opportunities to not be required to adopt, and they work to
industry collaboration and multi-stakeholder engage suppliers on the shared code together
partnerships that should be considered through joint assessments and auditing. Many
early in the development of the company’s of these groups also conduct joint capability
programme. building for suppliers.
AIM-Progress
AIM-PROGRESS is a forum of consumer goods companies assembled to enable and promote responsible sourcing practices
and sustainable production systems. It is a global initiative supported and sponsored by Association des Industries de
Marque (AIM) in Europe and the Grocery Manufacturers Association (GMA) in North America. Its key objectives include
development of a forum to exchange views regarding responsible sourcing practices and of common evaluation methods to
decrease duplicative auditing.
Railsponsible
Railsponsible is an industry initiative focused on sustainable procurement, with the aim to continuously improve sustainability
practices throughout the railway industry supply chain. The initiative is open to all railway operators and companies across
the railway industry value chain, along with key industry associations, that share its vision, mission and commitments.
ICTI-Care
ICTI CARE is the toy industry’s ethical manufacturing programme aimed at ensuring safe and humane workplace envi-
ronments for toy factory workers worldwide. To achieve these goals, the group provides education, training and a unified
monitoring programme for toy factories.
13
For information on industry collaborations, partnerships and initiatives, visit the UN Global Compact's portal Sustainable Supply Chains: Resources and
Prcatices at https://www.unglobalcompact.org/docs/about_the_gc/Architecture.pdf.
62 Supply Chain Sustainability
The Importance De Beers, a diamond mining company with In recent years, more and more stakehold-
of Partnerships headquarters in Luxembourg and a presence er groups have demonstrated willingness to
to Implement the in locations including London and Johannes- partner with companies. They can assist with
Post-2015 Devel- burg, works with other organizations in the understanding the context for sustainability
opment Agenda14 industry to address a range of historical chal- challenges, help with designing effective
Partnerships can help lenges including conflict diamonds, a lack responses and act as local implementing
optimize and scale up of commercial transparency and improving partners. They can also bring a wealth of
sustainability efforts working conditions in factories in major cut- information on best practices and learning
in the supply chain as ting and polishing centres. Although the Kim- from other companies who have faced simi-
well as contribute to berley Process Certification Scheme and the lar issues in the supply chain. In addition,
corporate participation World Diamond Council System of Warranties they can bring resources and legitimacy to
in the broader multi- were launched in 2003 to address the issue supply chain sustainability efforts.
stakeholder efforts of conflict diamonds, no single standard ex- Business can also work with govern-
to achieve UN goals. isted to verify full ethical practices through- ments, including local authorities, to
This collaboration out the diamond pipeline addressing social, support national and local efforts and
requires engagement employment, business, health and safety, and improve capacity to address the root causes
and co-investment environmental issues. De Beers saw an op- for sustainability challenges that business
by a broader group portunity to establish a benchmark for best experiences in supply chains.
of business partners practice not only within the diamond mining
and key stakeholders sector, but also through the cutting, polish-
to further strengthen ing and jewellery manufacturing pipeline. To Many companies have created cost efficien-
the various global this end, De Beers launched the Best Practice cies by undertaking efforts to reduce ac-
and local initiatives Principles (BPP) Assurance Programme in cidents and illnesses and improve the overall
and platforms that 2005 and made compliance to the standard a health of workers in their supply chains. Levi
have been developed. contractual condition of supply to De Beers’ Strauss & Co., a U.S.-based apparel com-
Through partnerships customers and a requirement for all entities pany, has implemented a number of worker
and the pooling and within the De Beers Group. rights and well-being programmes, such as
sharing of resources, health education training programmes at
Multi-Stakeholder Partnerships its suppliers’ factories in partnership with
these opportunities
can be fully realized In addition to collaborating with industry civil society organizations. These programs
for the benefit of all. peers, many companies are recognizing the are designed to improve worker well-being
There is an increasing value of working with a broader range of and ensure worker rights are respected and
number of platforms stakeholders. Chapter 2 described a range of have also helped suppliers achieve savings
and initiatives focused groups that could provide input on the com- through increased productivity and reduced
on sustainability, or on pany’s supply chain sustainability strategy, absenteeism. Additionally, Levi Strauss & Co.
a particular sustain- including national and local governments, includes workplace standards and worker
ability challenge, workers’ and employers’ organizations, non- rights as an integral part of all bilateral, re-
that companies can governmental organizations, advocacy and gional or multilateral trade negotiations. Levi
join, including busi- activist organizations, academic and issue Strauss & Co. publicly advocates for linkage
ness sector initiatives, experts, community groups and stakeholder of trade and labor, incorporating key work-
Global Compact Local groups, such as women, indigenous people, place standards and worker rights provi-
Networks and UN- minorities, elderly and persons with disabili- sions within the context of trade agreements
led multistakeholder ties. Many of these groups are knowledgeable through congressional testimony, meetings
partnerships such as about sustainability issues and can be useful with senior government officials, trade nego-
Sustainable Energy for partners, beyond just sharing perspective tiations and multi-stakeholder initiatives.
All or Every Woman and advice, by working closely to address
and Every Child. supply chain challenges. For example, enter-
ing into multi-stakeholder partnerships with
organizations that promote women’s partici-
pation in the supply chain can promote their
inclusion in the company’s supply chain.
For more information, see Architects of a Better World: Building the Post-2015 Business Engagement Architecture (2013), available at https://www.
14
unglobalcompact.org/resources/441.
63
Many Local Networks have engaged in activities to advance supply chain sustainability, including:
The Global Compact Network Spain has organized several trainings, conferences and roundtables around sup-
ply chain sustainability topics. Since 2011, the Network has developed several partnership agreements with large
companies aimed at reinforcing their commitment to sustainability and the UN Global Compact Ten Principles
throughout their supply chain. This collaboration engaged suppliers of these companies in a number of activities,
including: development of in-person and online training sessions, access to a reporting platform to assist in draft-
ing and submitting their annual Communication on Progrss (COP) to the UN Global Compact and access to con-
sultations with a CSR specialist to address specific issues. Several companies have partnered with the Network
on this project and encouraged more than 1,000 suppliers to become participants of the UN Global Compact. In
2009, it also published a guide on implementing the Ten Principles in the company’s supply chain.
http://pactomundial.org/wp-content/uploads/2015/03/Cadena_suministro-alternativa-de-gesti%C3%B3n.pdf
The Global Compact Network Japan has convened a Working Group on Supply Chain Management in which
more than a dozen Japanese companies from different sectors participate. In 2013, the members of the Working
Group published a Vision of Desirable CSR Activity in the Supply Chain – a Proposal from the Supply Chain Working
Group on how companies can engage more effectively with suppliers and realize the win-win-win potential of sus-
tainable supply chain management – for buyers, suppliers and societies.
http://www.ungcjn.org/activities/topics/detail.php?id=117
The Global Compact Network Italy and its Sustainable Supply Chain Working Group developed a self-assess-
ment questionnaire for suppliers based on the UN Global Compact Ten Principles as well as international agree-
ments, conventions and standards. The questionnaire was uploaded to an online platform: the TenP – Sustain-
able Supply Chain Self-Assessment Platform, a tool to support companies in self-evaluating their sustainability
strategies and practices, tracking their progresses, benchmarking their sustainability performances against peers
and sharing the self-assessment results with the TenP Platform Partners being able to monitor who has access to
their data. The tool is publicly available on the Italian Network’s website.
https://www.tenp.globalcompactnetwork.org/PortaleGCNI/
The Global Compact Network Germany has supported the development of the Sustainability Compass, a one
stop shop for companies who wish to align their procurement practices with international sustainability standards.
The Sustainability Compass, which is available in German, offers guidance to SMEs on how to identify risks in their
supply chain and address them. It also includes best practices by other companies as well as a list of internationally
recognized tools and standards.
http://kmu.kompass-nachhaltigkeit.de/
66 Supply Chain Sustainability
67
Restaurantes Toks operates 130 res- set by the company and adapted to address
taurants in 84 cities throughout Mexico, specific risks that may be relevant to particu-
providing more than 10,000 jobs and serving lar suppliers or parts of the supply chain.
more than 25 million consumers each year. Goals should enable the company to track
In an effort to integrate poor rural commu- how successful the supplier is at address-
nities into its supply chain, the company has ing relevant risks over time. For example,
initiated a project working with a strawberry companies often set goals for the number
marmalade production group formed and of suppliers completing corrective action
managed by 13 women in Santa Rosa de plans after they’ve been audited (see Chap-
Lima in Central Mexico. In 2005, the per ter 5). Companies should also set goals for
capita income in Santa Rosa de Lima was performance in specific areas such as human
less than $US 60 per month, and the town’s rights, labour, environment, ethics and sup-
population was disproportionately female plier management systems of suppliers— the
due to high rates of illegal immigration by internal policies, practices and organizational
men to the United States. structures that enable suppliers to proactively
Restaurantes Toks has incorporated straw- manage for sustainability.
berry marmalade supplied by the Santa Rosa
de Lima Enterprise into its menus, success- Goals for Internal Performance
fully integrating the community into the As described in the preceding chapter, one of
company’s supply chain. Before beginning the most persistent obstacles that companies
to sell to Restaurantes Toks, the Santa Rosa face in meeting their impact objectives and
de Lima Enterprise provided an income of supporting suppliers to meet supplier perfor-
$US 2,500 to all the families in the com- mance objectives is the unresolved tension
munity. The Santa Rosa de Lima Enterprise between supply chain management profes-
now sells more than $US 500,000 worth of sionals’ commercial objectives and their desire
strawberry marmalade to Restaurantes Toks to ensure fair working conditions and envi-
each year, radically increasing the commu- ronmentally friendly and ethical practices. To
nity’s per capita income. Furthermore, Res- support increased attention from supply chain
taurantes Toks is working with the company management professionals on sustainability
to increase production capacities to enable it issues, companies should consult with leaders
to enter additional markets. from supply management and other functions
Due to the demonstrable impact of this to set objectives for internal implementation of
model on protecting and promoting human supply chain sustainability.
and economic rights, Restaurantes Toks Goals for internal performance should pro-
has duplicated the approach with 40 other vide guidance on expectations for how sustain-
community food and handicraft production ability will be integrated into supply manage-
groups. ment decisions. For example, some companies
establish goals related to placing a specific
percentage of their spend (or volume) with the
Goals for Supplier Performance highest performing suppliers, while others
As discussed in Chapter 5, there are many emphasize setting goals that make sustain-
mechanisms the company can use to track ability a key factor alongside other commercial
performance of individual suppliers and and technical criteria, to be used in making
encourage supplier ownership. However, it is decisions about supply. Another goal would be
important that companies set objectives for the percentage of supply chain management
overall supplier performance, which can be professionals receiving training in sustainabil-
revised at later dates with supplier input. ity issues.
Goals for suppliers should be formulated
with inputs from management across func-
tions, especially supply chain management, to
ensure broad commitment and realistic goals.
They should establish objectives for overall
supplier performance against the expectations
69
Acknowledgements
A wide range of stakeholders were consulted throughout the revision
process of this guide including UN Global Compact staff, UN Global
Compact Local Network focal points, UN Agencies, issues experts
and civil society and members of BSR staff. We wish to thank the
following individuals for taking the time to review and comment on
the drafts of this revised version of the guide:
Ms. Lene Wendland, Head of Business and Human Rights and Ms.
Ragnhild Handagard, Consultant on Business and Human Rights,
Office of the High Commissioner for Human Rights (OHCHR); Mr.
Michael Rohwer, Project Director, Electronic Industry Citizenship
Coalition (EICC); Ms. Beth Jensen, Director of Corporate
Responsibility and Ms. Nikki Hodgson, Corporate Responsibility
Coordinator; Outdoor Industry Association (OIA); Mr. David
Lawrence, Executive Director, AIM-Progress; Ms. Isabel Garro
Hernandez, General Director and Ms. Cristina Sanchez Garcia,
Project Coordinator, Global Compact Network Spain; Ms. Margherita
Macellari, Programme Manager and Analyst, Global Compact
Network Italy; Mr. Philip Bleckmann, Economy and Human Rights
Advisor, GiZ/Global Compact Network Germany; Mr. Philip Hunter,
Program Director, Verité; Mr. Pierre-Francois Thaler, Executive
Director and Mr. Simon Gargonne, Senior CSR Analyst, EcoVadis.
73
PHOTO CREDITS:
Page 6 © World Bank/Lianqin Wang
Page 11 © Hard Rain Picture
Library/Mark Edwards
Page 21 © Hard Rain Picture Library/
Andi Wijaya, Unep
Page 27 © World Bank/Ray Witlin
Page 34 © World Bank/Jim Pickerell
Page 35 © istockphoto
Page 49 © UN Photo/Eskinder Debebe
Page 57 © World Bank/Ray Witlin
Page 65 © istockphoto
The Ten Principles of the
United Nations Global Compact
Human rights
Labour
Environment
Anti-corruption