What's Ahead in 2007?

I don’t have a crystal ball, of course, but I’ve been talking with a number of brands, retailers, investors and other stakeholder groups in our industry and I propose there are three emerging trends that will move to center stage in 2007: (i) supplier ownership, (ii) collaboration; (iii) convergence.

SUPPLIER OWNERSHIP

More and more companies are looking to engage suppliers in creating sustainable improvements that will positively impact the lives and conditions of workers. To do so, brands and buyers are promoting the adoption of management systems that will help suppliers run more efficiently as well as manage social compliance issues in a planned and organized manner.

I first caught the vision of supplier ownership in 2004 when I was preparing to speak to a group of factory managers at a CSCC conference in Hong Kong. The topic was on how to manage compliance to a range of different codes of conduct. It occurred to me that the most organized factories usually had appointed a social compliance manager to handle all of the buyer assessments. This manager was in charge of providing the monitor with access to the production area, to the workers, to records required to assess compliance with local laws, etc. These suppliers didn’t feel as victimized or inconvenienced by the assessment process because they were already prepared for it. Being prepared and taking on ownership of their own compliance practices was an effective way for factories to overcome some of the challenges they faced when confronting the compliance process. Ownership could empower suppliers and help them see social compliance as a means for improving their own business practices rather than an inconvenient exercise that should be avoided or managed only through deception.

Now three years later, the concept of supplier ownership is gaining momentum in the world of responsible sourcing. Companies with mature monitoring programs such as Levi Strauss, Reebok, Nike, and Timberland are experimenting with aspects of supplier ownership. The hope is that suppliers will become partners in the process of improving labor conditions and undertake new management systems aimed at ensuring not only social compliance but also production efficiency, with well-managed production processes that will reduce work hours and improve worker well being. Study after study seems to show that well-managed businesses can work fewer hours, produce more, and with well-rested and well-paid workers, by changing only the level of efficiency in production management. Companies are encouraging their suppliers to put aside the cooked books and get down to the business of business – running more efficiently and in compliance with local laws. In the end, it is cheaper and easier to do things right than spend the time and resources to hide behind fake records and coaching or bribing employees to lie.

COLLABORATION

Brand and retailer initiatives continue to emerge with the goal of fostering collaborative approaches to responsible sourcing. Following in the footsteps of the Fair Labor Association and the Ethical Trading Initiative, there is also the Business Social Compliance Initiative in Europe, l'Initiative Clause Sociale in France, and CSC9000t in China. Some initiatives focus around sharing assessment results and working together to promote improvements in like-supply chains, such as the Fair Factories Clearinghouse in the US, and SEDEX in Europe. These programs see the most success when they have members with similar product-types who actually have a chance of using the same suppliers (this lack of like-supply chains is probably the biggest limitation for the FFC right now.) However, more and more stakeholder initiatives are emerging that are sector-specific, including the Electronics Industry Code of Conduct program, the Council for Responsible Jewelry Practices, and the Framework for Responsible Mining. These initiatives make collaboration the foundation of their efforts. These follow other sector-specific programs such as ICTI (toys) and WRAP (previously apparel, though WRAP is now seeking to re-make itself as a multi-sector initiative.) We will continue to see the emergence of focused initiatives such as these in 2007 and beyond.

CONVERGENCE

As brands and retailers increasingly sign-up to these initiatives, we can hope for a converging of some of the many standards and programs into a few. The ETI, once thought of as a UK-based initiative, now boasts an increasing number of non-UK members, including the U.S.-based Gap, Inc. Many members of the ETI have chosen to adopt the ETI Base Code as the code of conduct used in their supply chains, in order to use an existing multi-stakeholder code that promotes the use of a common industry code. In fact, the Body Shop forewent their previously developed code to adopt the ETI code and promote the concept of a universal code of conduct. The Gap recently announced their intention to do the same. As positive as these developments look for convergence and a universal code, there is some competition for the ETI. Last week, the Financial Times reported the first detailed disclosure of a new initiative aimed at consolidating responsible sourcing codes and monitoring efforts under one umbrella. Ironically, however, rather than adopting another existing initiative, such as ETI, the retailer group, comprised of heavyweights such as Wal-mart, Carrefour, Metro and Tesco (already an ETI member) have opted to develop yet another new initiative, the Global Social Compliance Program. According to the FT article, this has been done so far without any stakeholder consultation, though the group assures us they would like a stakeholder advisory board to ensure the credibility of the effort. Wal-Mart makes mention of this project in their last ethical sourcing report, but provides no true specifics. The FT article cites the CIES food organization as the lead in the GSCP, who promises to make more details public within a month or so. This initiative will likely continue to make headlines throughout 2007.