A recent expose in the Sunday Times from August 1, 2009 (http://www.timesonline.co.uk/tol/news/world/africa/article6736290.ece) about a garment factory in Lesotho suggests that brands and retailers should rethink their environmental monitoring strategies. According to the article, a factory in Lesotho was allegedly responsible for dumping needles, razors and harmful chemicals such as caustic soda at the local landfill. In addition, the mill associated with supplying the fabric to the factory was also accused of dumping waste in the form of untreated wastewater from its dye facilities into the local river. Both of these infractions resulted in environmental contamination and had a negative impact on the human population. Unfortunately, such pollution is common in countries where enforcement of environmental legislation (if it even exists), is lacking and is often overlooked.
Social Assessments with an Environmental Twist
To account for increasing stakeholder concern about environmental issues, many brands and retailers with social monitoring programs have added an environmental component to the standard social assessment in the attempt to create a more comprehensive ‘ethical’ audit. There are essentially two problems with this approach. The first is that environmental problems are usually complex and cannot be assessed in an hour with a checklist of questions. Although content of the environmental component varies, it generally focuses on compliance with permits and some basic waste management issues. Does verification that a facility recycles its waste and has a waste removal permit guarantee the facility is operating in an environmentally friendly way and represents a low risk to buyers? I don’t think so. We would not conclude that a facility is socially compliant based on an hour of document review, so why is it permissible to do so for an environmental assessment?
Social Risk Assessments Won’t Capture Environmental Risk
The second problem with the ‘add-on’ of an environmental component is that social monitoring programs are designed to assess social risk and may not be appropriately structured to assess environmental risk. To assess social risk, monitoring is conducted where risk to the client is highest—usually factories where the garment or product is being manufactured and then shipped directly to the retailer or exporter. However, for many products such as cotton and leather goods, the final stages of the supply chain do not represent the highest environmental risk.
Rather, most of the environmental damage occurs at the beginning of the supply chain where the raw materials are produced or initially processed, like fabric mills, dye houses and tanneries. High levels of pollution are also emitted during the manufacturing process, as waste and other scrap material must be disposed of, usually at an off-site landfill. The Lesotho Case exemplifies such a situation where the pollution occurred off-site of the facility grounds. Would these violations have been found by social auditors or similar third parties conducting standard social compliance audits inside the factory itself? I doubt it. The landfill site and dye facility would have been outside the scope of the standard social assessment and would not have been visited by the auditors. Therefore, if social and environmental risk manifest differently, and the audits are not being conducted where environmental risk is highest, shouldn’t an audit program intent on capturing environmental issues reflect this difference be restructured to look at the entire supply chain?
Moving Forward: Examples of Environmental Strategies that Work
In reaction to the Lesotho Case, GAP and Levi Strauss—the brands mentioned in the report—responded by stating they would conduct a supply chain investigation to fully investigate the situation (http://www.gapinc.com/GapIncSubSites/csr/documents/Gap_Inc._statement.pdf; http://eu.levi.com/en_GB/information-center.html). Although this will perhaps uncover further issues in Lesotho, if supply chain investigations are not conducted systematically, what violations and risks will be left uncovered in the hundreds of other supply chains in other supplier countries?
To better identify and address environmental risk, brands and retailers need to be much more proactive from the outset. Timberland is an example of a brand that is leading the way by going above and beyond basic environmental compliance. The company has a comprehensive set of environmental programs and policies in place to reduce environmental impact throughout the supply chain (http://www.timberland.com/corp/index.jsp?page=env_steward). Consumers are also provided with information about the environmental footprint of a product (nutritional label), along with a rating system (green index) to help them make informed and responsible choices. Other initiatives such as the BSR Apparel, Mills and Sundries Working Group highlight opportunities for brands and retailers to collaborate with suppliers and to develop and move towards sustainable goals across the supply chain (http://www.bsr.org/consulting/working-groups/apparel-sundries.cfm). These are just two examples of programs and initiatives that have been developed to directly address environmental issues in an innovative and proactive way. The question remains whether the rest of the pack of brands and retailers are up to the challenge and willing to work together to catch up.
