This Week's Herman Trend Alert

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  The Herman Trend Alert

November 9, 2011

Companies Insist Suppliers be more Socially Conscious

Because of consumers' socially conscious buying concerns, companies are taking steps to ensure the integrity of their operations and those of their suppliers around the world and supporting the work of the United States Council for International Business (USCIB). Lately, its work has revolved around supply-chain issues, including customs practices, transport security, counterfeiting and piracy, labor and environmental concerns.

Most multinationals have programs that set standards for suppliers and hold them accountable. In addition, increasing numbers of companies are adopting supplier "codes of conduct" to fill the gaps left by the failures of local governments to implement or enforce their own laws---including labor and human rights regulations.

According to Peter Robinson, President and CEO of USCIB, "[The] pressure is growing for companies to push supply chain management efforts... beyond their present scope. New initiatives would make producers responsible for addressing broad social ills that may exist at some point in ‘their' extensive global supply chains, including child labor, forced labor, human trafficking, and armed conflict."

Some of these initiatives include...

  • In the US, the "California Transparency in Supply Chains Act", focuses on slavery and human trafficking and the "Dodd-Frank" law, which requires companies to disclose whether or not "conflict minerals"* are used in their products
  • In Uzbekistan, there are efforts to address forced child labor in cotton production
  • In Brazil, there is work to address forced child labor in cattle ranching, sugar, and charcoal production.

To address these challenges, the USCIB has organized workshops, hosted by The Coca-Cola Company, on how companies may address forced labor, child labor, and human rights. The group has also spearheaded efforts to address the Uzbek cotton issue through the International Labor Organization's disciplinary process. Finally, perhaps their greatest involvement has been in helping develop the United Nations' principles that ask companies to "respect human rights and institute a due diligence process".

As more people in developed nations evolve a social conscience, we expect this trend to intensify, driving up the cost of many raw materials. Companies will respond by seeking lower-cost suppliers in poorer countries, creating a greater need for oversight.

* "conflict minerals", particularly found in the Congo region, are those traded for weapons and other supplies that foster war.

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