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Corporate Social Responsibility (CSR) is undoubtedly a big issue for business in 2005 with its potential impact on reputation, customer confidence and ultimately profits. And as the UK continues to be a leading contributor internationally on CSR thinking and practice, it is technology that is now taking centre stage in managing CSR for more equitable business.
CSR covers a wide range of issues but it essentially focuses on how business takes account of its economic, social and environmental impacts in the way it operates.
The growth of the global economy has seen significant benefits across the world but it has also seen increasing public concern, the rise of pressure groups and government scrutiny over issues like working environments, packaging and the supply chain. This has led to wide spread scepticism and a general decline in trust for business and its practices to the point where analysts and investors are now gauging levels of responsible practice as a mark of business performance.
The bottom line is that CSR won’t be going away and whilst issues like recycling paper as part of an environmental policy are relatively easy to implement and manage, one last resting place with potentially the greatest level of perceived unmanageable risk sits within the supply chain.
Whilst technology per se is facilitating better business, playing a crucial role in achieving internal CSR compliance for large and small organisations from the shop floor to the warehouse environment, it is deeper within the supply chain where companies could be most at risk and yet still not employing enough scrutiny. This is where technology can be most beneficial and play a role as important as any back office, financial accounting, head office and even supply chain management system.
For the majority of companies who do not have the benefit of a CSR department, which enjoys the time to conduct deep levels of research into each supplier, CSR compliance audits are left to supply chain, procurement or departmental professionals.
Many suggest that you audit your suppliers to identify what they are doing about corporate responsibility. A laudable suggestion, but consider an organisation with 4000 suppliers. A CSR audit takes around a day per supplier and once aggregated across a procurement team of 15, that’s 266 suppliers each or over 50 per cent of the team’s operational time.
The task is barely manageable and these are procurement professionals we’re talking about, not CSR pro’s. The team’s ability to effectively undertake deep levels of structured analysis required to unearth non-compliance is stretched. Areas of risk are being missed daily across all sectors and areas of business. Put bluntly, the task in hand is vast.
Overseas manufacturing can often present myriad issues – such as how do you know that under age workers aren’t being employed by a local level manager trying to hit your manufacturing targets within tight budgets? Do you care? You should! Non-compliance can have fundamental consequences on legal and ethical levels, causing considerable damage to business.
Suppliers, customers and financial backers can change their perceptions of an unethical organisation overnight and it is this reputational damage that organisations are gambling with if a proactive approach to CSR compliance is not adopted.
Merchandise suppliers in particular can have issues when they manufacture overseas and there have been well known cases in the past of those that have unethically employed children. Separately, overseas working conditions can present serious unethical scenarios that leave a company open to scrutiny. Look at Nike, which has recently declared its own open door policy to prevent further revelations or criticism over working conditions in its manufacturing facility. Another publicly owned entity was alerted that one of its suppliers was defrauding them of large sums, leaving them open to charges of poor management and ‘being asleep at the wheel’. With the inevitable reputational risk, it wasn’t an option for them to get into the courts. The point is that if large corporate entities are still getting it wrong, what hope is there for smaller organisations?
But it’s not just overseas working that opens the door to the CSR nightmare, one major multiple retailer came close to employing a cleaning company to service a multi-million pound contract but then discovered it was funded by an ‘ill defined’ source.
But surely prevention is a better approach than cure? This is where technology is proving itself. For example, the organisation mentioned above developed its own supplier profiling software solution that engaged potential suppliers through an online application to answer numerous pre-weighted questions. The corporate team was then able to set parameters against which each supplier was profiled to unearth a supplier pool that matched its requirements and detailed CSR compliance policy at the touch of a button.
But it’s often not the first-tier suppliers who create CSR problems but second and third-tier suppliers and so on down the supply chain.
The reality is that for most, fighting for survival with limited resources, ever tighter margins and shortening budgets in an extremely competitive economic environment, puts supplier CSR scrutiny down as an unattainable luxury. Yet it could be the biggest compromiser of the business.
As is often the case when looking for effective solutions in business, you are not re-inventing the wheel. Isn’t this all about business, procurement and supply chain professionals more effectively managing supplier relationships in a structured manner? Surely it’s about fastidious due diligence and adopting a proactive approach to the requirements of supply engagement - the point at which any organisation seeks to manage a supplier relationship?
This is where technology’s powerful capability to store, manage and interrogate vast swathes of information, like business intelligence or forecasting & scheduling solutions, can be applied to return efficiencies and minimise CSR risk in the supply chain. Off-the-shelf technology exists that uses web-based facilities to empower corporate departments to even manage and interrogate thousands of suppliers whilst mobile working.
Methods of accessing supplier information is increasingly more sophisticated, to take account not just of financial status, reliability, quality standards and so on, but also conformity to minimum standards on health and safety, people development, pay and conditions, environmental good practice on topics like recycling and all the other factors that go towards making up a cohesive CSR policy.
Web based technology is now playing an innovative role here, offering structured tools that provide deep levels of insight into existing and prospective suppliers, mainly because of its ability to deal with huge amounts of information, making point and click analysis of suppliers very quick and easy.
Taking advantage of the technological solutions available for analysing the individual characteristics of thousands of suppliers, in order to be able to check CSR credentials and more, is an option now open to all organisations.
Deciding to explore these possibilities is surely one of the first steps an organisation should be taking in the long march towards a more equitable world.
VTR
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