Supply Chain Imperative, The: How to Ensure Ethical Behavior in Your Global Suppliers

Even if companies are going to sign up to international labor codes of conduct or social and environmental standards, a company first needs to create a set of written principles that reflect the ethical values of the company. These need to be more than the often vacuous platitudes that are reflected in most company vision statements or a limited focus on customer service, product safety, or conflict of interest guidelines. The value statement should reflect, among other things, the company leadership s position on social and environmental policy within their extended supply chain, and the code of conduct should be a detailed set of principles that specifically describes the company s position on issues such as energy usage, recycling, working hours, wages , child labor, and other key issues that plague supplier operations in the extended supply chain.

This broad policy statement should form the basis of a company s ethical supply chain planning process, providing at least a moral minimum standard of behavior for management, employees , suppliers, and other stakeholders who will benefit from a clear view of a company s ethical position. Northern Telecom provides a good example of a strong statement of ethical policy and objectives.

Case Study: Northern Telecom s Code of Conduct

Recognizing the critical link between a healthy environment and sustained economic growth, we are committed to leading the telecommunications industry in protecting and enhancing the environment. Such stewardship is indispensable to our continued business success. Therefore, wherever we do business, we will take the initiative in developing innovative solutions to those environmental issues that affect our business.

We will:

• Integrate environmental considerations into our business planning and decision making processes, including product research and development, new manufacturing methods , and acquisitions/divestitures.

• Identify, assess, and manage environmental risks associated with our operations and products throughout their life cycle, to reduce or eliminate the likelihood of adverse consequences.

• Comply with all applicable legal and regulatory requirements and, to the extent we determine it appropriate, adopt more stringent standards for the protection of our employees and the communities in which we operate .

• Establish a formal Environmental Protection Program, and set specific, measurable goals.

• Establish assurance programs, including regular audits , to assess the success of the Environmental Protection Program in meeting regulatory requirements, program goals, and good practices.

• To the extent that proven technology will allow, eliminate, or reduce harmful discharges, hazardous materials, and waste.

• Make reduction, reuse, and recycling the guiding principles and means by which we achieve our goals.

• Prepare and make public an annual report summarizing our environmental activities.

• Work as advocates with our suppliers, customers, and business partners to jointly achieve the highest possible environmental standards.

• Build relationships with other environmental stakeholders ” including governments , the scientific community, educational institutions, public interest groups, and the general public ” to promote the development and communication of innovative solutions to industry environmental problems.

• Provide regular communications to, and training for, employees to heighten awareness of, and pride in, environmental issues.

Source: Business Strategy for Sustainable Development, the International Institute for Sustainable Development (IISD), from BSDglobal.com/tools/ strategies.asp. See also Business Strategy for Sustainable Development, at www.iisd.org/ publications /publication.asp?pno_242 .

HP provides a good example of a code of conduct for its suppliers that is a combination of specific HP values and standard labor and environmental aspirational codes. We expect our product material suppliers, says HP, to act as responsible corporate citizens and take a positive, proactive stance regarding social and environmental issues. We ask that they pursue a policy of continuous improvement and be forthright in sharing relevant information with us. Suppliers need to understand HP s expectations and manage to them. HP suppliers must comply with all national and other applicable laws and regulations, and they must require their suppliers do the same. Suppliers must comply with HP s requirements specified in the Supplier Code of Conduct and the product content environmental guidelines found in the General Specification for the Environment (GSE). ^{[6 ]}

Case Study: Combined Aspirational and Company Code of Conduct: HP

HP SUPPLIER CODE OF CONDUCT

At HP, we work collaboratively with our suppliers to ensure compliance with our Supplier Code of Conduct. While we recognize that there are different legal and cultural environments in which suppliers operate throughout the world, this Code of Conduct sets forth the minimum requirements that all suppliers must meet in doing business with HP.

Specifically we expect our suppliers to:

1. Adhere to all national and other applicable laws and regulations governing protection of the environment, worker health & safety, and labor and employment practices wherever they do business.

2. Establish management systems (policies, plans and performance measures) that are designed to implement these requirements, and to provide for compliance assurance and continual improvement.

   We require our suppliers to sign a Supplier Agreement that says they agree with HP s Supplier Code of Conduct. If a supplier identifies areas that do not comply, the supplier agrees to implement and monitor improvements.

We use our Supplier Management Process to assess our suppliers performance. This process uses questionnaires, reviews, and on-site supplier visits . We may also use independent verification where appropriate. We are committed to working with our suppliers to address any deviations quickly and effectively.

1.0 Compliance with Laws

HP suppliers must comply with all national and other applicable laws and regulations, and they must require their suppliers do the same. This includes laws and regulations relating to environmental, occupational health and safety, and labor practices.

1.1 Environmental Practices

HP expects our suppliers to provide products to HP and to conduct their business operations in a way that protects and sustains the environment in accordance with applicable laws and regulations.

1.1.1 Products

Products supplied to HP must comply with HP specifications and all applicable legal requirements. Among these, is General Specification for Environment (GSE), www.hp.com/hpinfo/community/environment/pdf/gse.pdf which include the following:

• Product Content Restrictions Comply with laws and regulations that restrict or prohibit certain chemical compounds as constituents of products, as specified in HP s General Specification for Environment (GSE).

• Product Labeling for Recycling and Disposal Comply with all laws and regulations regarding product labeling for recycling and disposal, as specified in HP s General Specification for Environment (GSE).

  1.1.2 Operations

  HP suppliers are expected to comply with applicable environmental laws and regulations in all of their operations worldwide. Specifically, suppliers are expected to conform to these requirements in each of the following areas:

• Environmental Permits and Reports Obtaining and maintaining environmental permits and registrations for operations and facilities and fulfilling reporting obligations.

• Hazardous Materials and Waste Management Managing hazardous materials used in operations and disposing of hazardous waste generated from operations.

• Industrial Wastewater Discharge and Air Emissions Management Monitoring, controlling and treating wastewater and air emissions generated from operations.

1.2 Occupational Health and Safety Practices

HP suppliers are expected to provide a safe and healthy working environment for their workers in accordance with laws and regulations in all of their operations worldwide. Specifically, suppliers are expected to conform to these requirements in each of the following areas:

• Employee OHS Training Providing workers with the training they need to understand the health and safety hazards in their jobs and the protective measures and work practices appropriate to control those hazards.

• Occupational Injury and Illness Reporting and Management Encouraging workers to report occupational injuries and illnesses to their employer and providing workers with medical treatment and management of occupational illness and injury to enable them to return to work.

• Machine Safeguarding Providing and maintaining operating machinery and equipment with guarding or other protective measures as necessary to prevent injury to workers.

• Industrial Hygiene Identifying, evaluating and controlling workplace exposures to chemical, biological and physical agents to prevent worker illness and injury.

• Workplace Ergonomics Controlling ergonomic hazards in manual handling, machine operation, and other physically demanding jobs to prevent work- related musculoskeletal disorders. ^{[7 ]}

1.3 Labor Practices

HP suppliers are expected to adopt sound labor practices and treat their workers fairly in accordance with local laws and regulations in all of their operations worldwide. Specifically, suppliers are expected to conform to these requirements in each of the following areas:

• Freely Chosen Employment Ensuring no forced, bonded or involuntary prison labor is used in the production of HP products or services. Ensuring that the overall terms of employment are voluntary.

• No Child Labor Complying with local minimum working age laws and requirements, and not employing child labor.

• Minimum Wages Providing wages and benefits that meet or exceed legal requirements.

• Working Hours Not requiring workers to work more than the maximum hours of daily labor set by local laws, and ensuring the overtime is voluntary and paid in accordance with local laws and regulations.

• No Discrimination Prohibiting legal discrimination based on race, color , age, gender, sexual orientation, ethnicity , religion, disability, union membership or political affiliation .

• No Harsh or Inhumane Treatment Prohibiting physical abuse, harassment or the threat of either.

• Freedom of Association Respecting the rights of workers to organize in labor unions in accordance with local labor laws and established practices.

2.0 Management Systems

HP suppliers are expected to maintain management systems that measure, improve and communicate to interested parties the environmental, occupational health and safety and labor performance of the company s operations in a systematic way. Specifically, HP suppliers are expected to maintain management systems in these areas that contain each of the following components :

• Policy Written statement of the company s commitments and objectives for its environmental, health and safety, and labor practices.

• Performance Objectives with Implementation Plan, and Measures Written performance objectives, targets and implementation plans, as decided and adopted by the company for itself, with a plan for assessing the company s performance against those objectives.

• Assigned Company Representatives Identified company representative[s] responsible for implementation of the company s environmental, health and safety and labor programs.

Source: www.hp.com/hpinfo/globalcitizenship/environment/pdf/supcode.pdf.

Whatever the real or imagined legal obligations that come with membership of these types of compacts, or the development of these types of aspirational codes of conduct, pledges to adhere to these principles can hardly be taken lightly. It is an important part of the role of the CERO to weigh up the pros and cons of membership of the various codes, and this assessment should be completed as part of the process of building the business case for action and creating the moral minimum framework for a company s ethical supply chain policies.

^{[6 ]} See www.hp.com/hpinfo/globalcitizenship/environment/supplychain/scserfaqs.html.

^{[7 ]} Safety and health references that address training, injury/illness reporting, machine safeguarding, industrial hygiene and ergonomics can be found on the following Web sites: www.osha.gov; http://europe.osha.eu.int; www.osha.gov/us-eu/index.html; and www.ilo.org/public/english/protection/safework/index.htm.