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Blog | Tuesday July 18, 2017

Impact Sourcing and Inclusive Supply Chains: A Conversation with Bloomberg and Digital Divide Data

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The next wave for employment in outsourcing is not about finding the next location; it’s about thinking more inclusively when tapping local talent. Through Impact Sourcing, companies benefit from offering good job opportunities to disadvantaged people in any country they source services from, including the United States.

During a breakfast event held by BSR's Global Impact Sourcing Coalition (GISC) in New York, we spoke with Erin Lambert, global head of sourcing for Bloomberg’s Global Data Division, and Jeremy Hockenstein, CEO of Digital Divide Data, about their partnership to provide good job opportunities to underemployed populations in the United States. This interview was conducted by Jon Browning, CEO of Strategic Sourcing Advisors.

Jon Browning: Jeremy, tell us about Digital Divide Data’s work, and your partnership with Bloomberg.

Jeremy Hockenstein: A few years ago, one of our board members approached us to see if we could do Impact Sourcing in the United States, given our successful workforce development and employment programs in other countries. This was the beginning of our U.S. program, Liberty Source, which focuses on employment opportunities for the military community, including military veterans and military spouses.

Most of us are aware of the difficulties many veterans have transitioning to civilian employment, but you might be surprised to learn that military spouses are more likely to be unemployed than the average population, with an unemployment rate of 30 percent, which is six times higher than their civilian counterparts (at around 5 percent). They often cannot find work flexible enough to accommodate their spouse’s schedule or deployments. Through Liberty Source, we are able to offer stable work with more flexible work options, and as a result have a loyal, highly educated workforce that can deliver great value to our clients. Our partnership with Bloomberg has really been key in helping build our U.S. business.

Browning: Bloomberg has been working with its suppliers on Impact Sourcing for several years now. Erin, tell us about your experience to date.

Erin Lambert: When Bloomberg partnered with Liberty Source in 2015, our goal was to find a location and a partner to replace the need for contingent workers locally. We found that partner in Liberty Source, and our relationship continues to expand.

Most of the Liberty Source team have a university degree, and several have multiple degrees. I think one success factor is that we don’t just set up the work and forget about it; we visit the facilities in Virginia. And we enjoy visiting! I’ve got trainers who beg me to go there because they enjoy working with the Liberty Source team so much; they treat them as an extension of our internal teams. Impact Sourcing engages both hearts and minds. It is meaningful to Bloomberg employees that we are enabling military spouses to work remotely while their husbands or wives are deployed.

We are also sourcing from a provider in India that operates in remote villages outside of Kolkata, employing undereducated youth who would otherwise have to migrate to the large cities to find jobs. In visiting these job sites, I’ve met employees whose families were previously living below the poverty level. Through Impact Sourcing, the provider has been able to bring up the employees’ family income as much as 400 percent to 500 percent. Once you’ve visited some of these facilities in these countries, you’re even more dedicated to finding commercial ways to help make this work.   

Browning: Digital Divide Data also does work internationally. Jeremy, what are some of the differences between the work you do in the United States versus the work you do in other locations?

Hockenstein: Our operations first started in Laos, and then we moved to Cambodia and Kenya, where we targeted very talented high school graduates who couldn’t afford to go to university. We learned we could tap into a motivated, talented population who, without training and work, would be stuck in a cycle of poverty. Our work-study programs in those countries provides our employees about 35 hours of work a week plus scholarships and loans to go to university. In the United States, most of our employees come to us with higher levels of education, so we don’t need as much pre-employment training as we do internationally.

No matter where we operate, we see these jobs as stepping stones to future opportunities and career growth, maximizing the impact for employees. Even from the beginning, we had high retention rates compared to the average for the business process outsourcing industry, with new employees staying more than four years with us before moving on to bigger roles elsewhere. With higher employee retention, we are able to offer training in more advanced skills and a career progression that does not come with short-term employment. And this strategy has been good for our clients and our business. 

Browning: Erin, have you had any challenges in introducing Impact Sourcing within Bloomberg?

Lambert: Philanthropy and corporate social responsibility are deeply engrained in Bloomberg’s corporate culture, so there actually haven’t been a lot of challenges internally.

The only concerns that have been raised are whether our Impact Sourcing providers could continue to grow as Bloomberg grows. We have partnered with Liberty Source for over a year. They’ve grown a lot with us already, and we have a growth strategy in place that I’m pretty confident we will achieve together.

Browning: Erin, as a member of the GISC, what opportunities do you see through a collaborative approach to advancing Impact Sourcing?

Lambert: The Coalition has grown even since Bloomberg joined a couple months ago. For us, the value in participating in the GISC will come when we are able to evaluate the true social impacts of inclusive employment. Until then, it’s important for companies like Bloomberg to step up and talk about our work, and encourage other companies to follow. There’s an opportunity for others to learn from our experience, to hear that, yes, we are working on Impact Sourcing, and when issues have come up, here’s how we worked through it.

Blog | Wednesday July 12, 2017

Insights from Telia Company’s Human Rights Impact Assessments

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This week, Telia Company published the human rights impact assessments (HRIAs) undertaken by BSR of the company’s subsidiaries in Sweden and Lithuania. This follows the company’s earlier publication (in summary form) of similar HRIAs undertaken by BSR of the company’s subsidiaries in Azerbaijan, Georgia, Kazakhstan, Moldova, Tajikistan, and Uzbekistan.

Taken together, these publications by Telia Company represent an impressive commitment to transparency on human rights impacts and how they are addressed. This level of transparency remains rare in the business and human rights field, and we hope these steps by Telia Company are frequently cited as a leading example for other companies to follow.

These HRIAs represent a substantial body of work. Along the way, BSR and Telia Company gained many new insights into how to apply the UN Guiding Principles on Business and Human Rights, and we want to share four of them here:

• Stakeholder and rightsholder engagement is essential. To develop the eight HRIAs, BSR and Telia Company met with around 100 stakeholders and rightsholders, including human rights defenders, advocates, policymakers, diplomats, and regulators. Some were experts in telecoms, while others were not; some focused on the broad human rights agenda, while others specialized in specific areas, such as privacy, LGBTIQ+ rights, or gender equality. While companies can be hesitant to engage externally, with the right preparation, companies can gain valuable insights from these conversations and forge new relationships that are essential for the successful implementation of HRIA recommendations.
• Transparency by companies on human rights issues has impact. Over recent years, a number of internet and telecoms companies, including Telia Company, have become much more transparent in their approach to freedom of expression and privacy, especially when it comes to how they respond to government demands that risk violating the human rights of their users. These reports can be long and detailed, so it is tempting to assume they sit unread on a digital shelf. They are not—indeed, quite the opposite. In these Telia Company HRIAs, and in HRIAs BSR has undertaken with other internet and telecoms companies, it has been striking to learn how local human rights defenders and advocates have put them to use—for instance to inform their policy positions.
• An industry lens is required. The UN Guiding Principles on Business and Human Rights are written for all companies in all industries, so applying them to a specific telecoms company raises new questions that require industry knowledge. What is the responsibility of a telecoms company when compliance with local laws, regulations, and licenses can result in human rights violations? How can telecoms companies reconcile the huge freedom of expression benefits of their services with their accompanying risks? What unintended consequences does a telecoms regulatory change have in a country with strong rule of law (such as Sweden) when that same change is replicated in countries without the same legal protections? How will disruptive technologies, such as artificial intelligence and the internet of things, alter human rights risks? Industry organizations such as the Global Network Initiative can help explore what these questions mean for telecoms companies.
• The link between ethics and human rights is strong. While freedom from corruption is not a human right, it was clear throughout our assessments in all eight countries that there are strong links between ethics, corruption, and human rights. An ethics violation—such as the selection of an unqualified supplier with poor health and safety practices—can result in significant human rights consequences. The victims of both ethics and human rights violations are often the most vulnerable populations. Upon completing the HRIAs, we became even more convinced of the need for holistic approaches to manage ethics, corruption, and human rights. We even believe a case could be made to acknowledge freedom from corruption as a human right.

We hope Telia Company’s publication of these HRIAs serves three key functions. First, we hope it enhances Telia Company’s ambition to integrate human rights into business decision-making. Second, we hope it informs further dialogue on human rights in the eight markets covered. And third, we hope it provides insights for the broader business and human rights community on how to undertake HRIAs.

Indeed, we at BSR are also taking a risk by being transparent about our own work. We are committed to being at the leading edge of business and human rights methodology, and we believe our approach can be improved by transparency and constructive criticism. Both Telia Company and BSR look forward to feedback and dialogue. 

View the full case study of our human rights impact assessments for Telia Company.

Case Studies | Wednesday July 12, 2017

Telia Company: Human Rights Impact Assessments

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BSR helped the telecommunications firm Telia Company integrate human rights into business decision-making in two ways: Human Rights Impact Assessments (HRIAs) in six Eurasian markets where the company is exiting and HRIAs in two European markets where the company continues to invest.

The Challenge

In September 2015, Telia Company announced its intention to divest from Region Eurasia, including through the sale of its subsidiaries in Azerbaijan, Georgia, Kazakhstan, Moldova, Tajikistan, and Uzbekistan. For this reason, Telia Company sought to create a “responsible divestment plan” that would take into consideration the human rights impacts, risks, and opportunities arising from the divestment, including:

• How to minimize human rights risks from the announced sale.
• What to look for in the due diligence of potential buyers, such as their human rights record and commitments.
• What activities to undertake during the sales period, such as using the final HRIA reports to build the capacity of the buyer to manage its new assets with respect for human rights.

At the same time, Telia Company announced its intention to invest in a new generation of products and services in its European markets, such as the internet of things, entertainment, and security. Telia Company sought to understand the actual and potential human rights impacts in these markets, and how to address them in its policies, strategies, and plans.

Our Strategy

For each of the eight markets (the six Region Eurasia markets, plus Sweden and Lithuania of Telia Company’s European markets) BSR undertook HRIAs using methodologies based on the UN Guiding Principles on Business and Human Rights. For each HRIA, BSR completed four phases:

• Immersion, where we built knowledge of the company and the local context through document review, company interviews, and meetings with subject matter experts.
• Mapping, where we visited the country to identify actual and potential human rights impacts with local stakeholders and rightsholders.
• Prioritization, where we reached conclusions on where Telia Company and its subsidiaries should focus their human rights efforts.
• Final report, where we made recommendations for a company human rights action plan over the short, medium, and long term, and reached conclusions about the use of company leverage.

For the six Region Eurasia markets BSR made recommendations to Telia Company for how to integrate human rights into the sales process through a responsible divestment plan, and to each subsidiary and its future owners for how to manage and mitigate human rights impacts during the ongoing management of the companies.

For the two European markets BSR made recommendations to Telia Company for how to integrate human rights into its companywide strategy, governance, and management, and for the local subsidiary we made recommendations for how to manage human rights impacts in that market.

Our Impact

The impact of this work will arise through the implementation of BSR’s recommendations, which covered a diverse range of human rights issues, such as privacy, freedom of expression, non-discrimination, security, land rights, child rights, and labor rights.

In Region Eurasia, Telia Company has implemented BSR’s recommendations by undertaking human rights due diligence of potential buyers and sharing the HRIAs with them. Both Telia Company and the local subsidiaries have maintained human rights action plans and tracked progress over time.

Similarly, in Sweden and Lithuania, Telia Company is creating and maintaining action plans to implement recommendations and track progress. The implementation of these human rights action plans is overseen by Telia Company’s Governance, Risk, Ethics, and Compliance Committee.

In addition, Telia Company has published the Sweden and Lithuania HRIAs, and summary versions of the Region Eurasia HRIAs.

Lessons Learned

BSR and Telia Company gained many new insights into how to apply the UN Guiding Principles on Business and Human Rights in practice.

• Stakeholder and rightsholder engagement is essential. Across the eight HRIAs BSR and Telia Company met with around 100 stakeholders and rightsholders from a wide range of backgrounds. We met with human rights defenders, advocates, policymakers, diplomats, and regulators. Valuable insights were gained, and new relationships were forged that will be essential for the successful implementation of HRIA recommendations.
• Transparency by companies on human rights issues has impact. Over recent years a number of internet and telecoms companies, including Telia Company, have become much more transparent in their approach to freedom of expression and privacy. While these reports can be long and detailed, it has been striking to learn how many insights local human rights defenders and advocates gain from the reports, and how they are put to use.
• An industry lens is required. The UN Guiding Principles on Business and Human Rights are written for all companies in all industries, so applying them in a telecoms industry context raises all sorts of challenging questions—for example, how disruptive technologies such as the internet of things alter human rights risks, or how companies navigate situations where compliance with local laws, regulations, and licenses can result in human rights violations.
• The link between ethics and human rights is strong. While freedom from corruption is not a human right, it was clear throughout the HRIAs that there are strong links between ethics, corruption, and human rights. An ethics violation—such as the selection of an unqualified supplier with poor health and safety practices—can result in significant human rights consequences, while the victims of both ethics and human rights violations are often the most vulnerable populations.

Most of all, these HRIAs illustrated the importance of a proactive approach to integrating human rights into business decision making. Without the intelligence gathering required by the HRIAs, Telia Company’s senior decision-makers would have fewer decision-useful insights available on important issues of material significance to the company.

Blog | Tuesday July 11, 2017

How Business Can Support the Global Movement for Family Planning

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Maternal deaths are the second-biggest killer of women of reproductive age globally: Every two minutes a woman dies from complications in pregnancy and childbirth, with 99 percent of these women living in developing countries. Research by the Guttmacher Institute shows that around 40 percent of the 190 million pregnancies in the developing world in 2012 were unintended, and that about half of them ended in abortion. Unsafe abortions are recognized as one of the main drivers behind pregnancy-related complications and the leading cause of death among women aged between 15 and 19 globally.

The most effective way to avoid unintended pregnancy is through correct and consistent use of contraceptives. Yet an estimated 225 million women in developing countries who would like to delay or prevent pregnancy do not have access to any method of contraception.

Today, the international community is coming together for the Family Planning Summit 2017. It has been exactly five years since the 2012 London Summit on Family Planning adopted the ambitious goal of enabling 120 million more women and girls to use contraceptives by 2020. So far the global partnership for Family Planning (FP2020) is making progress, and an estimated 34 million more women are now using modern contraceptives. This indicates a clear acceleration compared to historical trends, but also suggests that we are not making progress fast enough to reach the FP2020 goal.

Now we need to pick up the pace. Achieving the FP2020 goal is a critical milestone for ensuring universal access to sexual and reproductive health and rights by 2030, as laid out in the Sustainable Development Goals. The international family planning community is calling on the private sector to join the global movement to enable women and girls to use contraceptives.

What does women’s access to family planning have to do with your business?

Access to safe, voluntary family planning is a human right. Accessing family planning services is essential for women and girls to be able to stay in school, join the workforce, and—crucially—remain active in the formal economy. Women play a key role in the global workforce, and their participation in the formal economy is critical for economic growth and for companies’ ability to recruit and retain workers. A recently published report by the Asia-Pacific Economic Cooperation recognizes health issues, including not having access to family planning, as critical barriers to women’s economic participation.

Promoting women’s access to family planning does therefore make good business sense, and business can play an important role in supporting more women and girls with access to family planning. Global supply chains—especially those with a high concentration of women workers in factories—present a major opportunity to connect women to comprehensive family planning services. BSR’s HERproject has implemented HERhealth programs over the past 10 years, improving health outcomes for more than 600,000 low-income women workers. Our impact data show increased awareness of the benefits of using family planning as well as an actual increase in the use of contraceptives among women workers. However, our experience tells us that we need to increase investments in workplace health systems to ensure full access to family planning for women workers.

Therefore, we are presenting a new approach for investing in workplace health systems to deliver for women, their families, and communities. Together with The Evidence Project/Raise Health Initiative, we have developed a set of resources to build the capacity of workplace managers and clinic staff to manage workplace health services and to implement health awareness-raising activities.

Investing in workplace health systems means that factories and farms can:

• Improve women workers’ access to critical health services, both in the workplace and outside the workplace through stronger referral systems.
• Increase the capacity of top managers and clinic staff to manage workplace health, and to run the health clinic as a strategic business resource.
• Sustain impact after the formal completion of HERhealth by creating an enabling environment for workplace health and local ownership.

Partnering with factories and farms to help them invest in workplace health systems is an essential component of HERproject’s efforts to ensure women workers have access to comprehensive family planning, and to support their right to decide whether, when, and how many children they want to have. Investing in workplace health systems will not only promote women’s health outcomes and right to health, but also will enable women and girls to participate in the formal economy more fully.

Women’s health—including sexual and reproductive health and rights—remains central to HERproject after 10 years. We are calling on companies to accelerate efforts to ensure access to family planning for women around the world. Business has a unique opportunity to invest in women working in global supply chains, and by actively partnering with local suppliers to improve workplace health systems, you can join a powerful movement to ensure women have control over their lives—for everyone’s benefit.

Blog | Monday July 10, 2017

Shape the Future of Sustainable Business at the BSR Conference 2017

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The BSR Conference 2017 will serve as the centerpiece of our 25th anniversary celebration. So much has changed since BSR launched in 1992. Our very first Conference, in Washington, D.C. in 1993, brought to the plenary stage a new president in his first year: Bill Clinton. President Clinton embraced a view of business that would make a meaningful difference in enabling people to reach their potential, of businesses that knew that a healthy environment was central to their success. He also knew that global trade could—done right—lift billions of people out of poverty.

While the view from Washington looks different in 2017, there is no doubt that in the previous quarter-century, we have developed an amazing ecosystem of sustainability leaders. I am exceptionally proud of the role BSR has played in building a real movement of changemakers in business.

At our 25th annual Conference this year, we certainly will celebrate what we have accomplished, in collaboration with our great network of member companies and other partners. But even more, we will take the opportunity this October to look resolutely to the future.

This year’s event will create the opportunities for networking and learning that so many have come to expect from the BSR Conference. 

In keeping with our approach to the 25th anniversary, we are taking the opportunity to redefine sustainable business—and the Conference as well. The venue itself will provide new opportunities for informal interaction in an inspiring beach-side setting. We have built an agenda that will take full advantage of the natural environment—from our opening night reception and dinner by the ocean to our closing 25th anniversary celebration overlooking Huntington Beach.

The theme for the Conference is “How Business Leads.” At this moment in history, business leadership is essential. More and more, sustainability leadership is crucial to successful business. Sustainability presents unique opportunities for innovation and value creation. Businesses lead through powerful collaborations that are fit for a world of distributed assets and diverse perspectives. And in today’s climate, the voice of business is crucially important, as other sectors often abdicate their leadership responsibilities. 

We have shaped a Conference agenda that will look to the future. This comes at a time when technology, economics, and politics are rewriting the sustainability playbook. We have dedicated a special track, “FastForward 25,” to sessions that will project the kinds of changes that business can create to make good on the promise of the Paris Agreement and the Sustainable Development Goals. Fitting with our location in California, from where so much innovation comes, we also will have multiple speakers looking at new business models, new collaborations, and new ways of engaging consumers.

BSR’s first Conference brought together a small but mighty band of believers who had a vision of a new way of doing business. Today, our numbers are greater, and the vision remains just as powerful as it once was. The scope of our opportunity is just as powerful, too.

Every year, I am excited by the prospect of being with many great leaders whom I consider to be friends and partners. This year, at the intersection of BSR’s 25th anniversary, serious disruptions affecting business, and the need for business leadership and voice, the question I have found myself asking is: “How will we meet this unique moment?” 

Come to BSR17 to shape the answer: Our shared future depends on it.

Blog | Wednesday June 28, 2017

BSR Collaborates with Indian Business Association to Address Sexual Harassment in Garment Industry

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Violence against women is one of the world’s most prevalent human rights violations. In India alone, almost 330,000 cases of violence against women were registered in 2015, equal to a reported crime every two minutes.

Violence against women does not stay within communities and homes; it also happens within businesses. Recent reports show that sexual harassment against women workers, including different forms of verbal and physical abuse, is common in the garment industry in India. Not only does this affect women, it also holds back the Indian economy and businesses. According to the Asia-Pacific Economic Corporation (APEC) Healthy Women, Healthy Economies initiative, workplace sexual harassment programs and policies can increase female workers’ productivity, resulting in gains of up to US$186 million in developed APEC economies and US$57 million in developing APEC economies.

Addressing violence against women will require everyone to take action. BSR recently launched HERrespect—an evidence-based workplace program that builds the capacity of management and workers to challenge social norms and identify, prevent, and address violence—in India. HERrespect represents an important stepping stone toward transforming gender norms in an industry that directly employs 8 millon workers. Support from global brands and donors has been fundamental for getting the movement started, however, strategic partnerships with local business and industry associations are essential to achieve a systemic-level shift to end violence against women in the garment industry.

The government of India has called on Indian business to take action by adopting the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act in 2013. The act makes it mandatory for all companies with 10 or more employees to set up an internal complaints committee and improve employee awareness about what constitutes sexual harassment at work. Research shows, however, that almost half of the Indian companies surveyed have yet to train employees and committee members on topics related to sexual harassment at work.

We are proud to announce a new collaboration with the Confederation of Indian Industry’s Centre of Excellence for Sustainable Development (CII-ITC CESD). The aim of the collaboration is to mobilize commitment from Indian business leaders to ensure a safe working environment for female workers in the garment industry. As an industry-led business association with a wide membership across the textile and apparel sector, CII-ITC CESD plays a unique role in engaging with textile and apparel factories to strengthen the role of business leadership in preventing violence against women.

In recent conversations with garment factory managers in Tamil Nadu, we found that local business leaders need practical resources on how to ensure a safe work environment for women. In response to this need, BSR has developed “Women’s Safety in the Workplace,” a HERproject toolkit supporting managers in the garment industry to take action against sexual harassment in the workplace. The toolkit, which we developed in collaboration with CII-ITC CESD and with support from C&A Foundation, includes ready-to-use training materials and step-by-step guides on how to strengthen workplace systems to prevent and address sexual harassment.

Over the next months, BSR and CII-ITC CESD will co-host a series of events across India for business leaders in the garment industry to discuss how to address sexual harassment in the workplace.

We invite you to join the initiative and partner with us to scale HERrespect in India and beyond. Take action today by sharing the toolkit with suppliers in India and support them to promote a safe working environment for women in the supply chain.

Blog | Tuesday June 27, 2017

Supply Chain Sustainability in the Consumer Goods Industry and the Benefits of Collaboration

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When it comes to building sustainable supply chains, collaboration is critical. It helps companies share best practices and resources and jointly develop principles and standards that amplify impacts. In fact, when BSR set out our Supply Chain Leadership Ladder framework earlier this year, we established collaboration as one of the four dimensions of a robust sustainable supply chain program.

Collaboration is also a core theme of a new AIM-PROGRESS study that BSR led to examine how much progress the fast-moving consumer goods industry is making on supply chain sustainability. The annual study, which BSR has supported for the past two years, is based on information and data submitted by 40 companies representing more than US$800 billion in revenue.

In addition to providing a snapshot of the state of supply chain sustainability in the consumer goods industry, the study also shows how collaboration can drive efficiencies, encourage companies to innovate and act with ambition, and deliver greater impacts in the world. Here are five key findings from the 2016 AIM-PROGRESS Member Benchmarking report:

• Collaboration is generating cost savings: In 2016, AIM-PROGRESS members accepted nearly 2,000 supplier audits commissioned by another member rather than asking suppliers to submit to another audit. In addition to addressing audit fatigue and reducing administrative burdens, this saved members an estimated US$5 million in avoided audit costs.
• Collaboration helps companies implement the international sustainability agenda: When the UK Modern Slavery Act was passed in 2015, one-third of AIM-PROGRESS members had no formal approach to address the risks of modern slavery in the supply chain. AIM-PROGRESS set modern slavery as a priority area for the group, and today, 92 percent of members have an established approach to this issue. 
• Supply chain sustainability goals are now mainstream: Today, 90 percent of AIM-PROGRESS members have set supply chain sustainability goals—an 18 percent increase since 2015.
• Supply chain sustainability actions are reaching a larger number of suppliers: In 2016, companies engaged about 50 percent of in-scope suppliers through a sustainability assessment, audit, or self-assessment—up from 33 percent of in-scope suppliers in 2015.
• Companies are investing in more robust governance and management: In 2016, companies reported a 60 percent increase in the number of people working on responsible sourcing, and a 14 percent increase in program oversight at the vice president level or above.

This survey reveals that company efforts on supply chain sustainability are maturing, as is the collaboration architecture that supports them. Members of AIM-PROGRESS said the collaboration has helped to strengthen their responsible sourcing programs. “We have benefitted substantially from learning from other companies and sharing resources as we have ramped up our program. We use the [survey] insights as a tool to engage our teams and drive further progress,” said Anheuser-Busch InBev Sustainability Manager Clare Flannery. WestRock Director of Supply Chain Compliance and Sustainability Christopher Campolongo added that this kind of work gives AIM-PROGRESS members “greater visibility into common topics that can be improved on a global scale.”

As we mark our 25th year, BSR will build on what we have learned to help our members get the most out of collaboration on supply chain sustainability. Whether through our own Collaborative Initiatives or via partnerships with other platforms, we will continue to champion collaboration as a way to build inclusive, resilient, and transparent supply chains.

Blog | Monday June 26, 2017

Three Steps to Tackle Raw Materials Risks—from the Inside Out

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For global companies, different commodities present a risk for serious human rights abuses, such as the worst forms of child labor, conflict, and forced labor, as well as other social issues and environmental degradation.

These risks have led the Organization for Economic Cooperation and Development (OECD) to publish the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas (OECD Due Diligence Guidance), which has been codified into law in the United States and European Union and is being debated in other jurisdictions. While some regulation focuses on the sourcing of minerals from specific locations, the EU law forces companies to look for risks in the raw materials wherever they are sourced globally.

Today, the number of raw materials facing scrutiny is also growing: A forthcoming handbook from the OECD will help companies apply the OECD Due Diligence Guidance to palm, conflict minerals, pulp and paper, diamonds and other gem stones, oil and gas, and other commodities. Cotton and seafood are also gaining attention.

This broader geographic and material scope means more companies across industry sectors will need to take action to reduce social and environmental risks in the procurement of raw materials. To make a real impact—and level the playing field so that there is sufficient capacity to protect human rights—collaboration will be critical.

But rather than starting by joining a collaborative initiative, companies should work from the inside out, identifying and assessing their biggest raw materials risks and then finding the right group to join to maximize impact and mitigate risks.

Step 1: Identify your company’s risk profile.

Collaboration may be necessary to create the conditions for improvement at the site of extraction or harvest, but the best place to start is by looking inward: What is your company’s raw material risk profile?

No company has the resources to comprehensively address every raw material in their products, nor do they have the expertise to effectively engage. Therefore, it is critical to create an internal strategy to focus scarce company resources. That requires an internal assessment process, like a materiality analysis, to identify the most important and impactful commodities and materials.

Step 2: Analyze the supply chain of your target raw materials.

The next step is to look at the supply chain of the raw materials you have identified: Where do the materials come from? What are the risks in that region? Answering these questions will allow you to identify the raw materials and regions that present the most immediate, most severe risks.

In an age of hyper-transparency, companies should assume that stakeholders will be able to map the supply chain and link commodity risks to your company. Proactively understanding where your company has raw material and commodity risks puts it in a position to more efficiently meet stakeholder expectations, minimize risk, and maximize impact.

Step 3: Create a collaboration strategy.

Once you clearly understand your company’s biggest risks, you can invest in the collaborations that will have the most impact. These partnerships might focus on the commodity, or they might focus on issues in that region. Different companies will have different types of severe risks depending on the commodities that are important to them. For example, one company may be sourcing a high-risk commodity from a low-risk region and should instead focus on a medium risk commodity from an area where human rights abuses are known to be more likely.

While many companies are responding in a reactive way to industry standards, legislation, or media and NGO reports, some have been proactive in identifying their risks and joining the most relevant groups that are advancing progress on specific issues. Microsoft, for instance, in reviewing its products, determined that tin not only presented risks not from a conflict minerals perspective, but also can present risks in its extraction in Indonesia. Therefore, they joined with a number of other companies and organizations to form the IDH Indonesian Tin Working Group, which focuses on driving the implementation of a roadmap for responsible tin mining in Indonesia.

The risks in raw materials and commodities can be complex for companies, which is why collaboration is important. But collaboration can’t happen until after companies take those first inward-focused steps to review their products and assess and identify their most relevant risks in sourcing raw materials and commodities.

Blog | Thursday June 22, 2017

BSR’s Women in Factories China Program: Moving from Risk to Value in the Supply Chain

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“I was a machine operator and became the first female line manager for my factory. The training helped me understand how to manage a team. I have a new sense of my own career development and how to lead my team toward even better performance.” —Xiangli Lu, factory worker and Women in Factories participant

Over the past three years, BSR’s Women in Factories China Program has delivered more than a million hours of training to nearly 90,000 workers in more than 45 factories across seven different industries in China’s manufacturing supply chain—significantly exceeding program goals and helping empower women as agents of sustainable change.

The Women in Factories program—funded by and in partnership with the Walmart Foundation's Women’s Economic Empowerment Initiative—was designed to build the capability of human resources departments to provide work and life skills for workers, while demonstrating the value of investing in women workers who can become the next generation of leaders. Surveys of participants show that the program has given women workers the skills and knowledge they need to change their lives and how they work, creating value for factories and catalyzing change in manufacturing supply chains.

At a recent half-day event in Shenzhen, China, BSR and Walmart highlighted program outcomes and led discussions about how brands and factories can invest in workers to help China become a manufacturing leader as the industry evolves in the future.

How Investing in Workers Benefits Women and Factories

When BSR Asia-Pacific Vice President Jeremy Prepscius opened the event, he described how brands’ perceptions of factory workers is shifting from a focus on identifying and managing risks to finding ways to add value. Previously, many factory managers didn’t understand the value of investing resources in workers and considered these efforts a waste. As the Women in Factories program progressed, however, more factories and companies began to see that investing in people can transform supply chains by building an internal pipeline of women leaders.

The value of this investment was evident in the survey results and personal stories about the program:

• Communication: 51 percent of participants significantly improved how they respond to disagreements at work, and 90 percent of workers showed improved communication skills.
• Commitment: 40 percent of participants showed an increased willingness to recommend their factories to others, indicating a better sense of ownership and a higher level of commitment to their work. One speaker from Hayco said that after the first wave of training, the company’s factories experienced a sharp decline in trainee turnover rates, from around 14 percent to 1 percent. 
• Stress management: More than half of participants reported a significant improvement in their ability to manage stress, and 83 percent said they felt more capable at their jobs, which supports higher productivity. Lulu Zhu, a factory worker who received the program’s Role Model Women award, said she is now able to cope with conflicts. “Women in Factories enabled me to help my peers focus on the problem itself and find a solution rather than venting negative emotions,” she said.

Professor Li Xiaoping of China Eastern Normal University, who analyzed more than 800,000 data points, said targeted training procedures, strong and interactive content, and timing were keys to the program’s success.

How Training Can Support the Future of Chinese Industry

To close the event, BSR China Director Lin Wang moderated a panel on how industry trends are affecting factories and the labor force, and how investing in workers through the Made in China 2025 government initiative will help China become a manufacturing leader. Panelists included EY Sustainability Director Brian Ho, Harvard Center Shanghai Assistant Research Director Nancy Dai, Walmart Senior Sourcing Director Sophia Yu, and Foxconn Project Director Xuehu Xiong.

China’s prevalent production and export business model is becoming a thing of the past. Today, the industry is poised to become more domestically self-sufficient, service-oriented, and competitive. This poses new challenges and opportunities for workers as more and more factories move toward automation.

Panelists noted that while automation has the potential to threaten factory jobs, it also presents a massive opportunity for job creation. Future employers creating “smart factories” will need to teach new skills and nurture confidence because, even as production processes are streamlined, new jobs will require people to program and maintain machines and emerging technology. Yu said that the Women in Factories program has helped give thousands of women workers the confidence to learn new skills and pursue new opportunities in the workplace, which will support the transition for the jobs of the future.

Ultimately, the Women in Factories program will reach beyond just the 90,000 workers in China’s manufacturing sector. That’s because the program has engaged key actors throughout the supply chain, helping them understand that investing in workers is really about investing in the future. As Prespscius said in his closing remarks, factories are now going from asking, “Why should we invest in our workers?” to “Why not?”

A Women in Factories impact report will be published later this year. 

Blog | Wednesday June 21, 2017

Activist Investors and the Rise of Short-Termism 2.0

Preview

There has long been a tension in the financial markets between long-term growth and short-term returns. In the past decade, short-term pressures have been exacerbated by executive compensation trends, quarterly earnings guidance, and increased shareholder turnover.  Several studies have highlighted executives who admit they would sacrifice a project that would create long-term value in order to meet quarterly earnings expectations.

In recent years, companies have found it even more challenging to focus on long-term value creation due to the rise of hedge fund activist investors. These activist investors are looking to maximize stock price before they sell their shares, and they have been very effective at influencing boards, changing CEOs and management, and driving mergers and acquisitions. There are around 550 activist investors globally, controlling more than US$180 billion in embedded capital—up from US$51 billion in 2011.

There are, of course, many institutional investors who have longer time horizons, and these investors have been instrumental in integrating environmental, social, and governance (ESG) factors as part of this approach. There is evidence that the revenue of long-term firms cumulatively grew an average of 47 percent more than the revenue of other firms from 2001 through 2014. In his annual letter to CEOs this past January, Larry Fink, the chief executive of BlackRock, the world’s largest investor, emphasized the need for long-term value creation:  “ESG factors relevant to a company’s business can provide essential insights into management effectiveness and thus a company’s long-term prospects.”

Despite this positive movement toward long-term thinking, some activist investors are pushing in the wrong direction and threatening to undermine progress. In recent months, we’ve seen significant activist-driven changes at companies that have been focused on sustainability and long-term growth. GE, for example, has a history of positioning itself for long-term growth. But facing pressures to cut costs and boost short-term profits, GE CEO Jeff Immelt announced that he will step down in August. Similarly, Whole Foods had been under intense pressure from activist investor Jana Partners since April, and last week’s surprising acquisition from Amazon is being described as saving the company from the activist investors.

This trend will likely worsen now that the U.S. House of Representatives has passed the Financial CHOICE Act, lifting many of the financial regulations enacted in the 2010 Dodd-Frank Act. This bill would require that investors own 1 percent of a company’s stock for three years in order to file a shareholder proposal. This would greatly limit the ability of most investors to even raise ESG issues.

“This raises the bar for entry to ordinary investors and would make shareholder proposals a billionaire investor’s privilege, when it should be a right for all investors,” said Anne Simpson, investment director, sustainability, at Calpers, the biggest U.S. public pension fund.

Interestingly, amid the debate about short-termism, the negative impacts of ignoring environmental and social issues have become more immediate. Climate impacts on business continuity are no longer 20 years out but affecting operations now. Human rights issues also impact business in near term: Just this year, concerns about the Dakota Access Pipeline have affected investments in Wells Fargo.

Still, the overall impacts of global social, demographic, political, and environmental trends are realized in years, not months. Investing to become a more sustainable business is inherently about understanding future trends and positioning the company for success over the long term. Here’s hoping the activist investor trend is short-lived, so that investors, companies, and society can all benefit in the long term.