No Easy Answers in Monitoring the Social Impacts of a Global Supply Chain

ANN ARBOR, MI — We now enter breakout session two and I am pivoting from social media’s impact on CSR to managing the social aspects of the supply chain.

The roster:

Bama Athreya, Executive Director, International Labor Rights Forum
Eric Olson, Senior Vice President, Business for Social Responsibility
Monique Oxender, Global Manager, Supply Chain Sustainability, Ford Motor Company
Ravi Anupindi, Program Director, Master of Supply Chain Management, Ross School of Business, University of Michigan (moderator)

We had to work  in this session. Moderator Ravi Anupindul passed out a case study for us to read prior to the panel beginning. In canonical MBA style, the audience was divided up into four groups, with each group tasked with responding to the case.

In a nutshell, we looked at the case of Ikea managing child labor risks in its carpeting supplier communities in India and Pakistan in the mid-1990s. The Ikea supply chain executive had just discovered that several of its 2,200 suppliers had violated the firm’s anti-child labor contracts. The executive immediately flew to the factories in question and created a third party monitoring partnership with Rugmark, to create an anti-child labor auditing system.

However, a German media outlet was going forward with an expose on Ikea’s supply management labor abuses. The case asked the following:

• Does Ikea cancel the contract with the supplier?
• Does Ikea do the interview?
• What is Ikea’s long-term solution to eliminate child labor abuses in its supply chain?

Here’s how the panelists responded:

Role of Business in Addressing Child Labor Issues in Supply Chain — Eric Olson

1. Know the market. In this case, Ikea was too late.
2. Know where you’re doing business, e.g. due diligence.
3. Know what you’re getting into. For example, understand country risk assessments like, what is the rule of law, child labor, local definitions of anti-sweatshop labor. Who are the decision-makers? Opinion formers?

What is the perspective of a NGO? — Bama Athreya

1. Analyze what the risks might be in the region.
2. Don’t wait until the problem hits. It doesn’t look good to embrace NGOs ex post (Rugmark did emerge indigenously in India and Nepa; Ikea actually bailed on Rugmark years later).
3. Go ask the stakeholders first, then create the system to solve the problem as opposed to the reverse (which far too many companies do).

1. Social issues are a bit marginalized in the auto industry; consumers are most concerned with energy/climate impacts.
2. Reducing number of suppliers is not always an option.
3. Ford does do country due diligence in its new supply chains, however human rights risks are rarely looked at.
4. 10-12 tiers of supply chains; human rights violations generally occur in middle levels of supply chain; Ford must be responsible for its entire sphere of influence, but this capacity takes time to develop.