Agents of "Unethical Globalisation" advocating for 'Ethics' in Marketing now
Globalisation has vastly increased the length and complexity of supply chains over the past few decades. At the same time as drawing more communities into the global economy and playing a role in development, it has dispersed the negative impacts of business activities on people and the environment to nearly every corner of the world. Those countries which underwent their industrial revolutions in the 18th and 19th centuries have had centuries to build regulatory and social norms in response to excesses, ensuring that most businesses behave in a relatively responsible manner. However, globalisation has rushed in an era of industrialisation in many emerging markets at a pace that has made it hard for local governments, businesses and civil society to adjust to while adequately protecting local communities.
This phenomenon places a moral responsibility onto multinational firms, to ensure that standards viewed as acceptable in advanced economies are applied in the markets from which they source. And from a pragmatic point of view, the globalisation of communications and media means that people across the globe have real-time access to stories coming out of the developing-world communities which produce their clothes, smart phone components, food and so on. Preventable disasters like the Rana Plaza factory collapse in 2013 can hit a brand’s bottom line (and that of its shareholders) hard. Positive stories, such as where a firm empowers the women in its supply chain to grow their businesses, can give a brand a reputational boost while improving supply chain resilience. There are also very rational business continuity reasons for responsible conduct, such as the threat to agricultural production in some regions from climate change, and growing competition for skills or labour in certain sectors.
Governments and international organisations have exerted increasing pressure on businesses to be responsible over the past decade. Sustainability reporting has become an industry in itself: the number of mandatory and voluntary reporting instruments has risen from 60 in 2006 to 383 in 2016, with the number of countries covered rising from 19 to 71.1 Some advanced economy regulators are also extending the applicability of their regulations onto a global scale—with regulations such as the Conflict Minerals Rule (Dodd-Frank Act, Section 1502) in the US and the Modern Slavery Act in the UK generating a worldwide ripple effect. New compliance risks are constantly emerging as NGOs and activists highlight scandals and governments attempt to close loopholes—but a reactive approach is not good enough. Firms need to get out ahead of the regulatory wave and show leadership in improving supply chain transparency and management. Those who do will find it does not just mitigate risks, but also generates opportunities. Consumers and business customers are paying attention: in every market we surveyed, customers were cited by firms as one of the top influences driving them to make their supply chains responsible, with a greater perceived impact than even regulators.
The first step is to admit you have a problem
This study confirms that corporate responsibility over supply chains is becoming more prominent on the radars of business leaders. More firms are integrating it into their core operations, as senior executives and boards come to see the value to their business of a more responsible approach.
Recognising a corporate responsibility towards the social and environmental impact of supply chains is an important first step, but the complexity of today’s global supply chains makes this challenging. We spoke to firms that had thousands, and in one case millions, of suppliers. Even small firms are much more likely to have cross-border value chains than was the case a generation ago. Large multinational businesses face a bewildering array of constantly-evolving regulatory and reputational risks. Dealing with these requires sophisticated systems with appropriate internal structures, well-designed supplier management systems and in many cases, outside support. The scale of the challenge is not yet well recognised. In section one, “confidence and complacency”, we present survey findings showing that executives had unwarranted confidence about how responsible their supply chains were. A significant minority of businesses had also allowed supply chain responsibility to slide as a priority in the past five years. There was a bias towards issues connected to more “obvious” material business risks and opportunities, while topics which were harder to quantify or which only affected sub-sets of the population were often neglected.
Time to stop pointing fingers
In our discussions with representatives of corporations, financial stakeholders, regulators, international organisations and NGOs, it was striking how often each blamed the others for constraining, or failing to adequately support, their efforts to be responsible. Company executives also pointed to the difficulties of fully understanding and monitoring their supply chains—something which some experts from academia and consultancy disputed, given the possibilities presented by digital technologies and outside specialists.
Companies seeking credibility with an increasingly well-informed and critical consumer base need to stop making excuses and get out ahead of this issue. They must recognise that in the digital era, they can neither control the agenda, nor who can access information on their supply chains. Pressure on them for transparency and responsibility will only increase. But the responsibility does not lie on the corporate sector alone. Corporations are best-placed to understand and take action on their supply chains, to mitigate both financial and ethical risks. They must therefore play the biggest role, but the other parties involved in setting, monitoring and enforcing standards must also consider how best to incentivise and support companies along this path. This report outlines key elements of best practice, illustrated with real-life case studies, to guide all stakeholders on this evolving journey.
A blueprint for better supply chains: understanding motivations and introducing best practice
Section two, “cultivating a responsible corporate culture”, looks at what influences and motivates businesses to uphold social and environmental standards, identifying the levers held by regulators, multilateral organisations, financial stakeholders, business customers, consumers and civil society watchdogs—as well as how these influences interact. We also ask which firms fall through the gaps, and how a responsible business culture can be motivated in such cases. Defining best practice on responsible supply chains is not easy, and there is inevitably nuance across industries and even from firm to firm. Yet lessons can be learned from the experience of leading firms and from experts on the subject. In section three, “more than words”, we identify some key elements of best practice with regard to internal management, supplier engagement and working with third parties. There is still plenty of disagreement over what role corporations and other stakeholders should play in ensuring responsible supply chains, and where the obstacles lie. In this white paper, we attempt to cut through the noise. Our argument is that there should be “no more excuses”: in a world in which 69 of the world’s 100 largest economic entities are corporations rather than countries, responsible supply chains are a moral imperative. In the context of a growing backlash against globalisation, rising consumer expectations and the rising economic impact of climate change, they are increasingly a business imperative. The millennials being recruited into corporations understand this and look for responsible behaviour in their employers; but it is down to today’s corporate leaders to act on it. No more excuses. It is time to embrace the necessity of, and business opportunities presented by, responsible supply chains.
Courtesy:- The Economist Intelligence Unit
