Statistics from the UK Government Small Business Services demonstrate the importance of the smaller business in the national economy. Taking the UK economy as a case in point… There were an estimated 3.7 million businesses in the UK at the start of 2001. Of these, the vast majority (99%) had less than 50 employees and they provided 43% of the UK non-government employment and 36% of total turnover. (source: Small Business Service website)
Earlier this year, more than 200 people gathered in New York in June 2003, to discuss supply chain management under the auspices of the UN Global Compact. Article 13 was there, and report back on the discussions…
The Global Compact is an international set of standards on how lots of different people think companies should be taking on the principles of sustainable development and running their businesses responsibly.
They were looking at supply chains in particular, looking at how companies who were trying to implement business responsibility strategies, could encourage these in the businesses who supplied them. The importance of this relationship between larger companies and their smaller counterparts has been highlighted by high-profile “scandals” in the clothing manufacturing and food industries, where a large well-known company is named in connection with social, ethical or environmental malpractice in the workplace at one of its supplier sites.
Recent Article 13 findings...
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Article 13’s recent research(1) looking at SME engagement in the CSR agenda, found that one of the top factors for SMEs to begin considering CSR issues explicitly was “pressure” or scrutiny from its “customers”. Within the UK, consumer evidence has been collected that suggests that customers look at the social behaviour of companies from which they buy (MORI cited in SBS 2002b). This can be directly related to SMEs, or be passed by larger companies to SMEs through their supply chain. For example, of SMEs sampled 60% said they had been asked by big business customers about their safety policies and practice, 43% had been asked about environmental policies and 17% about social and community issues (DTI et al. 2002). Similarly, professionals now consider a company’s social and ethical approach when looking at changing jobs (SBS 2002b).
In many cases this “customer” might be:
a large corporate further up the supply chain (which is itself under scrutiny from its consumers or investors or other stakeholders), or a large public organisation (such as the National Health Service, which is delivering to government guidelines on “green” procurement, for example).
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Supply chain management programmes
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Whichever it is, the “big boys” can exert their influence to ensure suppliers achieve certain standards on their environmental, social and economic performance.
One of the ways this is done is through a formalised “supply chain management” programme.
Such a programme might be carried out through written policies and principles which suppliers need to adhere to. It might involve monitoring and evaluation of supplier sites carried out by independent verifiers. E.g. an organic restaurant might ask independent verifiers to check that their suppliers of “organic” cauliflowers are indeed supplying them with organic produce.
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Recent global discussions…risks and opportunities
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Recent global discussions…risks and opportunities The recent discussions in New York highlighted why it made good business sense for corporates to seriously consider supply chain management programmes to promote social, ethical and environmental issues in the supply chain, whether it be a risk management mechanism, or a positive advocacy exercise.
The discussions also highlighted what some of the barriers are to implementing such a supply chain management system, and to making a real difference at supplier sites.
Implementation
Monitoring and evaluation exercises can be a time-consuming and cumbersome process of box-ticking. The example above highlights just one of the concerns with this.
The organic restaurant can in fact, depend upon the Soil Association certification mark which is the recognised standard for organic food – in a sense, there is agreement on what constitutes organic and what doesn’t. However, no such agreement exists on some social and ethical issues, to do with labour standards. Differing legislation and business practices in other countries makes this even more complicated.
It was suggested that a partnership approach may provide solutions. For example, if three corporates in France source their raw materials from the same factory in Brazil, there is no point in the factory being monitored three separate times. By working in partnership, they can achieve more.
Making a real difference
Much supply chain management to date has focussed on top-down enforcement management strategies, where an SME either complies or doesn’t. This doesn’t really help an SME much, it either loses the business, or is forced to make a heavy investment, which may impact adversely in the short term on its competitiveness and position in the marketplace. For a small company, this can be serious. Studies are finding that even though certain suppliers have undergone monitoring and evaluation, over several years, this has not led to any real improvement in its position on environmental, social and ethical matters.
Recommendations are for companies to take a different approach which focuses on empowerment, capacity-building and training. Again a partnership approach here can yield benefits, sharing resources and building advocacy.
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Further help
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UN Global Compact
Article 13 research report: “Corporate social responsibility – a source of competitive edge for SMEs”, Article 13, June 2003
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Sources:
- “Corporate social responsibility – a source of competitive edge for SMEs”, Article 13, June 2003
Also in this feature:
© Article 13 2003
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