Supply Chain of the Future

This daylong discussion, attended by roughly 40 scholars and practitioners from universities, labor organizations, corporations and NGOs, focused on how companies can move beyond monitoring and compliance to build socially and environmentally responsible supply chains.

At two workshops in 2008, the group discussed a few key strategies, leading Josh Cohen and Rick Locke to seek funding for a new research center. These included:

1. Scaling up codes of conduct
2. Reinvigorating national regulation
3. Combining labor standards and trade rules

The event on January 29th covered the following topics, summarized below:

Panel 1.   Recent research on ethical consumption

• Michael Hiscox, Jens Hainmueller, Sandra Sequeira (Harvard)
• Margeret Levi (University of Washington)
• Yotam Margalit (Stanford University)
• Dara O’Rourke (GoodGuide, UC Berkeley)

Selected findings:

• The Average “Fair Trade” effect is 9%, based on a coffee experiment with Whole  Foods
• Consumers are willing to pay some premium for social labels (7.3-13.1%)
• Berkeley: Personal health and wellness and the environment outrank labor concerns for consumers of products listed on GoodGuide.com

Panel  2.   Best practices in the environmental area that might be carried over to labor/trade

• Edgar Blanco (MIT)
• Bonnie Nixon (HP)
• Erica Plambeck (Stanford)
• Charles Sabel (Columbia)

Selected discussion points:

•  Compliance-based regulation no longer works; there are new roles for NGOs, government, and public-private partnerships in creating incentives for suppliers
• Suppliers care most about volume and length of contracts; since not everyone is Wal-Mart, buyers may need to come together to encourage ethical behavior

Panel 3.   New regulatory strategies in labor markets in emerging economies

• Salo Vinocur Coslovsky, Massachusetts Institute of Technology
• Mary Gallagher, University of Michigan
• Andrew Schrank, University of New Mexico
• Rick Locke, Massachusetts Institute of Technology

Selected discussion points:

• Evidence from Brazil shows that law enforcement operates in parallel with private auditors in monitoring suppliers, becoming “shock troops of sustainable development”; some issues require state regulation
• There may be trade-offs between bureaucratic efficiency and equity in a compliance system, as in the Dominican Republic
• In some cases, the state’s role is to delegate work so private sector can police more effectively

Panel 4.   Looking Forward

• Caitlin Morris (Nike)
• Marcela Manubens (Phillips-Van Heusen)

Selected discussion points:

• Key issue is how to tie labor and environmental agenda together; for some companies, environmentalism is self-interest—materials like bamboo often resonate with designers. But who makes the bamboo shirt is less of an issue. One option is to derive cost savings from environmental policies and direct that money to programs for workers.
• Big question: in an entry-level sector, how far across the spectrum from minimum or entry-level to living wage do we go? How do we measure progress? Is it a 3% increase in labor value /product each year?
• Another issue in need of further exploration: where upgrading doesn’t reach lower down in the supply chain. There’s got to be a virtuous circle where technical upgrading and labor issues can be joined
• Environmental issues have won the battle because regulatory environment incents companies to care about it, and consumers care, too—it’s become hip. Maybe what’s needed is to institutionalize the “triple bottom line” approach to business such that companies with good labor policies get tax breaks.

» Notes and Presentations (password protected)

Co-sponsored with the Global Supply Chain Management Forum