24 August 2009
A web portal is helping multinationals to share their experiences of embedding CSR into their supply chains.Adrienne Margolis reports
International companies may wish to cascade CSR initiatives through their supply chains, but just how easy is this to put into practice?
One group of multinationals - Hewlett Packard (HP), L'Oréal, Volkswagen and Titan - working through business network CSR Europe, has set up a web portal
(www.csr-supplychain.org) to share experiences of responsible supply chain management. The idea is to move beyond compliance to embedding CSR into the corporate culture. Here we explore what some of these companies have done and how.
TEAMWORK In 2004, HP, together with IBM, Dell, Microsoft and Intel, helped to devise the Electronic Industry Code of Conduct (EICC). "This is now the basis of HP's supply chain programme," says Karl Daumueller, programme manager for global procurement services at HP.
To work with HP, a supplier is required to sign a social and environmental responsibility (SER) agreement, pledging to comply with certain standards. "Rather than policing, we work through partnership and continuous improvement. The reporting procedures involve us asking a supplier for a plan, and following up with an audit after six to 12 months," says Daumueller.
The importance of audits prompted cosmetics company L'Oréal to join the CSR Europe website project. L'Oréal purchasing director Ariane Thomas says: "We are very aware of the problem of audit fatigue. One of the ways in which CSR Europe helped was that we shared experiences with other companies on issues like this."
L'Oréal spent three years from 2002 auditing the most 'at risk' countries and businesses in its supply chain. The CEO and executive committee then decided the whole supply chain should be audited. One goal was harmonisation. "We had very different types of businesses depending on the date of acquisition of the brand and its distribution network," says Thomas.
"We audited all our warehouses, all our suppliers' factories and 'at risk' elements of packaging and promotion. Although it involved a high number of audits, we used the same process for all of them." This took a further three years.
L'Oréal operates through four centres - Asia, the US, South America and Europe. Each buyer is in charge of between two and 10 sites, and they conduct audits every six months to assess the performance of suppliers.
"Our aim is to work with suppliers that are innovative and ethical, and we find that we get positive results," explains Thomas. "We were one of the first cosmetic companies to share things such as health and safety practices with our big suppliers, and discovered there is then a closer fit between companies and a better alignment of values."
L'Oréal has the advantage of long-term supplier relationships. It has dealt with more than 75 per cent of its vendors for more than a decade and with some for more than 25 years. "They are people we know," adds Thomas.
COMPETITIVE EDGE Cement maker Titan became involved in the CSR Europe portal to give suppliers the message that social responsibility strengthens long-term competitiveness. Despite the tough economic climate, CSR is increasingly a requirement.
"Over the next two years, adoption of CSR principles will be one of the main conditions of our work with suppliers," says Maria Alexiou, Titan's CSR manager.
At the moment, all its main suppliers are expected to define their own priorities for CSR. Alexiou acknowledges that different suppliers will need to adopt different strategies.
"It depends on their size, the sectors they are in, their level of exposure to global markets, whether they are public, private or family-run businesses, and their level of interdependence with other companies," she says.
All the multinationals that led the CSR Europe project agree that capacity building is needed in order to cascade CSR policies down supply chains. "It is a question of ownership," says Thomas.
"The CSR Europe supply chain portal sends the message that suppliers have the chance to invent a system, such as a code of conduct, that works for them. They will look after it more closely if they own it themselves."
To help build capacity, HP collaborated with a Danish think tank, introducing CSR policies to second-tier suppliers in central and eastern Europe, mostly small and medium-sized companies. "Many of the suppliers had very little knowledge of CSR concepts. Our approach was low key - but we saw lots of room for improvement," says Mette Andersen, special adviser at the Danish Commerce and Companies Agency.
HP focused on management systems, but as far as suppliers were concerned, it was a tick-box exercise. "The management systems did not produce real results," Andersen explains. "A key message was, if you have management systems for CSR, they need to be properly integrated into your operations."
The project ran for 20 months until January 2008. "We identified where suppliers needed assistance, then gave them training," Andersen says. One of HP's aims was to show that CSR can improve the bottom line. But, as Andersen points out, this will take time, as smaller firms tend to focus on costs, and some benefits only show in the long run.
This chimes with the experience of Ink Design, a small Athens-based supplier to Titan. Limited resources make it difficult to build the business for the long term, manager George Pizanis says. But he believes smaller companies can tap into extra resources to introduce CSR programmes by working together. "Cooperating in networks and common projects with support from outside experts can help," he says.
Funding would also be useful. "If small grants could be provided to develop new skills, we could implement our own initiatives," adds Pizanis.
Daumueller says moves to cascade CSR down the supply chain continue despite the downturn. "We cannot afford to compromise," he explains, "not just because of our reputation, but because our sales depend on these programmes."
See www.csr-supplychain.org SMaug2009
