Recently, I asked Ray Schlaff, CPO of international electricity and gas company National Grid, to list his top challenges for 2013. The first topic he listed: sustainability. It’s gaining increased focus in his industry, he said. "Our challenge is how we embed sustainability in our procurement processes and down into the supply chain while ensuring both financial and environmental benefits are quantified and realized."
Schlaff is a plain-spoken, articulate, forward-thinking executive with a knack for nailing critical issues, and I thought of his comments last week when I read the news of the Bangladesh factory collapse that, by some recent estimates, killed more than 600 workers.
The word "sustainability" generally refers to environmental-protection efforts, but as part of the broader concept of corporate social responsibility (CSR), sustaining the lives of factory or other workers is an absolute imperative.
So what’s procurement’s responsibility in that effort? Unquestionably, it’s effective management of the supply chain, including the tier 2s and 3s - your key suppliers’ suppliers. Finding it hard to get good information that far down the supply chain? That’s no excuse. As my Procurement Leaders colleague Tim Burt wrote just after news of the building collapse, supplier audits may not be up to the challenge of spotting such potential problems, but the stakes - both business and personal - are high and demand better systems.
In the days since the tragedy, the media has reported or proposed several potential remedies to the problem of inadequate protection of workers. One possibility could be tax incentives. The KPMG Green-Tax Index reports on the tax incentives different countries offer to promote cleaner manufacturing. Perhaps similar incentives could be used to promote safer working conditions.
There have also been calls for clothing retailers to sign on to The Bangladesh Fire and Building Safety Agreement, which would, among other things, require factory inspections and make the findings public.
Some brand-name retailers like The Walt Disney Company have cut their ties to factories in Bangladesh and Pakistan in the wake of the collapse, while others, such as Wal-Mart and J.C. Penny have vowed to stay the course and intensify efforts to ensure safe working conditions.
Still, for procurement, the best strategy is a bit more fundamental: Start requiring thorough reports on the finances and operations of tier-1 and tier-2 suppliers. If any key suppliers can’t or won’t help you get that data, maybe you shouldn’t be working with them.