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From Audit to Innovation:

Advancing Human Rights Through Global Supply Chains

David Kovick, ShiftResponsible Electronics 20132 October 2013

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SHIFT

An independent non-profit center for business and human rights practice

A team that was centrally involved in shaping and drafting the UN Guiding Principles on Business and Human Rights

Chaired by Prof John Ruggie

Helping governments, businesses, and stakeholders put the UN Guiding Principles into practice

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OUR ENTRY POINT

Corporate Responsibility to Respect Human Rights

“Avoid infringing on the human rights of others and address adverse human rights impacts with which they are involved”

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CAUSE, CONTRIBUTE, LINKAGE

Cause and Contribute: Own activitiesAvoid and remediate

Linkage: ‘Business Relationships’, including supply chainsSeek to prevent or mitigate… Even if they have not contributed to those impacts

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LEVERAGE

Use it(!)Seek to Increase it[Consider exiting relationship]

Responsibility exists independent of Leverage

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HUMAN RIGHTS DUE DILIGENCE

Assess actual and potential impactsIntegrate and Act: Prevent and MitigateTrack PerformanceCommunicate

For most companies, HRDD with respect to supply chain is limited to ‘compliance audit and corrective action’ paradigm

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THE LIMITATIONS OF AUDIT/CAP

Limited Visibility / Quality of InformationLack of Capacity of SuppliersLack of Perceived Incentives of SuppliersSystemic / Endemic ChallengesThe Role of Purchasing Practices

Collaboration with GSCP and member companiesInterviews with leading brands/retailers and experts in the fieldSurvey, categorize and provide examples of a range of innovative approachesCompany case studies

Timberland, Chiquita, Tesco, HP

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OUR RESEARCH: WHAT SEEMS TO BE WORKING?

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INNOVATIVE APPROACHES

Comprehensive Continuous Improvement ProgramsFrom Audit to Collaborative AssessmentGrievance MechanismsCapacity-BuildingNGO PartnershipsCommercial Incentives (External Incentives)Business Case for Suppliers (Internal Incentives)Corporate Leverage for Regulatory ChangeMultilateral CollaborationPurchasing Practices

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GAINING VISIBILITY

Comprehensive Continuous Improvement Programs

Vs. ‘zero tolerance’ and ‘free pass’ approaches

From Audit to Collaborative AssessmentTimberland: policeman to partner

Grievance MechanismsTesco, PVH, Disney: an additional source of dataCANIETI/CEREAL in Mexico

“We have two conditions: First, you have to be honest; and Second, you have to commit to working with us over time to make improvements.”

– Social Performance Leader for a Global Retailer

Grievance Mechanisms:

-- For Supplier: Risk Management, Early Warning, Pressure Valve

-- For Workers: Substantive Outcomes and Process Interests

-- For Brands: More Visibility

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ADDRESSING SUPPLIER CAPACITY

Capacity-Building ApproachesNot only on social performance… but management systems more broadlyPeer-learning supplier forumsGood practice guides

NGO PartnershipsIncreasing capacity, credibility, and trustChiquita and the Rain Forest Alliance; Starbucks and Conservation International; PVH and local NGOs; HP and child rights organizations in China or CEREAL in Mexico

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INCENTIVES: EXTERNAL AND INTERNAL

Commercial IncentivesSupplier preference, premium pricing, longer-term contracts, access to capacity-building, audit relief, symbolic reward

Making the Business Case for SuppliersBeyond the Anecdotal: Measuring the return on investment in profit and loss statementsStarbucks and Timberland… working with ELEVATEMarks & Spencer’s ‘Pilot Factories’

“Money talks: You have to live in the land of market forces, or else you are living in the land of illusion.”

-- Company Social Performance Leader

“All of the training we do on supplier codes, the why’s and wherefore’s, that it’s good to be good – people sit and nod politely… But if you can persuade them that there’s a business benefit to all of this – that a properly looked after workforce is more motivated and more efficient, that by taking care of people better and rewarding them better, their business will be more profitable – that’s the holy grail.”

-- Company Social Performance Leader

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SYSTEMIC CHALLENGES

Engaging Unilaterally for Regulatory ChangeAddressing the Living Wage in Bangladesh (H&M)

Multilateral CollaborationBangladesh Fire and Building Safety AccordHP Case Study: Conflict Minerals, Labor Relations in Mexico, Student Workers in ChinaIndustry-wide and Multilateral Platforms, like FLA, ETI, EICC/GeSI

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BUYER ‘CONTRIBUTION’

Purchasing PracticesJoint forward-planning Educating designers and buyersGovernance safeguards on orderingAccountability and performance metrics

Addressing Purchasing Practices

•Training Buyers to Recognize Impacts, Contribution•‘A Seat at the Table’: Embedding, Internal Alignment•Governance Safeguards: Review and Veto of

Purchase Order Changes•Performance Metrics for Buyers, Directors•Monthly Reports to Buyers, to take conversations

forward•Joint forward planning with Suppliers

“Companies that do not take a hard look internally at how they themselves contribute to the issues that arise in their supply chain are only playing around the edges of social compliance issues.”

– Industry Expert

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INNOVATIVE APPROACHES

Comprehensive Continuous Improvement ProgramsFrom Audit to Collaborative AssessmentGrievance MechanismsCapacity-BuildingNGO PartnershipsCommercial Incentives (External Incentives)Business Case for Suppliers (Internal Incentives)Corporate Leverage for Regulatory ChangeMultilateral CollaborationPurchasing Practices

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ADDRESSING THE LIMITATIONS

Scalability?Yes… but why not lead with Impact?Prioritization: Principled Pragmatism

Short-Term Supplier Relationships?Not sure there’s an answer there…Gets at the fundamental business strategy

The Electronic Industry Citizenship Coalition

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