Supply Chain Impact – How To Start Assessing Your Supply Chain

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This post originally appeared on Green Business Network’s blog. 

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Social Compliance

The emergence of ‘Codes of Conducts’ in the past 20 years is the result of stakeholder pressure and the response of brands to create a common set of guidelines for manufacturers in a global supply chain. Understanding risk in your supply chain is key in maintaining your brand reputation and trust with your clients. In the case of promotional merchandise, the last thing you want is your company to be on a 60 Minutes exposé because of the t-shirts you gave away at an event.

Codes of conducts are descriptions of expectations of business conduct related to human rights, labor standards, working conditions, occupational health and safety, environmental management, business integrity, and anti-corruption.

These codes are generally based on the International Labour Organization’s (ILO) Declaration on Fundamental Principles and Rights at Work and related conventions on core labor standards.

Codes of conduct also typically reference local labor laws. Labor laws are surprisingly consistent across countries (enforcement unfortunately is not consistent).

Our approach at Fairware

While we have a formal survey and Code of Conduct letter for suppliers, every foray starts with a conversation with a potential supplier. It’s a great way to gauge whether they have experience with social compliance programs and Codes and to diffuse any anxiety they may feel about the process. There are four elements to our approach.

1. 1. Code of Conduct and Supplier Survey

Fairware is a Category D Licensee of the Fair Labor Association (FLA) and our code has always been modeled by that of the FLA. We ask suppliers to review our Code and answer a 4 page questionnaire on their own supply chain practices. The letter tells the supplier about us and our clients and clarifies what we’re asking for. The questionnaire includes questions on:

  1. Country of origin for their products
  2. Certifications the facilities may have (e.g. ISO Certifications)
  3. Whether their facilities have been audited for social and environmental performance (by which brands/standards and when)
  4. Highlights of any social, community or environmental programs they operate.

We ask our suppliers to complete the survey and sign off on our Code of Conduct, stating that to the best of their knowledge their supply chain is compliant. While the majority of our suppliers have reviewed and signed off on our Code, we also accept suppliers that provide copies of 3rd party certification or that have publicly accessible information on their own Code of Conduct and social compliance program. We ask suppliers to fill out our questionnaire regardless of whether they’re in the USA, Canada, China or any other country.

We recently added a question to our survey after we realized many of the questions were quite ‘formal’. We added the question “is there anything you’re particularly proud of at your workplace” – it has allowed for some more qualitative ‘stories’ from our suppliers.

1. 2. Look for suppliers with Third Party Certifications

We actively seek out suppliers that have independent 3rd party certification verifying their environmental and social performance and management systems. Examples of the Labour Standard Certifications we look for include:

  1. SA8000: Created in 1997 by Social Accountability International, it is an international standardized code of conduct for improving working conditions around the world. Based on the principles of thirteen international human rights conventions and developed through a multi-stakeholder process, SA8000 is a tool to help apply these norms to practical work-life situations.
  2. Fair Labor Association (FLA): Fair Labor Association (FLA) is a collaborative effort of socially responsible companies, colleges and universities, and civil society organizations to improve working conditions in factories around the world. The FLA has developed a Workplace Code of Conduct, based on ILO standards, and created a practical monitoring, remediation and verification process to achieve those standards.
  3. Quality Certification Alliance (QCA): QCA accreditation is open to promotional products suppliers that have demonstrated knowledge and commitment to meeting or exceeding all relevant domestic and international standards for: Product Safety, Social Accountability, Environmental Stewardship, Quality Assurance and Supply Chain Safety.
  4. Fair Trade: Fairtrade International is the organization that coordinates Fairtrade labelling at an international level. From offices in Bonn, Germany, it sets international Fairtrade standards, organizes support for producers around the world, develops global Fairtrade strategy, and promotes trade justice internationally.

1. 3. Audit Factories

We audit our factories on a case-by-case basis at the request of clients who are placing large orders or long-term programs. These audits are done on a cost-shared basis, and as a general rule, are done to the client Code of Conduct specifications. For many, the thought of auditing a factory is daunting. While it is daunting, it’s not as overwhelming as you may imagine.

To start, it is relatively inexpensive if you’re considering a key part of your supply chain. On average, a factory audit for social compliance will cost between $1000 and $1500 USD. Because of the nature of our business, and our size and scale, we can’t afford nor is it realistic to audit all the manufacturers we use.  We started looking at our bag and water bottle suppliers, as they are two of our top selling commodities. Next year we hope to look at our USB drive suppliers.

To be blunt, auditing a factory is easy – you hire experts to do the actual auditing. The difficulty lay in ensuring you have the buy-in from your factory partners to address any issues that may arise in the findings. The remediation and follow-up steps from an audit are generally the part that poses the most challenges.

It is useful to go into the process knowing what your partner’s willing to participate in. A good test of commitment is whether they will cost-share the price of the audit, so as to have a financial interest in the outcomes. It is so important to reward your suppliers when they make improvements. Nothing says thank you like a purchase order.

1. 4. Seek out like-minded suppliers

We always look for suppliers that have the same mission and purpose as us. We look to support social enterprises or ventures operated by non-profits and cooperatives as a way to encourage community development opportunities in our supply chain.

We look to directories from Green America, B-Corp and the FLA to identify suppliers. These suppliers are ‘our people’ – we love to help them innovate and their stories are ones we can’t wait to pass on to our clients.

At Fairware, we have had to go through surveys and Code of Conduct assessments that customers have asked of us. We know from experience it’s hard work and it can also be enlightening. We’ve used both Green America’s Green Gain Tool (we’re a silver level company) and the B-Corp Assessment (we have 103.6 Pts.) to review our own operations.

Going through these tools is a useful exercise. For us, the most enlightening finding was our lack of written policies. The Green Gain tool identified that while we practiced a program of community donations and philanthropy – we had nothing written down about it (we do now). The ‘gaps’ these assessments identify serve as a future ‘to do’ list and the content from both assessments proves useful in answering questions for surveys we’re taking or awards we’re applying for.

In seven years, our biggest take-away for getting to know your supply chain better is this: just ask. It might sound obvious but we continue to be amazed at what we find when we ask our suppliers about their supply chain. We recently found a new vendor of USB Drives and desk items. After our first conversation, they sent through a laundry list of third party certifications on both the social and environmental performance of their factories (SA8000 and ISO 14,001) – something that was not publicly noted on their website.

We have won bids where we quote on the EXACT same product as our competition. And our clients have told us that the only difference between our pitch and our competitors was the level of detail and transparency we provided on our quote document. From basic information like country of origin, to more detailed information as to the charity the factory supports. Our clients trusted that we had a deeper understanding of our supply chain and they were grateful to be provided with information they could share with their team or the recipients of the products.

In the end, we believe every product should have a good story – and our supply chain efforts are driven by that belief.

Green America’s Green Business Network™ is a diverse network of socially and environmentally responsible businesses in the country. The Green Business Network™ is a program of Green America, the nation’s leading non-profit organization working to build a green and just economy. It is home to both rising social and eco enterprises.