Does big have to equal bad in terms of ethical behaviour?
The recent news has been full of stories of corporate greed, focusing not only on the anti capitalist protesters in New York, London and elsewhere, but also on the size of executive pay packets. While average pay rose by 2.4 per cent last year, and public sector workers continued to receive no increases, the average total earnings of FTSE 100 directors rose by a staggering 49 per cent, according to a recently released IDS study.
Meanwhile, in the US, a Washington think tank has reported that 25 of the 100 highest paid CEOs in the US earned more than their companies paid in federal taxes. Some procurement professionals could be forgiven for thinking the savings they deliver are falling straight into their CEOs’ pockets.
So in the quest for growth, profit and pay rises, are the leaders of the world’s largest corporations letting social responsibility take a back seat?
Coca-Cola, Microsoft and HP have all been dropped from the Dow Jones Sustainability Index this year. Dow Jones does not give any details of the reasons for the removals. HP and Microsoft have always thought of themselves as leaders in supply chain practices, but maybe they have been a little too arrogant in their assessment of their capabilities? In 2009, HP was famously invaded by Greenpeace, which was protesting at the use of toxic materials in its products. Since then, HP has shown it is capable of working with its suppliers to remove brominated flame retardants and polyvinyl chlorides from its product components. But why did it need a headline grabbing action from a world renowned protest group to get HP moving?
Microsoft has long had an inconsistent approach to reporting sustainability; indeed, it was removed from the Nasdaq Sustainability Index two years ago due to inadequate disclosure of quantitative environmental metrics. As a response to investor pressure, it recently announced it will require written sustainability reports and audit results from selected hardware suppliers – hardly leading-edge supply chain sustainability practice.
In the UK, the FTSE 100’s highest paid CEO, with a total package of over £18m, is Mick Davis, head of Xstrata. Davis has built Xstrata from a £250m Swiss steel firm, to a £30bn global mining group with a total annual procurement spend of around £10bn. With that kind of scope and scale, and in an industry not best known for its CSR practices, one might expect Xstrada to have a poor supply chain sustainability record. However, that is far from the case. It has a decentralised approach to supplier selection, encouraging the use of local businesses, and uses selection criteria that include local expertise, innovation, environmental impact, safety records and processes, and labour standards. Its programmes support community members to establish SMEs and it helps smaller companies to gain the skills required to become suppliers of goods or services to Xstrata. The section on sustainability on its website is written with candour and humility, a change from some conceited hogwash found on similar sites. Davis has shown responsible leadership in building the fortune of his organisation. It is not surprising that Xstrata was top in its sector in the Dow Jones Sustainability Index.
So big doesn’t necessarily have to mean bad in terms of supply chain sustainability. Indeed, some of the large global fashion and footwear firms, which have been pilloried in the past for breaches of workers’ human rights, are now leading the way in best practice.
Nike has moved way beyond auditing and monitoring its suppliers. It is now working collaboratively with factories, teaching them how to engage with workers and establish human resource management practices to reward quality and consistency. It works with others in its industry to reduce the audit burden on the factories at the end of its supply chains. It now sees supply chain sustainability as a crucial weapon in its innovation armoury and views it as a profit driver, not a cost.
☛ Meryl Bushell is a business coach and consultant, and former CPO at British Telecom