By Coral Rose
Original post here:The University of Delaware's online FIBER JOURNAL publication
We have witnessed decades of
widespread global economic growth, in which we have seen the standard of living
for millions of people around the world rise to unprecedented levels. As China
and India enter the age of consumerism, global economic development is linked
not only to the core practices of business, but that of environmental and
social issues as well.
Our planet now supports 6.5 billion
people. We are adding to that, about 70 million people each year. Some may
assert that the current global economic business model cannot support or
sustain social and economic progress for the projected 8 billion people who
will live on this planet by 2050.
In the world of globalization,
fundamentally social and environmental issues are business issues and are
inseparable from one another.
According to a recent poll conducted
by the Global Strategy Group, 87 percent of consumers are more likely to buy
products from a retailer that is committed to environmentally sound practices.
With increased awareness, the
concern for many companies becomes how to achieve the maximum economic benefit
from environmentally and socially responsible products and practices while at
the same time increasing shareholder value and increasing stakeholder trust.
Hidden from our View
Today, the majority of products’
social and environmental impacts are hidden from our view — that is, the
effects of a product’s social and environmental impacts (life cycle) before it
hits the shelves and consumers’ hands. The average designer to purchasing agent
(consumers as well) is unaware of the global impacts of their decisions. Hidden
from their sight is what lies upstream; all the impacts of growing, processing,
manufacturing and transporting raw materials and component parts.
Twentieth-century business practices have taught these professionals to focus
only on what is downstream (production to consumer).
In the United States in 1960, we
were generating 2.7 pounds of waste per person per day. In 2006, that number is
4.6 pounds of waste per person per day. By the time that waste fills one
garbage can, 70 garbage cans of waste was created upstream to make the stuff that
is now going to the landfill.
To begin to create an accurate
picture of what and who are upstream and to make informed decisions about what
actions we will take downstream, we must begin to ask: What is the source of
our raw materials? Where were the materials harvested, processed, produced? And
who and what (people-animals-environment) in the supply chain is affected by
the harvesting, processing, and production of our products?
Considering all the social and
environmental impacts from harvest/processing to waste/reuse is a total mindset
shift at the product design and creation level and a key component to
sustainable economic development strategies.
Supply chain transparency is one of
the basic tenents or “rules of engagement” for any 21st-century business model.
Ethical Consumerism
Ethical consumerism is on the rise.
It’s a movement based on purchasing products that have been ethically produced
by organizations that are involved in a process of ensuring that the basic
labor rights of the employees of their Third World suppliers are respected.
According to a recent study reported
by the Wall Street Journal, companies that embrace more ethical
production practices (social and environmental) that are third-party certified,
may produce larger profit margins.
What are consumers willing to pay
for a pound of coffee based on what they were told about the company’s
production standards?
- Ethical standards . . . . . . . . . $9.71
- Unethical standards. . . . . . . . $5.89
- Control (no information) . . . . . $8.31
Source: WSJ — Does Being Ethical Pay?
Consumers may be willing to purchase
unethically produced products, but at a steep discount. A recent survey by BBMG
indicated that 35 percent of all Americans have avoided buying a product
because of a company’s practices. Return on investment (ROI) in the 21st
century is clearly rooted in social and environmental responsibility and the
ability of a company to look upstream when making sourcing decisions.
Fair Trade — Supply Chain Transparency
Fair Trade Certification is a
market-based model of international trade that benefits over one million
farmers and farm workers in developing countries. Fair Trade products have
experienced consistent global growth in the 40 percent range over the last few
years, making Fair Trade good for business.
The roots of Fair Trade can be
traced back to churches in North America and Europe in the late 1940s. The goal
of these organizations was to provide relief to refugees and other
poverty-stricken communities by selling their handicrafts to Northern markets.
In the U.S., Alternative Trade Organizations (ATOs), such as Ten Thousand
Villages and Equal Exchange, purchase from worker-owned cooperatives. The ATOs
were formed to import Fair Trade crafts and coffee to the U.S. market.
In 1988, world coffee prices began a
sharp decline, The Netherlands’ Max Havelar offered the mainstream coffee
industry the first standardized system of Fair Trade criteria. Currently,
Fairtrade Labeling Organizations International (FLO) is the “umbrella
organization” that establishes Fair Trade standards globally for the industry
using a multi-stakeholder process.
Fair Trade standards require
sustainable farming techniques and offer further price premiums for organic
production, but Fair Trade certification does not guarantee that a product was
organically grown. Where farmers are not certified organic, they are required
to implement a system of integrated crop management (ICM). FLO stiuplates that
the International Labor Organization’s (ILO) conventions be followed.
One hundred million people around
the world rely on cotton for their livelihoods. Fairtrade certified cotton
carrying the FAIRTRADE Mark was launched in April 2005. Countries and producers
receiving certification for cotton include farmers in India, Mali, Peru, and
Senegal, Burkina Faso, and Egypt. Pakistan and Brazil will follow in the near
future.
Note: Under the FAIRTRADE Mark it is only the cotton that is
certified Fairtrade, not the yarn, fabric, or garment. Therefore, a product can
only be referred to as Fairtrade Cotton NOT for example a Fairtrade Cotton
shirt. The label must read: “Made with FAIRTRADE Certified Cotton.”
Currently The United Nations “Least Developed” Countries are the only countries
eligible for Fair Trade Certification.
The term Fair Trade is
sometimes used interchangeably with Ethical Trading. Ethical Trading
refers to organizations. The FAIRTRADE Mark, applies to products
rather than organizations.
Walmart — Increasing Social and
Environmental Global Supply Chain Standards
Walmart Stores, Inc., recently
announced in Beijing, China, that the company will focus on taking a number of
steps to strengthen and enforce supplier compliance with rigorous social and
environmental standards, including the creation of a new supplier agreement and
scorecards that will require factories to certify compliance with laws and
regulations where they operate.
The agreement will be phased in
beginning with suppliers in China in January 2009. It will expand to suppliers
globally by 2011. In terms of supply chain transparency, by 2009, Walmart will
require all direct import suppliers plus all suppliers of private label and
non-branded products to provide the name and location of every factory they use
to make the products it sells. The company will also instruct all suppliers it
buys from directly to source 95 percent of their production from factories that
meet the company’s highest ratings on social and environmental practices by
2012.
Looking Forward
Organizations not communicating
their social and environmental practices and progress may lose out to their
competitors that do. Here are some steps you can take:
- Not only understand but be responsible for improving
your product’s life cycle. To better understand where you can improve your
performance both economically, socially, and environmentally, consider
Lifecycle assessments (LCA.) Reach out to NGOs and subject matter experts
to support this process.
- Develop and choose products that can be authenticated
to the source. Strive to use independent third-party certification or
accredited standards (e.g. Organic, Fair Trade).
- Educate your organization, consumers, and investors.
Focus on energy saved, waste reduced, pollutants eliminated, and
protection of workers’ rights. Be prepared to link to a source that can
authenticate all of the above statements and tell the whole story across
the supply chain. Note both the successes and the areas for improvement.
Supply chain transparency is the new business and marketing model.
- Many view social and environmental sustainability as
the competitive advantage to the slowing economy. Organizations that can
adapt quickly to the current troubled economy and become focused on the
cost savings of sustainable business practices may be the ones to deliver
a return on investment in tough times. Cost savings derived from increased
energy efficiency of the supply chain could lead us to not only cost
savings but a more localized and regionalized supply chain versus one that
is globalized.
- Keep your eye on the future and horizon issues. Plan
now. Should consumers opt to buy less, how will this affect your business
model? Will you be offering more services to offset the lower product
sales?
Economic success in the 21st century
will be measured and led by brands and retailers that can successfully create
long-term brand value and stakeholder loyalty by creating products, processes,
and services that consider the environmental and social impacts of their supply
chains.