Over the past three decades, international commerce has jumped sevenfold. As Richard Locke suggests, government and industry must work both independently and together to drive improvements in working conditions and create a culture of compliance that benefits all.
But labor standards are not the only ethical challenge that global supply chains create for governance. The organization I lead—the Center for Responsible Enterprise and Trade (CREATe.org)—works with global companies and their supply chain partners on two different but related issues: protection of intellectual property (IP) and the prevention of corruption. Companies face increasing challenges due to trade-secret theft, piracy, counterfeiting of goods, and incorporation of counterfeit components into products. Corruption increases liabilities and costs for companies. IP theft and corruption both contribute to an unethical business environment that can have implications for workers and companies alike.
Over the past eighteen months, we’ve worked on these issues with contributors from more than a hundred global companies, think tanks, andacademic initiatives. We have launched a pilot program of best practices—CREATe Leading Practices—with participating companies and suppliers in China, India, Brazil, the United States, and Europe. These experiences yield insights relevant to Locke’s research.
First, I agree with Locke that the kind of collaboration and management techniques in place at Nike Plant A are fundamental to capability building: management had ongoing dialogue with workers, invested in training, and provided advice and a framework for improvement. At CREATe, we take the same approach to protect IP and prevent corruption. Suppliers who have participated in the pilot have welcomed our approach because it helps position them competitively and enables them to build management systems in line with leading practices. We found, as Locke did, that focusing on evolving management systems and employee engagement, rather than strict compliance, is key. This creates more transparency and dialog among the companies, which is critical to progress.
The collaborative approach is especially useful for combating IP theft and corruption. Historically, labor compliance has been focused on upstream suppliers, with buyers seeking to mitigate their risk by asking their suppliers to comply. Thus labor-compliance programs took shape around buyers’ initiatives. In the cases of IP protection and corruption prevention, the challenges are both upstream and downstream.
Corruption and intellectual property theft also pose challenges in global supply chains.
Indeed, SCM World’s 2012 Chief Supply Chain Officer Report points out that the best way to improve compliance among suppliers is “not more compliance audits, but to collaborate with suppliers so that they benefit from [social and environmental responsibility] improvements.”
Second, industry has an important role to play by providing expertise and leverage. Global companies have spent decades building management systems and best practices for IP protection and anti-corruption. Sharing these approaches with suppliers in regions with weak rule of law and where business systems are still evolving provides benefits for both sides. It enables companies to reduce the risk of IP theft and corruption, and suppliers gain competitive advantage. Becoming a more trusted partner also paves the way for higher-value collaborations.
Ultimately, the challenge for industry is creating more collaborations like Nike’s with Plant A—in a scalable and cost-effective manner. Sharing best practices on management systems and employee engagement needs to be central to this effort, whether the concern is labor standards, IP protection, or corruption safeguards.
Governments, too, have a role to play. Existing laws in many countries already cover these issues. As Locke points out, the reason industry has stepped in is that enforcement is inconsistent. Governments from many emerging economies are starting to get serious about IP protection and anti-corruption, in part due to global pressure, but also in response to local companies trying to protect their own innovations and hoping to compete on a global scale. Through research and investment, governments can support the cultural shift toward ethical and responsible business practices.
Supply chains are part of the vast global web that supports trade, economies, and companies. Each player involved—governments, brands, suppliers—can promote more ethical and responsible business practices.