For lots of very good reasons, the topic of Corporate Social Responsibility (CSR) is a top-of-mind subject for supply chain executives around the world. From environmental concerns to conflict minerals, forced labor, illicit activities and product safety issues, companies large and small have to make a strategic, as well as tactical commitment to being good corporate citizens.
Much like any facet of global trade, the journey from committing to a CSR program, to making it an operational reality is a difficult one. Depending on factors like business model, number of countries sourced from, customer locations, product characteristics, financial resources and access to subject matter expertise, achieving a high level of Corporate Social Responsibility is one of the more difficult aspects of managing an international business model.
When it comes to creating a corporate culture founded on the principles of Corporate Social Responsibility, two primary areas of focus have been “KYS” (Know Your Supplier) and “Know Your Customer” (KYC). Certainly a great place to start, it is the premise of this blog that a third area should be added…“Know Your Products” (KYP).
When you think about it, the products that companies procure, manufacture and sell really do serve as the genesis of any holistic CSR program. After all, what is it that firms source from vendors and sell to customers? Based on that fact, it is also the premise of this blog that CSR starts at the item level, and for companies that buy and/or sell goods internationally, the requisite item-level granularity must be built into their Product Master Database.
On the procurement side of the house, a “Product Master” file houses information like item number, product description, HTS number, country of origin, vendor(s), unit cost, etc. For finished goods exports, the Product Master carries similar information, but also fields like Schedule B number, an Export Control Classification Number (if required), product-specific labeling requirements, etc.
Given the level of detail already required for an import and/or export-oriented Product Master Database, it makes sense to add fields that help executives to manage Corporate Social Responsibility at the item level. And based on a clear understanding of a given organization’s supply chain, it will soon become clear what fields are required in a Product Master to enable the tactical management of a CSR program. An example will help illustrate this point.
Consider a U.S. toy importer that sells over 5,000 different products, both on-line and via retail stores. Imported toys are a great illustration of how the Product Master Database serves as a foundation for CSR for a number of reasons, all of which not only enable ethical sourcing, but that positively impact other facets of a multi-country supply chain.
First, offshore toy manufacturing is carried out by workers that aren’t as skilled as those in other industries, and toy production takes place in countries that have (historically) demonstrated a disregard for the working condition of those same workers. Whereas some countries have improved their track records, it’s still up to U.S. companies to engage in CSR from the aforementioned perspective of Know Your Supplier and if possible, “Know Your Supplier’s Supplier”, too.
To be effective, ethical sourcing has to drill down to the item level of the Product Master with specific information on vendors, the provenance of their raw materials and if those vendors are certified in areas like treatment of workers and environmental standards. Admittedly difficult to implement, there are technologies in existence today that allow for this level of linkage.
The toy industry has important CSR ramifications from the customer side of the supply chain, as well. Depending on the item, toys have to meet criteria for things like lead content, choke hazard, sharp edges, flammability, etc. Not only do products have to meet specific criteria, regulations require that these products be tested periodically by PGA-certified overseas labs. Without item-level specifics in a Product Master on test types, test results and certification expiration dates, the supply chain can’t function responsibly.
In some companies, it’s common for product safety to be handled as a stand-alone activity, with little-to-no connectivity between CSR functions and mainstream supply chain activities. As such, miscommunication and blind spots can cause importers to (unintentionally) miss important CSR-related details. Conversely, when all product data is housed in a Product Master that can be shared across functions, the level of company-wide CSR increases dramatically.
Although the Product Master Database definitely serves as the foundation for a strong CSR program, companies have to implement the policies, procedures and measuring tools that keep standards up to snuff. To do that, companies should take advantage of external tools and guidelines that contribute to building a CSR-based culture of ethical trade. Let’s wrap up this blog with examples from both the procurement, as well as sales side of the supply chain.
One great tool that companies can use to achieve CSR down to the item level is published by the International Labor Organization (ILO) and is called, “Checkpoints for Companies: Eliminating & Preventing Child Labor” (https://www.ilo.org/global/publications/WCMS_456960/lang--en/index.htm). As the name indicates, it provides a checklist of how to vet overseas suppliers to make sure that they’re not using child labor, or any type of forced labor.
Here in the U.S., it was in 2012 that the State of California enacted the “California Transparency in Supply Chains Act” (https://oag.ca.gov/SB657). This law takes an interesting approach in that it compels companies to, “provide consumers with critical information about the efforts that companies are undertaking to prevent and root out human trafficking in their supply chains”. Basically, companies that import goods from overseas have to show consumers what they’re doing to assure in ethical sourcing.
For companies that sell goods internationally, the United Nations Environment & Trade Policy Center published its “Guidelines for Providing Product Sustainability Information” (https://wedocs.unep.org/handle/20.500.11822/22395) in 2017. Intended for use globally, this publication focuses on providing best practices and standards that assist companies in achieving sustainability from a social, environmental and economic perspective.
Clearly, there are lots of internal, as well as external resources that companies can access in their journey to long-term corporate social responsibility. Any CSR undertaking should start with a clear vision and mission statement, and then be manifested through a strategy that can be made granular down to the item level. Of course, item-level granularity is only made possible through software that not only captures every detail on a product, but that can be shared openly across an organization.
Here at 3rdwave, we’ve taken a multi-functional approach to developing a web-native Product Master Database that considers every facet of product management and in particular, Corporate Social Responsibility. Built for both import and export environments, and capable of handling Bills of Material that are native to a manufacturing model, the 3rdwave “Product Master” can be used as a stand-alone tool, or in support of a company’s Enterprise Resource Planning software.
Within the 3rdwave Product Master environment, users can customize fields to accommodate important factors like Know Your Supplier and Know Your Customer, while having total visibility into item-level requirements for product testing, export licensing, certification, labeling and packaging. Easily accessed by an unlimited number of users within an organization, every department can see the details they need to contribute to a strong CSR culture.