for more responsible purchasing practicesâ€¨ A E u r o p e a n P r o j e c t i n t h e Te x t i l e I n d u s t r y
WHY RESPECT? www.responsible-practices.eu
With civil society raising concerns over corporate responsibility practices, investment in CSR policies all along the supply chain are becoming the norm. However, sourcing strategies are often too far removed from responsible practices. Short deadlines, tight prices, incomplete planning and unfavorable payment conditions are often imposed upon suppliers during purchasing negotiations, undermining their ability to ensure fair working conditions for their staﬀ. While this is partly due to a lack of real commitment from diﬀerent actors, it is also often because of the lack of dialogue and understanding between stakeholders in the supply chain.
Initial Context Lack of dialogue & understanding between stakeholders in the supply chain: !
I want choices! I want reasonable prices!
Get this ready for yesterday, at the cheapest price!
I would like to pay my workers more, but to remain competitive, I have to ensure that my staﬀ is flexible and low-cost.
I don’t have any other choice, if I complain I might lose my job!
Over the last couple of years, Corporate Social Responsibility (CSR ) has become a common preoccupation within supply chains. However: I am concerned about sustainable practices, and am willing to pay a little bit more to ensure the products I use are ethical.
Let’s take that into consideration. A sustainability clause will be added to suppliers’ contracts; however, we will still need to look for the cheapest prices and the quickest delivery times!
I cannot implement CSR while having to deal with these harsh purchasing conditions!
I don’t see any changes in my working conditions… I need respect !
Unfair purchasing practices jeopardize CSR implementation within supply chains.
Purchasing practices issues Short Deadlines
Consumers want choices and cheap prices
Employees work more and are still paid low salaries
Sourcing strategies are too frequently kept apart from responsible practices. Short deadlines, tight prices, incomplete planning and unfavorable payment conditions are often imposed upon suppliers during purchasing negotiations, undermining their ability to ensure fair working conditions for their staﬀ. In order to have an eﬀective impact on workers’ welfare, purchasing practices need to be integrated into companies’ CSR eﬀorts
Needs Exchange of experiences ! I need communication channels to share my experience with other stakeholders in the supply chain. â€¨ I also need assessment, communication, and planning tools; they will help me to negotiate efficiently with buyers!!
Transparency ! I need more information on the topic, as sometimes I am unaware of the consequences of my purchasing practices. To achieve awareness among my staff, I need communication materials and assessment tools. Also, I am interested in processes that could enhance dialogue with other stakeholders, in order to find innovative remediation solutions that respect CSR. !
Traceability of products ! I want to know the production steps and the origin of the products I consume! â€¨ I need to be part of the process!!
Respect! My rights need to be respected! I want to be heard..â€¨ !
WHAT CAN BE DONE TO CHANGE IT?
The gaps between purchasing practices and CSR implementation at the factory level can be filled through empowerment of stakeholders across the supply chain. This empowerment can be reached through vocational training but also through an increased participation and collaboration between key actors (consumers, buyers and suppliers). Suppliers can also be a source of innovation and good practices and should be more involved in defining responsible sourcing strategies. A win-win situation could be reached if the collaboration between stakeholders was more eďŹ€ective.
WHAT DO COMPANIES THINK ABOUT IT?
A preliminary online survey was conducted to provide an overview of the situation with regard to purchasing practices issues and validate the eďŹ€ectiveness of the RESPECT approach for those stakeholders involved.
Respondents’ Overview 25 Buyers textile and apparel (15) o apparel and footwear (6) o equipment (2) o accessories (2) o
30 Suppliers Bulgaria (5) o Turkey and Middle Eastern countries (9) o Asia (13) o Central America (3) o
BUYERS’ SURVEY RESULTS
100% of respondents have a dedicated department in charge of social and labor compliance issues in their supply chains
100% declare that this department is collaborating with their sourcing/purchasing department
96% are making eďŹ€orts to better align sourcing/ purchasing criteria and workplace standards in their supply chains
76% are willing to collaborate more with suppliers and other stakeholders on the issue
BRANDS’ STAFF HAVING COMPLIANCE AS PART OF THEIR OBJECTIVES
CSR/Compliance staﬀ Sourcing/Purchasing staﬀ 11% 4%
Do not know Other
BRANDS HAVE A RATHER GOOD LEVEL OF UNDERSTANDING of the impacts of purchasing practices on workplace standards in their supply chain
2 low level 3 medium level 4 good level 5 very good level 25%
STEPS OF THE ORDERING PROCESS having the greatest impact on CSR or Compliance (according to the buyers)
15 13 11
Raw materials delivery
MAIN OBSTACLES FACED to implementing more responsible purchasing practices 13
BRANDS AND WEB 2.0 ?
BRANDS USING WEB 2.0 TOOLS to seek feedback from stakeholders
9 brands out of 25 do use web 2.0 tools
WHY? Â 1 Â To identify what are the biggest issues in the view of
their customers 2- To have consumers comment on their CSR report 3- To allow universities to provide feedback
on the brands’ CSR practices
Very important Important Not so important
Buyers’ perception of
IMPACT OF CONSUMER’S REACTION on brands’ sales due to media campaigning
5 Greatly signiﬁcant 4 PreJy signiﬁcant 3 A liJle signiﬁcant 1 Not signiﬁcant at all
SUPPLIERS’ SURVEY RESULTS
97% have factory staﬀ trained on workplace standards and labor compliance
97% have factory staﬀ communicating and working together with their compliance staﬀ/department
80% have factory staﬀ held responsible for workplace standards and labor compliance in their own factories and supply chain
87% of suppliers are committed to collaborate more with brands
57% are committed to collaborate more with other stakeholders – like consumers – to share good practices and benefit from their feedback
Factory staﬀ dealing with
CUSTOMERS’ PURCHASING/SOURCING STAFF
Merchandisers and/or Merchandising Manager Owner/Partner/General Manager MarkeMng Manager Adm Manager
FACTORY’S DECISION MAKER regarding the customers’ orders Owner/Partner/Management Board 3% 3% 13%
General Manager Merchandising Manager Planning Manager Managing Director
SUPPLIERS HAVE A VERY GOOD LEVEL OF AWARENESS of the impact of purchasing decisions on workplace standards
2 low level 4 good level 5 very good level
Suppliers feel they have
SOME BARGAINING POWER when negotiating with brands’ purchasing/sourcing staﬀ
2 low bargaining power 3 some bargaining power 7% 27%
4 signiﬁcant bargaining power 5 high bargaining power
STEPS IN THE BRANDS’ ORDERING PROCESS having the greatest impact on CSR/Compliance (according to the suppliers)
Lead =me decision
HOW TO DEAL WITH
THESE CHALLENGES? With new theories and research
Open Innovation for inspiration? Open innovation is a term promoted by Henry Chesbrough, a professor and executive director at the Center for Open Innovation at the University of California, Berkeley, in his book Open Innovation: The new imperative for creating and profiting from technology, though the idea and discussion about some consequences (especially the inter-firm cooperation in R&D) date as far back as the 1960s. The concept is related to user innovation, cumulative innovation, knowhow trading, mass innovation and distributed innovation. “Open innovation is a paradigm that assumes that firms can and should use external ideas as well as internal ideas, and internal and external paths to market, as the firms look to advance their technology”. Alternatively, it is "innovating with partners by sharing risk and sharing reward.“ The boundaries between a firm and its environment have become more permeable; innovations can easily transfer inward and outward.
From Wikipedia, the free encyclopedia
A researcher at the London think tank Demos, Charles Leadbeater was early to notice the rise of "amateur innovation" -- great ideas from outside the traditional walls, from people who suddenly have the tools to collaborate, innovate and make their expertise known.
However, several factors have led to the erosion of closed innovation (Chesbrough, 2003) : the mobility and availability of highly educated people. As a result, large amounts of knowledge exist outside the research laboratories of large companies : when employees change jobs, they take their knowledge with them. Second, the availability of venture capital has increased significantly recently, which makes it possible for good and promising ideas and technologies to be further developed outside the firm, for instance in the form entrepreneurial firms. Besides, the possibilities to further develop ideas and technologies outside the firm, for instance in the form of spin-oďŹ€s or through licensing agreements, are growing. Finally, other companies in the supply chain, for instance suppliers, play an increasingly important role in the innovation process. Therefore, companies have started to look for other ways to increase the eďŹƒciency and eďŹ€ectiveness of their innovation processes. For example, through cooperation with suppliers and competitors, in order to create customer value.
OPEN INNOVATION CAN THUS BE DESCRIBED AS:
Combining internal and external ideas as well as internal and external paths to market and to advance the development of new practices.
KEY ROLE FOR SUPPLIERS!!
SUPPLIERS are the ones who know the root causes of existing gaps and obstacles that keep better workplace standards from being implemented.
They can help move this issue forward and have a say in the search for solutions.
BUYERS can improve their purchasing practices while boosting CSR within their supply chains… …and avoid wasting both time and money! SUPPLIERS are ready to collaborate more on the issue and consumers are eager to support companies that have more responsible practices.
WHAT IS A SUPPLIER IN THE 21ST CENTURY? A textile supplier is a company or person that supplies fabrics to other people or businesses. These suppliers may work with a large variety of clients, such as craft or fabric stores, clothing manufacturers, and even individual customers. Depending on how the textile supplier operates, they may provide yarn, loose fibers, or fabric at costs lower than retail prices to any number of buyers.
“Buyer-supplier relationships in the supply chain are one of the most important elements of supply chain integration”.
WHAT DO SUPPLIERS
W E H AV E D O N E A S U R V E Y T O D I S C O V E R I T…
SURVEY OBJECTIVES To collect suppliers’ best practices in the textile industry (located in Bulgaria & Turkey)
What is at stake for companies? (Obj : to understand the market context)
Analysis of best practices (Obj : to promote best practices and be aware of the hurdles)
Relationship Buyer – Supplier – Consumer? (Obj : to find the leverage)
2 main constraints for suppliers in a very competitive market
ONE OBJECTIVE : BE COMPETITIVE!
What about the implementation of CSR?
From the suppliers’ point of view
A part of their business culture is to: « Give importance to the people, planet and profit » « This is what we believe in, where our interest is, and what we have to do »
A question of commitment and transferability: “If directors believe in CSR they can filter it through to the bottom”
C S R S L O W LY B E C O M E S ROOTED IN A SUPPLIER’S C U LT U R E A S B U S I N E S S S TA K E S A R E R E A L
« PEOPLE »
About S U S TA I N A B L E A C T I O N S / / G O O D W O R K I N G CONDITIONS
« 100% of our workers have social security » « Free medical care, twice a year » « We don’t pay the minimum salary, we pay more » « A bonus system every 3 months, linked with quality » « A small loan, with 0% interest » « We support their education » « Our own professional education license » « We provide foreign language classes »
EASIER HIRING**BETTER PRODUCTIVIT Y**LOWER TURN OVER
A VIRTUOUS CIRCLE
Positive impact on business
« Our employees must be happy and if they are, it positively impacts on our production and our customers are satisfied ! »
Attract & keep good employees
Best quality & Price Efficiency & effectiveness
EMPOWERMENT throughout the supply chain « Our customer trained us because we didn’t know anything about CSR »
« It is difficult to find subcontractors that apply all social and labour standards. If we find them, it is important to train them to ensure sustainability »
ANSWER: The RESPECT project aims to develop innovative methodologies and tools to help key stakeholders create change in the way purchasing practices are made in supply chains.
1st STEP Help suppliers to identify problems and imagine solutions
THE CASE STUDY METHODOLOGY In the social sciences, a case study is a descriptive, exploratory or explanatory analysis of a person, group or event. An explanatory case study is used to explore causation in order to find underlying principles. Case studies may be prospective (in which criteria are established and cases fitting the criteria are included as they become available) or retrospective (in which criteria are established for selecting cases from historical records for inclusion in the study).
The case methodology is a practice largely used in business schools. For instance, it has been used at the Harvard Business School since its founding in 1908.
Several business cases have been compiled by the RESPECT partners to show examples of good practices in CSR, stakeholder collaboration and responsible supply chain management; but also to collect good practices in the diﬀerent factories linked with the RESPECT partners.
WHAT ARE THE RESPECT’S CASE STUDIES? Case studies recount real life business or management situations that present business executives with a dilemma or uncertain outcome.
The case describes the scenario in the context of the events, people and factors that influence it and enables students/lecturers to identify closely with those involved. RESPECT’s cases have been : u written by RESPECT’s partners with particular communication / learning objectives in mind ; u refined during RESPECT’s workshops before publication on this e-book and in the website.
… an approach to emerging best practices.
5 RESPECT CASE STUDIES
2 TYPES OF CASE STUDY
CSR IN GENERAL
Discover the cases: www.respect-practices.info/index.php/m-r-factory/m-cases
… LET’S REASSURE SUPPLIERS THAT THIS COLLABORATIVE APPROACH IS EXPECTED BY THE END USERS, THAT IS, THE CONSUMERS …
We conducted a study with the company Patagonia: it confirms that end users consider that suppliers have â€¨ an active role to play in improving the conditionsâ€¨ of production of goods and thus in general the responsible purchasing policy.
GOOD NEWS End users support responsible practices!
2 nd STEP Build 7 modules to design an approach â€¨ for the emergence of a dialogue between stakeholders in purchasing practices
The RESPECT project aims to develop innovative methodologies and tools to help key stakeholders create change in the way purchasing practices are made in supply chains. RESPECT puts special emphasis on the increasing role of suppliers and empowers them through capacity building.
Goals of this training: u to provide professionals from suppliers’ factories with appropriate tools for improving their position in the SupplierBuyer relationship; u to test and improve the training content.
Learning outcomes: “After the training expected objectives are: u Know more about CSR/Purchasing practices issues and how you, as a supplier, can contribute to improve these issues; u Gain new skills/tools for self-evaluation and problem-solving; u Improve your communication/negotiation skills to better communicate with your buyers and other stakeholders, especially consumers”.
Module 1_CSR and Responsible purchasing practices Module 2_RESPECT project Module 3_Root cause analysis
Module 4_Problem-solving Module 5_Action-planning Module 6_Communication skills
7 Module 7_Negotiation skills
THAT’S WHAT SUPPLIERS NEED !
…WHAT ABOUT BUYERS?
Toward the end of the project, RESPECT held a workshop with buyers (four brands – Boyner, H&M, Marks & Spencer, Nike) in Istanbul, Turkey, to present the project’s results, brainstorm together on good practices and how to further improve collaboration with suppliers and discuss next steps. Brands’ representatives showed interest and willingness to conduct future activities to enhance responsible sourcing. Discussions also helped to identify further needs to be fulfilled in terms of tools, training and capacity building.
THAT’S WHAT THEY SAID ! Buyers’ workshop, Istanbul, Sept 2013 Boyner, H&M, Marks & Spencer, Nike
THEY SAID… Root cause analysis and training are recognized as the best tools to go beyond auditing and achieve sustainable change.
At the brands level, purchasing staﬀ should be systematically trained on CSR and collaborate closely with CSR teams.
Good communication with suppliers is key to build trust and long-term strategic relationships.
Increased collaboration and exchange of experience (collective learning) between suppliers, facilitated by brands, is a key mean to improve practices.
Consumers are key actors to push for more change. They have the power to influence business strategies.
RESPECT’s solutions … …what does the future hold?
Communication Tools Web Platform
The RESPECT project started in 2011 was co-financed by the Leonardo Da Vinci European programme. This initiative is the joint eﬀort of 8 partners from 5 European countries representing diﬀerent fields of expertise.
RESPECT developed innovative methodologies and tools to help key stakeholders create change in the way purchasing practices are made in supply chains. It puts special emphasis on the increasing role of suppliers and empowers them through capacity building.
2 pilot countries - Turkey and Bulgaria – were selected to lead assessments and trainings with local suppliers.
RESPECT fosters dialogue between supply chain stakeholders.
Secured consumer adherence
Improved image Informed
Long-term relationship providing security with orders Better planning
Raised awareness & Dialogue Incen=ves
Improved quality & deadlines
Root Cause Analysis & Problem-‐solving
Supplier cash flow secured Unnecessary business costs avoided
Compliance with CSR Improved work conditions
Reduced turnover Motivated
New purchasing practices are created through this collaborative process.
Lessons learnt Supply chain actors are well aware of CSR and purchasing practices issues
Responsible and sustainable supply chains can only be achieved through a collaborative eďŹ€ort and shared responsibility
Suppliers can also be source of innovation and good practices and they can surely contribute to more responsible practices
Lessons learnt For brands (buyers), the use of survey and web 2.0 tools can be highly beneficial for seeking stakeholders' input, both in terms of their practices and CSR programs but also in terms of innovation
Build the capacity of suppliers in terms of labor compliance but also root cause analysis, problem solving and communication is key to build stronger and more reliable business relationships
Lessons learnt In terms of workplace issues at the factory level, there are still many issues whose root cause lies in the external sphere of the buyer's practices
Consumers are more and more aware of supply chain issues and they show great interest in supporting responsible brands
AND THE FUTURE?
1 – SCENARIO "NEW AGENDA”: Further deploy the RESPECT process and toolkit
2 - SCENARIO "NEW VISION 3.0" Continue exploring this new approach 3 - SCENARIO "NEW SKILLS" Towards an ECVET competency framework
4 - SCENARIO "NEW LEARNING" Design a new collective learning process
5 - SCENARIO "A.V.S.L. " An integrated approach to social innovation
1 - SCENARIO "NEW AGENDA”:
further deploy the RESPECT process & toolkit The RESPECT project allows to tailor-make and validate the relevance of a set of tools, in particular for suppliers. Option 1: Interesting? to deploy this approach with a larger and more diverse panel of suppliers. à... geographical criteria? à... in another sector of activity?
Option 2: Interesting? To monitor the impact of processes and tools implementation of existing partners to see how they embody the overall RESPECT approach in the long-term. The use of this plan is therefore synonymous with deployment in the form of "AGENDA", i.e. in other places with other players or in the longer term.
2 - SCENARIO "NEW VISION 3.0" : continue exploring this new approach The RESPECT project has updated an existing process and some tools, each of them having being tested through a series of studies, pilot training, consultations, etc.... with various stakeholders being involved in the purchasing process. Yet the result is only a prototype approach, i.e. a “Supply Chain 2.0”: marriage of theories of innovation with the current vision of the supply chain 1.0. The overall approach can still be further improved, tested, explored and be updated with new contributions, ideas, innovations coming from new stakeholders. Purpose : to integrate new actors of innovation and social responsibility in order to question, critique and feed the current model of Supply Chain 2.0 proposed by the RESPECT project. The ideal goal would then be to achieve a model of “Agile Supply Chain 3.0”.
3 - SCENARIO "NEW SKILLS": â€¨
Towards an ECVET competency framework The RESPECT project gave a special forum to professionals involved in supply chain issues, in particular the suppliers. The R-partners have built a number of modules to help these players be more active stakeholders. These modules allow the acquisition of new skills that are not theoretical but are from the field and the daily practice of suppliers. This approach is fully in line with the ECVET approach promoted by the European Union. Interesting? to continue the validation of ECVET skills more extensively, quantitatively and qualitatively. Yes! As reported by SMEs during the RESPECT project, this is particularly interesting for SMEs in Member states wishing to reveal and take advantage of the skills that emerged during the RESPECT process.â€¨
4 - SCENARIO "NEW LEARNING":
Design a new collective learning process The RESPECT project has highlighted the need to promote greater dialogue between the diﬀerent supply chain actors. These actors must collaborate in a more active way in order to generate more significant progress in CSR. Interesting? To build a true "learning platform”, to generate this new vision, those practices and approaches 2.0 in a collaborative way. (The current RESPECT website is a prototype of what could be the new community platform for sharing and dialoguing among stakeholders of the supply chain 2.0).
5 - SCENARIO "A.V.S.L. ": An integrated approach to social innovation The 4 scenarios previously mentioned are all relevant exploitation plans allowing the RESPECT project to deploy its full potential. Yet, the RESPECT partners agree that a comprehensive global approach could also be an exciting and relevant path to explore. By combining the four above-mentioned plans, the (A)genda, the (V)ision, the (S)kills and the (L)earning, it could form a very promising and integrated approach “AVSL”. Where? in other European territories, with other actors likely to provide a critical eye, or with the same actors but over a longer timeline to refine the operational nature of the process, etc.
notes . . .
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The Respect project has been funded with support from the European Commission. This publication reflects the views only of the author, and the Commission cannot be held responsible for any use which may be made of the information contained therein. Programme: Leonardo da Vinci # CH2011‐1‐CH1‐LEO05‐00044 www.responsible-practices.eu