Welfare in Global Supply Chains
Paul Trudgian Ltd | Supply Chain & Logistics Consultancy No Comments

Corporate Social Responsibility (CSR) is a huge factor in modern supply chains. It’s not enough to simply acquire components, or goods, at any cost. It’s essential that ethical considerations are applied consistently throughout the chain.

With CSR being nothing new on our supply chain agendas, do we actually still need to pay it so much attention? The answer is yes, because despite the progress made, concerns are still being raised for staff welfare in global supply chains.

The Problems of Welfare for Staff in Global Supply Chains

It’s a complex issue with multiple affecting factors. It’s not a case of setting standards and simply going ahead and implementing them. Different issues affect different labour forces in different countries. Any single supply chain might find itself having to deal with multiple different complex staff welfare and wellbeing issues in different cultural melting pots.

The first hurdle is to identify the problems. Abuses and welfare problems come in various different guises. For example, in the clothing industry the Ethical Corporation has stated that low wages, abusive managers, and problems obtaining leave from work are big problems.  In India, Matthew Rae, Vodafone’s Director of Health, Safety and Wellbeing has identified that bike helmets are not the “done thing”. Audits can go some way to identifying problems like low wages. They can’t identify some of the less quantifiable issues.

Ideals v. Reality

This means that, in practice, there is often a notable discrepancy between what is aimed for, and hoped for, against what is actually happening on the ground. As Matthew Rae from Vodafone has recently explained to the Financial Times, there is often a large discrepancy between what business leaders expect and real life local practices. Getting standards at the grass roots up to the expectations of managers is difficult.

We can see this in practice with Vodafone. Vodafone has multiple suppliers and a vast logistics operation spanning the globe, all managed out of their London head office. India features highly on their global supply chain focus. Therefore, 5 years ago, being aware of the lack of helmets for bike and motorcycle riders, all Vodafone staff and contractors were required to wear helmets. However, due to cultural differences, it took several more years before the authorities matched those expectations.

Rae has explained that narrowing the gap between welfare expectations and reality take “perseverance and consequence management”. It’s not a case of simply saying “do this” and it happens. This makes for extreme challenges for supply chains to improve welfare conditions in many situations, especially in developing countries where meeting the standards set can be particularly difficult.

The Scope of the Problem

In the Financial Times article, they go on to point out that research points to only 10% of the “working population in developing countries are effectively protected by health and safety laws.” This is hugely at odds with the aims and ideals of supply chain leaders.

However, the article also explains that progress is being made, even if there’s still a significant problem. For example, following the Rana Plaza disaster in 2013, when over 1000 garment workers lost their lives when the factory collapsed, steps were taken by companies and supply chains which saw the effect of the negative reputation caused. These supply chains are now more driven to see the business benefits of corporate social responsibility as well as the humane ones.

Indeed, better conditions and improved health and safety has been shown to increase productivity and profitability. Tufts University on behalf of the International Labour Organization has demonstrated that better working conditions and increased compliance with health and safety requirements have helped the businesses overall. Conversely, putting negative pressure on the same elements of the supply chain (causing the welfare problems to worsen) not only increased ethical breaches, but also negatively affected the productivity and profitability of the overall supply chain.

Vodafone has taken a strategic approach towards this. Four times each year they hold a safety forum with the ‘highest risk’ global suppliers who they are most concerned may fall below their expected safety standards. Steps, such as this, aim to address the problem consistently and find a way through the cultural differences which exacerbate problems.

Time and Cost Pressures

Many of the concerns for staff in global supply chains are exacerbated, or contributed to, by time and cost pressures. They can effectively be stuck between a rock and a hard place. This requires careful thought by leaders.

An example given concerns the Olympic Delivery Authority responsible for construction during the London 2012 Olympics. Audits identified that health and safety accidents spiked in the mornings, with incidences such as fainting. It became apparent that many of the workers were skipping breakfast. By the simple introduction of low-cost breakfast options, Lawrence Waterman of the Olympic Delivery Authority explained how they reduced these morning accidents. It was a way which “aligned safety, health and wellbeing – and was a way of demonstrating to the workforce that we really did care about looking after them”.

Lawrence went on to explain: “At London 2012, by working cooperatively with the construction companies on health, safety, and workforce wellbeing, it made co-operation in all sorts of other areas, like logistics, so much easier because the relationship had been built up. There was trust there.”

What Can Be Done About the Welfare of Staff in Global Supply Chain?

These issues are very real, and a huge problem in many ways. However, it’s important that they are addressed – for ethical reasons, and for business ones. By working with suppliers to reduce health and safety issues, supply chains can minimise staff turnover, reduce recruitment costs, and create productive workforces. Overall this will increase the efficiency and effectiveness of the supply chain and benefit everyone.

Also, technology needs to be harnessed to go beyond simple audits of quantifiable issues such as low wages. It should also be used to provide insight and reporting, even listening to the voices of individual workers, for example through tools such as LaborVoices. In this way, supply chain leaders can gain insight into problems which go beyond straight-forward data, and therefore act to make changes.

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