Human and labour rights violations, environmental pollution and destruction. Many companies cannot be certain that various ethical or ecological standards are not being violated in their supply chains. This is particularly the case when there is a high dependence on suppliers. Companies can therefore have different incentives to monitor their supply chain carefully. It may be pressure from the legislators, but also may be due to reputation and competitive reasons. In a joint study, the German Graduate School of Management and Law in Heilbronn and the University of Sussex have investigated how companies seek to promote adherance to social and environmental standards, using the example of conflict minerals.1
In particular, jewelry manufacturers, as well as the electronics industry, are reliant upon suppliers to source valuable minerals and precious metals. But the sourcing of these materials is often accompanied by violations of human rights and / or environmental degradation and can even maintain and support criminal structures, for example in the DRC and its neighbouring countries. This raises the question of how the company is able to ensure that their products include no affected materials.
In the study, 27 Supply Chain experts were interviewed from various industries. The researchers have established three widespread strategies.
Firstly, compliance measures are introduced which includes the implementation of codes of conduct and guidelines and contract terms with suppliers regarding ethical procurement of raw materials.
Another concept is to establish a commitment approach. In this way suppliers are helped in various ways to practice due diligence. Here, for example, a positive incentive system plays a role.
In contrast, the Analytical model is used by companies which still have no compliance measures.These companies analyse, for example, the chemical composition of their products so as to determine the origin of the materials.
The inclusion of sustainability aspects has several positive effects for the company, according to the study. Including: Enhanced reputation among customers, lower costs through more effective risk management and thus increasing market shares. The researchers stressed that the implementation of social responsibility brings advantages to all parties along the supply chain . The findings of the study are to be understood as concrete recommendations for business .
Click here for the study of the German Graduate School of Management and Law:
- http://epo.de/index.php?option=com_content&view=article&id=12392:wertschoepfungskette-studie-zu-konfliktmineralien-gibt-handlungsempfehlungen&catid=120&Itemid=34, 02/09/2016, accessed on 02.15.2016 [↩]