Supplier Sustainability: Is Your Brand at Risk?

While it's certainly easy for many companies to make a business case for investing in supplier sustainability initiatives which focus on improving environmental practices and reducing waste, there's also a strong case one can make to put sustainability efforts aimed at reducing a company's brand exposure due to supplier practices as a top priority initiative. Just yesterday, I had a conference call with a number of colleagues who will be speaking on a panel with me at IACCM about supply risk. One of the gentlemen suggested that in his risk discussions with one large CPG company, the only thing that mattered to the organization was brand exposure. This notion of brand über alles when it comes to supply risk is nothing new for retailers such as The Gap who have been forced to explain their supplier's less than appropriate labor practices to the general public.

Another proof point about the importance of a company's brand when considering supplier sustainability and labor practices comes from this recent Reuters' feature that exposes the practices of a Disney supplier in China which led to workers filing a $90,000 suit against the company. Yes, you read that correctly. Chinese workers are suing their employer -- Disney's supplier -- for back wages from overtime pay and related compensation. Even though I'm sure Disney is not happy about this, at least workers are finally getting their day in court in a country which is not exactly known for due process.

According to the article, "The circumstances surrounding the case ... suggest that firms such as the Walt Disney Co. that outsource production to licensees are more exposed to poor labor practices than companies with more direct control over their supply chains, despite concerted efforts to stamp out labor violations." In this particular example, the labor conditions of Disney's suppliers would not be something you would want to think of before your next trip to Disney World or to a Disney movie. According to one of the plaintiffs, "Workers were threatened with the sack if they paused, even to help someone who'd fainted ... They had no insurance, slept 12 to a dorm room, and were charged for room and board ... [they] often worked from 8 a.m. until 11 p.m., or later ...” So next time you think about skimping on supplier labor practice audits in China or other developing markets, consider what could ultimately surface if a worker decides to claim in the courts -- or go to the media -- what he is rightly owed. I'm sure Disney would have happily paid ten or even hundred times the $90,000 for that lawsuit to have never seen the light of day.

- Jason Busch

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