Outsourcing, CSR and Supplier Management — Curious Intersections (Part 1)

As much as we like the snark in much of the content, it's not too often that we find anything on Huffington Post that is of much relevance for the Spend Matters audience. But we must say that the following column by AMD's Tom Mohin titled Who Owns Social and Environmental Performance in an Outsourced Economy? hits the mark. In it, Mohin frames his argument by first noting that "we live in an age of globalization where companies have the ability to maximize efficiency and help lower costs by using manufacturing services anywhere in the world." But as this trend continues, he proffers, the big question is "who is responsible for the social and environmental impacts of manufacturing the product?"

Mohin draws the somewhat nebulous distinction between manufacturing within one's four walls and outside of them (i.e., in the former, you're absolutely 100% responsible for labor practices, health, environment, and safety, but in the latter, it's not entirely clear how far one must go). As he puts it, when "manufacturing is outsourced, this responsibility can become less clear. In essence, outsourcing moves labor and environmental issues from the black-and-white realm of compliance to the murkier area of business ethics." Or does it?

Here at Spend Matters, we've done paper after paper, project after project, post after post, and advisory session after advisory session considering and evaluating supplier information management tools and programs. Topics have included corporate social responsibility, diversity, risk, performance, and EHS (environmental, health, safety). It's the one topic where a day does not go by where we don't get an inbound question from someone on it. Based on this level of interest, most forward thinking companies have owned up to the fact that you can't separate out supplier practices from your own.

The crux of Mohin's pragmatic observations and advice begins when he asks: "How far should a company go to ensure its suppliers are appropriately managing social and environmental conditions?" We would argue that while there is not a black and white answer, having established policies, programs, norms and audit trails is the ante to create a culture of enforcement and awareness. In the second part of this post, we'll continue to explore Mohin's suggestions and talk about how we see companies backing them up with technology platforms and investments to drive compliance, automation and most important, a culture of more responsible sourcing and vendor management decisions that encompasses supplier CSR practices.

- Jason Busch

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