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February Newsletter
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February 5, 2010
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From the Desk of the President
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3Rs for 2010- Rethink, Redesign, Rebuild
We had not yet finalized New Year resolutions, when media around the world made a monumental announcement: Google considers pulling out of China. On January 12, 2010, arguably the most powerful company in the world took an active stand against one of the two most powerful governments in the world. Never before has technology challenged ideology in such a direct way! With heated arguments on both ends of the spectrum “Why should they…”, “Why shouldn’t they” …” socially responsible sourcing became the center of political and economic debates.
On January 24th, Sam’s Club and its parent company Walmart announced cutting 11,200 jobs by outsourcing the task of in-store demonstrations to a local company in an effort to improve productivity and competitive standing against rival Costco. Fallout from this decision will be carefully evaluated against the “Sustainability Index,” which has been championed by Walmart to become an industry standard. Undoubtedly, we will hear more of how Walmart measures up against its own sustainability and social responsibility principles on its home turf – stay tuned
This everything-but-boring first month of the second decade, is wrapped up with the 40th Davos World Economic Forum. Practitioners, theoreticians and observers of the global economy debate how to improve our lives after the second global recession. You will not find “global sourcing” or “social responsibility” as separate items on the Forum agenda - and rightfully so. After two decades of pondering these issues, we have learned that a successful Corporate Social Responsibility agenda means it has become a business philosophy and not a separate initiative, and that social responsibility must be embedded in every process throughout an entire life cycle of a product or a service – from design to demise. From that perspective, the 3Rs of the 2010 Davos forum - Rethink, Redesign, Rebuild - are all about sustainability and social responsibility, and its role in final economic outcomes
It is only appropriate that, as global sourcing enters the second decade of the 21st century, we challenge ourselves with Davos questions; and we look at the Google and Walmart dilemmas from the perspective of:
· Rethinking – values
· Redesigning – processes
· Rebuilding – institutions
I invite you to take part in this global debate by participating in our GSC webinars:
Re-Design Processes: Feb 24th webinar – on e-waste program run by the Federal Prison System REGISTER
Re-Think Values: March 4th webinar on sourcing “conflict minerals” for the electronic industry REGISTER
Re-Building Institutions: April 7th webinar on socially responsible investments: performance and profitability. REGISTER
Wanda R. Lopuch
President of Global Sourcing Council
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GSC Launches New Certification Program
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The GSC is holding the first Associate level GSC Certification in Socially Responsible Sourcing, April 22-23 in NYC. This is a unique certification that covers all the traditional information normally found in a certification, but puts it in the context of socially responsible global sourcing, carried out through sustainable practices.
The class will begin at 1PM on Thursday and run until 6PM. On Friday the times will be 8AM to 3PM. This is an exciting opportunity for you to be in the premier graduating class!
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January Webinar with the Ontario Ministry of Development and Trade
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The January 22 webinar on leveraging an economic development group in a global sourcing strategy focused on the environment in Ontario as a sourcing destination for companies from the US and other locations. In addition to discussing a great amount of data about doing business in Ontario, Eric Hochstein led a very useful discussion about the new green initiatives that are part of the Green Energy and Green Economy Act (GEA):
· Focus on becoming North America’s renewable energy leader
· Create a culture of conservation, assisting homeowners, government, schools and industry in embracing lower energy use
· Build on earlier initiatives, including a plan to eliminate coal-fired power by 2014, the single largest climate change initiative in Canada.
Two key elements of GEA are:
· Developing a feed-in tariff system to provide guaranteed prices for renewable energy projects
· Streamlining approvals for renewable energy projects
To access the recording of the webinar and to see all the slides, click HERE
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Understanding Socially Responsible Sourcing
The Global Sourcing Council was founded to advocate social responsibility in global sourcing. What does this mean? Most companies understand the application of social responsibility in their own organizations as practicing policies that would label them “good corporate citizens.” These are self-regulating actions where organizations examine their impact on employees, their communities, the environment, their customers and, generally, all stakeholders that may be affected by their work.
The concept of socially responsible sourcing is that companies who engage in global sourcing, that is “clients” of global sourcing, should adopt best practices that include reviewing the socially responsible policies of their providers. Clients should be concerned about the practices of those organizations with whom they engage or partner for work outside their own organization. Just as a company’s reputation can be damaged by poor in-house social responsibility, it can also be equally damaged by association with a business partner who is not a good corporate citizen.
In the past, it was thought that being socially responsible was a moral requirement and not a particularly good business practice. However, more recently, organizations have discovered that the being socially responsible is profitable! Enacting sustainable practices can improve the bottom line. For example, companies who reduce the carbon footprint of their data centers have discovered that it is less expensive to run data centers using cooling systems that are powered by alternative methods such as solar or geothermal systems. Organizations that implement comfortable, safe working environments reduce the staff turnover and associated costs of hiring and training.
So while the focus in global sourcing is often about savings, cost cutting, maximizing margins, these can be better achieved through working with socially responsible providers.
Most clients of global sourcing have a set of best practices that includes a due diligence investigation into areas such as finance, credit worthiness, and evidence that that provider has the where-with-all to be a successful on-going business. GSC advocates including an investigation of social responsibility and sustainable practices as well. This is especially important when the client has its own set of policies in these areas and will not want to risk working with a provider partner who does not.
Lack of policies in social responsibility has led to poor human resource practices such as unsafe work places, excessive hours of work, unpleasant work conditions – all of which have also led to increasing staff turnover. In the area of the environment, the problems are extensive including pollution from chemicals and electronics, exposure to e-waste, and depletion of raw materials. The adoption of sustainable practices in concert with a policy of social responsibility can correct all of this and has been shown to improve productivity and profitability.
Global sourcing providers who have a strong record in social responsibility are using this strength to sell their services to clients. Their sustainable practices make them more attractive and more profitable to work with. Socially responsible sourcing is a win-win game!
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Taking Responsibility for E-Waste Recycling
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Join us on Wednesday, February 22 at 11:00AM EST for a discussion with Robert Tonetti, General Manager of UNICOR on Taking Responsibility for E-Waste.
UNICOR sponsors the federal prison electronics recycling program where organizations can have their electronics processed safely and at no cost to the organization. Check out the UNICOR program.
Join the Webinar from anywhere and learn about e-waste recycling locally and globally! REGISTER TODAY
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Disclosures on the Risks of “Climate Change”:
New SEC Interpretive Guidance Highlights Business Resiliency Planning in Global Sourcing including Supply Chain Management, Shared Services Organizations and Outsourcing Services
© 2010 William B. Bierce. All rights reserved.
On January 27, 2010, the U.S. Securities and Exchange Commission adopted an “interpretive guidance” to public companies on existing disclosure requirements as they relate to business or legislative events on the issue of climate change. Such “interpretive guidance” is not a new regulation, but serves to express an intention to clarify existing requirements. It was adopted by a vote of 3 Democrats to 2 Republican commissioners, who in principle are not representing their respective political parties. The interpretive guidance will have a significant impact, both in the U.S. and across the world, on investor relations, risk management and indirectly on corporate social responsibility.
Impact on Business Continuity and Profitability. Climate change could have material impacts on a company’s business. Disclosures of the impact of changes in climate – such as more severe storms, a rise in sea levels, increases in the costs of farm products, etc. – could be a “ material” factor for an investor in deciding whether to buy, sell or hold securities in such a company. Thus, the issue of climate change has, in a sense, always been a material factor for discussion in management’s general discussion and disclosure of risk factors.
The SEC’s Interpretive Guidance. Quoted below, the SEC’s interpretive guidance on January 27, 2010 highlights several specific areas as examples of where climate change may trigger disclosure requirements:
· Impact of Legislation and Regulation: When assessing potential disclosure obligations, a company should consider whether the impact of certain existing laws and regulations regarding climate change is material. In certain circumstances, a company should also evaluate the potential impact of pending legislation and regulation related to this topic.
· Impact of International Accords: A company should consider, and disclose when material, the risks or effects on its business of international accords and treaties relating to climate change.
· Indirect Consequences of Regulation or Business Trends: Legal, technological, political and scientific developments regarding climate change may create new opportunities or risks for companies. For instance, a company may face decreased demand for goods that produce significant greenhouse gas emissions or increased demand for goods that result in lower emissions than competing products. As such, a company should consider, for disclosure purposes, the actual or potential indirect consequences it may face due to climate change related regulatory or business trends.
Impact on Global Sourcing. This interpretive guidance is important for outsourcing service providers that support global or globalizing businesses in outsourcing of IT, business processes, call centers, knowledge processing, HR staffing and administration, legal processing and other services. The possibility of severe storms in a service delivery center should thus be reflected in a disclosure about the susceptibility of such a center to service outages and damages to facilities and resulting consequential damages to the reporting public company. Such disclosures should consider the related disaster recovery plans and business resiliency plans that might mitigate such outages and lost business.
What does this regulatory concern mean for global sourcing?
- Corporate Investor Relations. “Climate change” is now on the scoreboard for disclosures by public companies and evaluation by portfolio managers.
- Corporate Strategy, Business Process Design and Risk Management. Business resiliency measures that relate to climatic conditions have now become a subject of scrutiny.
- Global Workforce Management. “Climate change” is now a matter of very public concern. The impact of weather and climate change on a service provider’s capacity to deliver services, as well as on the customer enterprise’s ability to receive services from different service centers, have now become very openly a regulatory disclosure concern.
- Corporate Social Responsibility. The interpretive guidance gives a new impetus for corporations, both public and private, to identify their strategies and contingency planning for reducing the impact of adverse climate changes. While not commanding any CSR initiative, the interpretive guidance will undoubtedly highlight this on the corporate business agenda for branding of “good corporate citizens.” It could further spur greater interest in measuring and reducing the carbon footprint of publicly traded companies.
Underscoring Existing “Best Practices.” The SEC’s interpretive guidance has given enterprises a clear path on managing risks related to climate change. This is actually nothing new, since sophisticated service customers have already been demanding disaster recovery plans and contingency sourcing plans as “best practices” in global sourcing. What was a “best practice” has now become an even more compelling “best practice.”
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We are looking forward to hearing from you. Please contact Wanda Lopuch if you would like to participate in the work of committees or contribute your time, talent or resources in other ways. |
Last updated on 2/5/2010
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