VOLUME VI, NUMBER 1

California Roundtable Series

Host: Hewlett-Packard Company Palo Alto, California
Speakers: Anna Walker, Senior Manager, Worldwide Government Affairs and Public Policy, Levi Strauss & Co.
Bonnie Nixon, Global Program Manager, Supply Chain Social and Environmental Responsibility, Hewlett-Packard Company

I. Network Presentation
Key Findings
Perspectives

II. What’s New

III. The Women’s Network for a Sustainable Future

I. Network Presentation

WNSF’s second California Roundtable focused on a theme of increasing importance - sustainability in the supply chain. Escalating business interest in the issue is fueled by mounting concern on the part of stakeholders, from NGOs to investors, and especially by the rising numbers of green consumers, who want to know where their products come from, what they are made of, and under what conditions they were produced. Hewlett-Packard Company (HP) and Levi Strauss & Co. (LS&CO.), leaders in sustainable supply chain management, brought fresh insights into the rewards and challenges in the era of sustainable branding.

Key Findings

• There is increasing collaboration within and among industries on improving supply chain sustainability
• Challenges remain and are differentiated by a company’s business and culture. They also come with working in emerging market countries, where infrastructure, health, worker rights and rule of law vary considerably
• Companies recognize the importance of cross-industry partnerships: In the technology industry, 35 companies have come together under the Electronic Industry Citizenship Coalition (EICC) and another 15 in Global E-Sustainability Initiative (GeSI);
• Metrics, goals, documentation, feedback mechanisms, and reporting remain critical
• Engaging stakeholders, including employees, government, investors, suppliers and NGOs, lengthens the process, but also provides significant benefits and improvements
• Companies are increasingly expected to oversee deeper levels of their supply chains, sometimes raising policy issues with governments in the countries where suppliers are based

Perspectives moderated by Ann Goodman

Bonnie Nixon Gardiner came to HP 10 years ago to work with the Vice President of Procurement and began to evaluate the risks of outsourcing. In China, companies were growing rapidly, some increasing tenfold within a year. A group of employees at HP Vancouver was concerned about the working conditions they saw at supplier factories and raised a red flag on the issue. They recognized that a common code was needed, as well as a focus on management systems, and that local expert teams were key to on-the-ground monitoring of factories.

Anna Walker of LS&CO. is responsible for issues such as sustainable supply chain policy and worker rights. Like HP, the LS&CO. initiative began as a grass roots, employee-initiated movement building on the principles established by the privately held, 154- year- old, family- run company based in San Francisco. While LS&CO. is small compared to HP (the company has three brands: Levi’s, Dockers and Levi Strauss Signature) it has 800 factories and 315,000 workers - 40% of sourcing is in the Americas with increasing shifts to Asia predominantly, but also Europe and Africa. The impetus for change came from employees when the supply base began to shift overseas, raising concern about the conditions employees were working under abroad. In 1991, the Global Terms of Engagement were developed as a simple monitoring program and later evolved into a more robust program working on sustainability and management systems, urging factories to own and create sustainable change.

Where do pressures for sustainable supply chain management come from today?

Bonnie Nixon Gardiner (BG) - HP began outsourcing to the developing world in the late 90s. There are multiple drivers and external forces that a company like HP is experiencing. Enterprise customers, NGOs and media are asking an increasing number of questions in European markets. General investors, sustainable research investors and research groups such as Forrester, Gartner, AMR are starting to ask targeted questions. Worker representation groups tell us that they want to see living wages, the code strengthened, and overtime as completely voluntary and not mandatory. NGOs, human rights activists group such as SACOM, SOMO, Swedwatch, Finnwatch, CEREAL and CAFOD, all create regular reports discussing practices in our factories.

Anna Walker (AW) - Apparel industries are under the eye of the NGOs, so part of our work is engagement with the NGO community. Originally, it was name and shame and finger pointing. The NGOs now have hands on experience as to what is happening in factories and they also are willing to engage with companies because they understand it can be beneficial to their goals. They do still put pressure on us and that is an important part of their work. Multilateral institutions, such as the World Bank and ILO, are increasingly entering into public-private partnerships with business to advance common agendas and working collaboratively in certain countries to strengthen sustainability and efficiency. Employees are still an important impetus. As the company develops environmental priorities and strategies, employee interest and initiative has been an important motivator and source of innovation. The business integration program allows us to look at our own business operations and how they impact the way our contract factories operate and comply with our code of conduct. We can change some of our purchasing behavior and those changes would benefit the company and our suppliers.

What do you consider to be your program’s strengths? What challenges have pushed you to strengthen it, and what challenges remain?

BG - We benchmarked and learned from footwear, toy and apparel, and other brands that were hit by the media to find out what worked and what hasn’t worked for them. NGOs look out for the voiceless stakeholders such as the workers, animals and the environment, etc. The strength of programs like HP’s is to always listen to NGOs. There is never a point where we do not listen to them and we always take responsibility to respond, to investigate and to influence outcomes positively. One of our real strengths has been our process orientation and management system philosophy: Metrics, goals, documentation, feedback mechanisms, and reporting. Not to just go do it quickly. HP used to do all of our own manufacturing - so we really understand the factories and the issues. Many competitors have never actually manufactured. When reflecting on the challenges of working with industry groups it is important to recognize that competitors, suppliers and customers, while all a part of the same network, have very different agendas. We sometimes give up speed, but we all need to give up our corporate ego and bring all the industry along to be successful.

AW - Challenges, strengths, weaknesses - we do this work as a value-based and family-owned company. This gives us a lot of space and freedom to experiment. We have a great team across the company working on these issues with innovative thinkers who push the envelope. However, there are not enough great people, or resources, and we need more so we can get some new great ideas. People are too busy doing the daily job. We have not done enough yet on the environment and have not had a focused comprehensive program. We do have goals on the horizon but a broader focus and vision is needed.

What do you consider to be the key issues and challenges facing your company and industry in this area? What are the hot places geographically and thematically?

BG - One of the recent topics that has come up in our industry is the issue of tracking raw materials back through the entire supply chain. How far back in the supply chain do you go and what leverage is possible? Some of these countries have safety challenges and the issues exist largely because of poverty, lack of infrastructure, and poor enforcement of laws including lack of labor inspectors or environmental inspectors to protect workers. A question that a corporation has to constantly ask themselves is where is the line drawn in terms of taking responsibility? Migrant workers come from rural areas and generally don’t have access to legal support, health care, education, financial services and basic information. Who do we collaborate with to get changes to occur? Workers can empower themselves once they have access to needed services. There are almost 35 companies in the EICC - Electronic Industry Citizenship Coalition and there are another 15 in GeSI (Global E-Sustainability Initiative). 50 of largest tech companies in the world have come together and together we can affect great change. Extractives are one such challenge and we must work on this together. Can we have influence several tiers down the supply chain? Metals sold on commodity markets add complexity. The list goes on.

AW - Two things will change the way sourcing will work. First, fast fashion with a constant changing array of products will require quicker lead times and put pressure on our suppliers. Second, the depth of the supply chain is becoming harder for us to see our entire supply chain. Now factories take responsibility for full-package sourcing. As a result, there is less visibility into the supply chain. How do we take on the role and who do we work with? China creates challenges around freedom of association. Trade unions are illegal so we employ parallel means. As the media of the last six months has demonstrated, there are product safety concerns around products sourced from China. China is a dynamic place for sourcing as well as a future robust market - there is so much to learn about how to manage and work there. We need an increasing dialogue across industries to work with the government in China and there are questions about how we can all work together with the government to address common areas of focus.

What is some of the cross industry work being done?

BG - HP is working with Levis around auditor certification. HP has people trained in house on ISO 9000, 14000, OHSAS 18000, Six Sigma, Lean Manufacturing, etc. and uses those internal auditors to conduct our audits. We knew that if we were going to create an effective and efficient joint auditing program we need qualified external auditors. Brands are part of the blame for the poor external audits being conducted today because of the cost pressure, etc. - external auditors were doing audits for little money with no quality. In the past year, multi-industry groups have launched a strategic monitoring program and another effort with Business for Social Responsibility (BSR) called Beyond Monitoring. Monitoring is an integral part of the process. The real question is how we take it to the next level? How do we get to supplier ownership? How do you get the suppliers to truly own this and help them to see the business case justification? Same as we did with quality a few decades ago. Brand ownership - how do your sourcing people contribute to this problem? We need to look at our own internal processes and alignment. Government ownership especially in countries with potential transparency issues and the natural consequences. How do we work with governments to put better structures in place? Finally, worker ownership and looking at how have workers lives have actually improved? We need to empower the workers and their participation is critical.

AW - For LS&CO., cross industry partnership is critical especially with the environmental issues. For example, renewable energy, we need to learn from the companies that have good environmental programs. LS&CO. is part of the CEO Water Mandate through Global Compact so we do lead in working with suppliers on water treatment and know we can contribute in that area.

Audience Questions

Has LS&CO. been able to explore links to SER conformance and benefits? What are the bottom line benefits to doing these actions?

AW - One of the things that has come out of this is an integrated sourcing scorecard on quality, speed to market, and score from code of conduct. Those factories that mark high on quality and productivity score high on SER and vice versa. Suppliers are then rewarded with increased sourcing from LS&CO. The scorecard is tied to sourcing decisions.

What about codes of conduct and certification?

BG - The code has 5 elements (environmental, health and safety, labor, ethics and overlay with management system) and most codes are founded on these same things. Each industry may have some slight difference because of something different in operations or manufacturing processes. However, the fundamentals are present in everyone’s code. Should there be a super code, e.g. Walmart. At end of day there is no argument around what is in the code. We will always have to look at whether there are certain cultural or manufacturing differences. You have to be sensitive to all the cultures before there can be a universal code we can apply. At the end of the day, companies need to look at the risks where they source.

What advice do you have for University faculty members that want to follow in your footsteps? What advice do you have for the large numbers of women students with an interest in CSR?

AW - Training for LS&CO. employees is mostly on the job training. We attract people with big vision, experience in the field, and who are collaborative. Our training system embeds values and we have a more robust system for understanding what values are needed. To get into a corporate environment - you need to take initiative and do informational interviews, think about taking a job that you may not think is a good fit to learn a bit more.

Ann Goodman (AG) - The reason why WNSF exists is because the demographic shows women have more passion and interest in social and environmental well-fair. Young women are a great part of this initiative. WNSF is completing a sustainability training program called BEST for corporate women in companies to figure out how they can integrate some of the principles into their mainstream job.

BG - Training needs are true for both HP and our suppliers. Upper level management trainings need to be more concise and clear about what customers are asking for and how many dollars are attached to the bid. You need to demonstrate the business case and you need metrics. There is also a need to collect data to establish the business case for CSR. Universities are constantly looking for data now to see if they can demonstrate the business case. It is also necessary to train management about NGOs, the Issues around transparency and politics. Commodity managers or mid-level management needs the scorecards because what you measure gets managed. Sourcing managers need the tools on how to do it effectively and efficiently. Employees are ambassadors and excited about working for a company that have programs like ours. There is a need for trainings for suppliers and NGOs in country to build their capabilities in these areas. There are multiple opportunities for universities as it relates to education, capacity and capability building. It takes a village and young people are very conscious today about these issues so students need to be involved because they are the upcoming consumers.

What communication strategies do you put in place to communicate with various audiences?

AG - WNSF does have a communication strategy and web site. A summary of highlights are provided from the meetings. Both live interaction and robust electronic interaction are necessary.

Barbara Waugh, HP - Remember the dirty diamond campaign from Tiffany’s? Employees boycotted and didn’t want to work there any more. Both companies started programs because of employees. Employees are very good warning indicators and voice for what is happening. HP has a Sustainability Network of 1000 people but the citizenship piece around the company can start to erode when there are competing pressures to meet corporate objectives and cut costs. HP has a network of highly distributed employees globally. How do we ensure and step up our methods to inform and communicate with this very important stakeholder group?

AW - Consumer voice has been absent but still price, quality and style are the deciding points. Is the consumer there or are they coming?

BG - HP puts out monthly and quarterly newsletters for management and employees in the global business units. Ongoing communication and discussion forums are critical for those in the company that work on SER implementation. We currently have several regional teams around the world that focus on local countries and employees and management and social and environmental issues have always been important to HP employees. The real question is how do you get employees involved? You go to where they are and see what they are participating in already. Through surveys we know the consumer population is beginning to wake up. Companies that are willing to take a risk and make fair trade products ahead of consumers asking for it will be successful. Differentiators will increasingly become important between products.

How can you directly communicate with consumers in a very short sound byte that is easy for them to understand especially at point of purchase?

BG - I am opposed to the whole labeling scheme. You need a better rating scheme that is widely publicized and fair across all companies and credible entities. Universities can play a role here.

AW - Through school curriculum for middle schools and universities. The younger generation needs to be trained for new design for environment techniques.

II. What’s New

WNSF is proud to announce the kick-off of events in Atlanta. See events posted on WNSF’s web site (www.wnsf.org) and stayed tuned for more information.

WNSF Board Member Joyce LaValle was selected as one of Atlanta’s Most Innovative Minds by Inspiring Futures. Joyce is Senior VP of Associate and Customer Engagement, Interface Americas.

WNSF Executive Director Ann Goodman was selected by the US State department to address a group of Latin American women business leaders interested in sustainable development in NYC in March.

III. The Women’s Network for a Sustainable Future

WNSF provides a forum for business and professional women to congregate, reflect, and act on the converging issues of corporate social responsibility and sustainable development. Through meetings and simple electronic support tools, the Network aims to facilitate the exchange of experiences and best practices on these vital workplace issues. By creating a new network of executive women, the Network seeks to improve responsible practices in workplaces; sensitize corporate culture more generally to issues of sustainability and social responsibility; and encourage a public commitment locally, nationally, and internationally to sustainability principles.

For more information, please contact:
Ann Goodman, PhD
Executive Director
WNSF
www.wnsf.org
info@wnsf.org

Board of Directors CHAIR: Kathy Robb, Esq., Partner and Head of Environmental Practice, Hunton & Williams; Marlys Appleton, VP, Alternative Investments and Sustainability, AIG; Dianne Dillon Ridgley, Director, Interface Inc. Board; Karen Flanders, Director of Sustainability, Coca-Cola Co.; Joanne Fox-Przeworski, Director, Bard Center for Environmental Policy, Bard College; Ann Goodman, Executive Director, WNSF; Sarah Howell, Director, Corporate Communications, BP; Michele Kahane, Special Projects Director, Center for Corporate Citizenship, Boston College; Clair Krizov, Executive Director of Environmental and Social Responsibility, AT&T; Joyce La Valle, Senior Vice President, Interface Inc.; Anita Roper, Director of Sustainability, Alcoa Corp.; Deborah Sliter, Vice President of Programs, National Environmental Education & Training Foundation.

The Women’s Network for a Sustainable Future is a 501c3 organization.

This issue of Net Notes was reported by Lindsey Ridgeway and compiled by Liza Pullman

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