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January 2009
Social Responsibility
FIBERcast announcement

Looking Upstream: A New View of
21st-Century Business Practices


Coral Rose
Coral Rose
Member, University
of Delaware Department of Fashion and
Apparel Studies Advisory Board

Coral Rose is a widely recognized agent of change, strategist, eco-educator, and speaker on the subject of sustainable textiles and the practical application of sustainability to business. For over twenty years, she has held senior management positions in merchandising and product development, including sustainable textile product development for major retail corporations.

In 2004, Rose was able to integrate her sustainability values into her profession. She and a co-worker led the Wal-Mart Sustainable Fibers and Organic Cotton Environmental Sustainability Team, which was committed to bringing sustainable fibers to the everyday consumer. The company soon became the world’s largest user of organic cotton, and ultimately, that team was the catalyst for global change.

Rose’s role in moving the retail giant toward sustainability has been widely documented initially in Fortune Magazine’s July 2006 feature
“The Green Machine” and most recently in “Strategies for the Green Economy” a book by Joel Makower.

She has been a featured speaker and panelist at events such as the MAGIC International Textile Show, The ECO-SHOW, All Things Organic (ATO), and Texworld-New York.

Rose also is a member of the University of Delaware Department of Fashion and Apparel Studies Advisory Board. The University of Delaware offers a graduate program in Socially Responsible and Sustainable Apparel Business. Rose also created and led the first ”Sustainability Leadership“ Executive Education Course for the University of Arkansas.

Rose recently joined National Stores Inc., a 200+ store family-owned and oriented company established in 1962. Fallas Paredes Discount Stores and Factory 2U serve local communities in five states — California, Texas, Arizona, New Mexico, and Nevada. The company is uniquely positioned to serve the emerging U.S. Hispanic demographic population.

Rose says she feels that close-out retailers such as Fallas Paredes and Factory 2U are a sustainable channel for fast fashions’ role in mass manufacturing. Fallas Paredes affords the market an outlet for over-runs and canceled merchandise and at the same time serves local communities by providing them with affordable fashion.

 

We have witnessed decades of widespread global economic growth, in which we have seen the standard of living for millions of people around the world rise to unprecedented levels. As China and India enter the age of consumerism, global economic development is linked not only to the core practices of business, but that of environmental and social issues as well.

Our planet now supports 6.5 billion people. We are adding to that, about 70 million people each year. Some may assert that the current global economic business model cannot support or sustain social and economic progress for the projected 8 billion people who will live on this planet by 2050.

In the world of globalization, fundamentally social and environmental issues are business issues and are inseparable from one another.

According to a recent poll conducted by the Global Strategy Group, 87 percent of consumers are more likely to buy products from a retailer that is committed to environmentally sound practices.

With increased awareness, the concern for many companies becomes how to achieve the maximum economic benefit from environmentally and socially responsible products and practices while at the same time increasing shareholder value and increasing stakeholder trust.

Hidden from our View

Today, the majority of products’ social and environmental impacts are hidden from our view — that is, the effects of a product’s social and environmental impacts (life cycle) before it hits the shelves and consumers’ hands. The average designer to purchasing agent (consumers as well) is unaware of the global impacts of their decisions. Hidden from their sight is what lies upstream; all the impacts of growing, processing, manufacturing and transporting raw materials and component parts. Twentieth-century business practices have taught these professionals to focus only on what is downstream (production to consumer).

In the United States in 1960, we were generating 2.7 pounds of waste per person per day. In 2006, that number is 4.6 pounds of waste per person per day. By the time that waste fills one garbage can, 70 garbage cans of waste was created upstream to make the stuff that is now going to the landfill.

To begin to create an accurate picture of what and who are upstream and to make informed decisions about what actions we will take downstream, we must begin to ask: What is the source of our raw materials? Where were the materials harvested, processed, produced? And who and what (people-animals-environment) in the supply chain is affected by the harvesting, processing, and production of our products?

Considering all the social and environmental impacts from harvest/processing to waste/reuse is a total mindset shift at the product design and creation level and a key component to sustainable economic development strategies.

Supply chain transparency is one of the basic tenents or “rules of engagement” for any 21st-century business model.

Ethical Consumerism

Ethical consumerism is on the rise. It’s a movement based on purchasing products that have been ethically produced by organizations that are involved in a process of ensuring that the basic labor rights of the employees of their Third World suppliers are respected.

According to a recent study reported by the Wall Street Journal, companies that embrace more ethical production practices (social and environmental) that are third-party certified, may produce larger profit margins.

What are consumers willing to pay for a pound of coffee based on what they were told about the company’s production standards?

Source: WSJ — Does Being Ethical Pay?

Consumers may be willing to purchase unethically produced products, but at a steep discount. A recent survey by BBMG indicated that 35 percent of all Americans have avoided buying a product because of a company’s practices. Return on investment (ROI) in the 21st century is clearly rooted in social and environmental responsibility and the ability of a company to look upstream when making sourcing decisions.

Fair Trade — Supply Chain Transparency

Fair Trade Certification is a market-based model of international trade that benefits over one million farmers and farm workers in developing countries. Fair Trade products have experienced consistent global growth in the 40 percent range over the last few years, making Fair Trade good for business.

The roots of Fair Trade can be traced back to churches in North America and Europe in the late 1940s. The goal of these organizations was to provide relief to refugees and other poverty-stricken communities by selling their handicrafts to Northern markets. In the U.S., Alternative Trade Organizations (ATOs), such as Ten Thousand Villages and Equal Exchange, purchase from worker-owned cooperatives. The ATOs were formed to import Fair Trade crafts and coffee to the U.S. market.

In 1988, world coffee prices began a sharp decline, The Netherlands’ Max Havelar offered the mainstream coffee industry the first standardized system of Fair Trade criteria. Currently, Fairtrade Labeling Organizations International (FLO) is the “umbrella organization” that establishes Fair Trade standards globally for the industry using a multi-stakeholder process.

Fair Trade standards require sustainable farming techniques and offer further price premiums for organic production, but Fair Trade certification does not guarantee that a product was organically grown. Where farmers are not certified organic, they are required to implement a system of integrated crop management (ICM). FLO stiuplates that the International Labor Organization’s (ILO) conventions be followed.

One hundred million people around the world rely on cotton for their livelihoods. Fairtrade certified cotton carrying the FAIRTRADE Mark was launched in April 2005. Countries and producers receiving certification for cotton include farmers in India, Mali, Peru, and Senegal, Burkina Faso, and Egypt. Pakistan and Brazil will follow in the near future.

Note: Under the FAIRTRADE Mark it is only the cotton that is certified Fairtrade, not the yarn, fabric, or garment. Therefore, a product can only be referred to as Fairtrade Cotton NOT for example a Fairtrade Cotton shirt. The label must read: “Made with FAIRTRADE Certified Cotton.” Currently The United Nations “Least Developed” Countries are the only countries eligible for Fair Trade Certification.

The term Fair Trade is sometimes used interchangeably with Ethical Trading. Ethical Trading refers to organizations. The FAIRTRADE Mark, applies to products rather than organizations.

Walmart — Increasing Social and Environmental Global Supply Chain Standards

Walmart Stores, Inc., recently announced in Beijing, China, that the company will focus on taking a number of steps to strengthen and enforce supplier compliance with rigorous social and environmental standards, including the creation of a new supplier agreement and scorecards that will require factories to certify compliance with laws and regulations where they operate.

The agreement will be phased in beginning with suppliers in China in January 2009. It will expand to suppliers globally by 2011. In terms of supply chain transparency, by 2009, Walmart will require all direct import suppliers plus all suppliers of private label and non-branded products to provide the name and location of every factory they use to make the products it sells. The company will also instruct all suppliers it buys from directly to source 95 percent of their production from factories that meet the company’s highest ratings on social and environmental practices by 2012.

Looking Forward

Organizations not communicating their social and environmental practices and progress may lose out to their competitors that do. Here are some steps you can take:

  1. Not only understand but be responsible for improving your product’s life cycle. To better understand where you can improve your performance both economically, socially, and environmentally, consider Lifecycle assessments (LCA.) Reach out to NGOs and subject matter experts to support this process.

  2. Develop and choose products that can be authenticated to the source. Strive to use independent third-party certification or accredited standards (e.g. Organic, Fair Trade).

  3. Educate your organization, consumers, and investors. Focus on energy saved, waste reduced, pollutants eliminated, and protection of workers’ rights. Be prepared to link to a source that can authenticate all of the above statements and tell the whole story across the supply chain. Note both the successes and the areas for improvement. Supply chain transparency is the new business and marketing model.

  4. Many view social and environmental sustainability as the competitive advantage to the slowing economy. Organizations that can adapt quickly to the current troubled economy and become focused on the cost savings of sustainable business practices may be the ones to deliver a return on investment in tough times. Cost savings derived from increased energy efficiency of the supply chain could lead us to not only cost savings but a more localized and regionalized supply chain versus one that is globalized.

  5. Keep your eye on the future and horizon issues. Plan now. Should consumers opt to buy less, how will this affect your business model? Will you be offering more services to offset the lower product sales?

Economic success in the 21st century will be measured and led by brands and retailers that can successfully create long-term brand value and stakeholder loyalty by creating products, processes, and services that consider the environmental and social impacts of their supply chains.

Toptop

Look Who’s Talking Now

Stephen Frost
Stephen Frost
Co-Founder and Executive Director,
CSR Asia, and
Assistant Professor,
Asian and
International Studies,
City University,
Hong Kong

Stephen Frost is one of the co-founders and an executive director of Corporate Social Responsibility (CSR) in Asia. He is also an assistant professor at the Department of Asian and International Studies at the City University of Hong Kong. He has consulted for numerous companies, governments, and multilateral organizations, and is widely published. He is regularly interviewed by local and international media organizations, and he sits on the advisory boards of major corporations and CSR initiatives internationally. Frost developed and taught the first CSR modules in MBA programs in Chinese universities, developed and is teaching the first undergraduate CSR course in Asia, and along with his co-founder offered the first public training of CSR in the Asia-Pacific. He helped develop an innovative factory training program for Chinese factories, and led a team to develop capacity building for Chinese organizations to deliver service to companies in supply chains. He is a recognized pioneer in CSR in Asia.

For two decades, the loudest critics of the fashion industry’s supply chain in China have originated in North America and Europe. Groups like Students Against Sweatshops and the Clean Clothes Campaign have — with local support — been the major actors in shaping business responses to workplace issues confronting Chinese factories.

But with the rise of social media (or Internet technologies that allow interactivity) in China, this may be starting to change. Chinese stakeholders are now voicing their expectations of fashion brands using technology like bulletin board system (BBS) forums and blogs.

Young adult on a cell phone

Take the case of Semir, a Wenzhou-based youth fashion brand with 3,620 outlets across China. In 2007, the company ran an advertising campaign featuring youth dressed in the company’s latest outfits with the tagline, “I might not be [a sports star, Olympic torch bearer, etc], but at least I look good [in Semir]”. But when they published an ad saying “I can’t deal with global warming, but I look good”, all hell broke loose. Visitors to blogs like “Youth Focused on Climate” and popular BBS forums on Internet portals such as Daqi and Xici were all incensed at what they perceived was an act of corporate irresponsibility. This comment summed up the feelings of many: “What can a company with no sense of corporate social responsibility bring to the public and to society?” It was the first case of Chinese citizens holding an apparel firm accountable online for a CSR issue, and due to the pressure exerted (including articles appearing in influential papers like the China Youth Daily), Semir apologized.

A new interactive Web site — http://www.74ligui.com — provides more evidence that Chinese stakeholders are taking action over issues that concern them. In this case, it’s fakes. Based on contributions from the public, http://www.74ligui.com provides detailed accounts of how to spot fakes (the term ligui refers to a product whose packaging is intentionally made to resemble that of a well-known brand). It covers numerous products, but fashion wear is clearly a major concern. The brands covered include Adidas, Bape, Burberry, Calvin Klein, Diadora, Diesel, Evisu, G-Star, Jack Jones, Lacoste, Lee, Levi’s, Nike, Polo, Stussy, and Triumph. Once again, this is a first; Chinese stakeholders are using social media to express views, make expectations known, and play a visible role in shaping corporate behavior.

New Web sites like Our Workers (http://www.ourworkers.org/index.asp, a Chinese-language Web site that among other things provides an outlet for apparel factory workers’ voices) are also using the social media to express expectations deeper in the supply chain.

A broad range of Chinese stakeholder views has been absent from much of the discussion about the apparel sector and its supply chain. The rise in use of social media suggests that is changing. The real question now for apparel brands is whether they are underestimating Chinese social media, and whether they know who is talking about them and what they’re saying.

Toptop