MANAGING REPUTATIONAL RISKS OF GLOBAL SOURCING Richard J. Coyle In affiliation with Kreab & Gavin Anderson richardcoyle@cox.net August 17, 2010
INTRODUCTION Global sourcing relationships have come under intense scrutiny by non-governmental organizations (NGOs) and socially responsible investor (SRIs) groups. Some want to improve working conditions, while others simply want to make a name for themselves and attract more funding. Still others are funded by external interests with the goal to destroy corporate reputations.
KNOW WHOM YOU ARE DEALING WITH! DON’T BELIEVE WHAT THEY SAY...PAY ATTENTION TO WHAT THEY DO!
WHAT TO DO If confronted with allegations, establish a single point of contact for the media and begin your own investigation. Form an internal team with the legal, corporate communications, ethics, purchasing, and investor relations departments. Notify the factory and the supplier to refer all inquiries to the single point of contact.
QUESTIONS TO ASK • Who is claiming to be the author? How large is the organization? Where does their funding come from? • Analyze the quality of writing. Does it flow like a native speaker of English wrote the report? • Study the pictures. Show them to buyers or auditors who are familiar with the facility. Are they accurate? Do they look staged? • Take note of the sources for statistics. Are they credible, and can they be verified? Are the authors citing data which is not available to the public?
CHECK YOUR PURCHASE ORDERS Obtain a complete history of purchase orders and shipments for the factory. Become familiar with what was ordered and the timing of the shipments. Do they match what the report claims was being made and the time frame of the alleged violations?
CHECK PRIOR AUDITS Review previous audit reports for the factory. What were the commonly found violations? Are they repeated in the new report? If the factory has received stellar reviews in the past, the findings in the new report could be fabricated. It could also mean, however, that the previous auditors were paid off to mask serious violations.
INVESTIGATE THE CLAIMS Get an investigative team dispatched to the factory immediately with a copy of the report. Can the conditions in the report be readily observed? Do the photographs look like the factory? Do the workers interviewed in the report really exist? Do the records support the claims?
TAKE PROMPT ACTION If the claims cannot be substantiated, prepare a statement for the media to be used for any follow-up stories. If the claims prove to be legitimate, swift remedial action is needed. Your company reputation can be enhanced by working with factory management to rectify the problems.
ENLIST LOCAL ASSISTANCE You should also assess whether local government or law enforcement can assist. Caution: Local officials can often be very corrupt.
STAY FOCUSED AND CALM Keep a cool head. Some activists will intentionally try to get under your skin with outrageous allegations. They are focused on achieving a political goal, and their actions should not be considered as personal.
FUTURE HORIZONS Future debates regarding social and environmental concerns will move from the factory floor to where raw materials are harvested: • Cotton • Sugar • Wool • Seafood • Cocoa • Minerals • Palm Oil • Timber
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