THE NETWORK FOR
RESPONSIBLE SUPPLY CHAIN MANAGEMENT
CALL FOR THE NETWORK FOR RESPONSIBLE SUPPLY CHAIN MANAGEMENT
Your corporation is hereby invited to join The Network for Responsible
corporations, such as yours, is the key to success. Groups of non-
competing corporations with common business interest in a specific
PARTICIPATION Supply Chain Management (NRSCM). NRSCM is a groundbreaking ini-
tiative launching a risk mitigating, cost efficient and sustainable approach
geographical area will initiate the pilots. A preliminary screening by
GLOBAL CSR of a proposed location determines the viability of the
to responsible supply chain management. The aim is to create CSR Risk area for a pilot project. When determined viable, and if local interest
Free Sourcing and Investment Zones™ in areas (e.g., cities, regions, states is expressed, an assessment of the existing level of CSR risks will be
or even smaller countries), where your corporation has investments; carried out. The assessment will be followed by the development
whether it is through procurement, production or acquisition. of a project document, in the form of an application from local au-
thorities, asking donor agencies (DAs) to finance a three to five year
CSR RISK FREE SOURCING AND INVESTMENT ZONES™ implementation process. By the end of implementation, the given
CSR Risk Free Sourcing and Investment Zones™ are areas from area will be ready to be certified as a CSR Risk Free Sourcing and
which your corporation can procure without the risk of suppliers Investment Zone™.
being involved in any kind of violations of internationally agreed
standards, derived from the UN Global Compact principles. By sup- MEMBERS BENEFIT FROM DAY ONE
porting the creation of such zones in areas of your interest, your While RSCM 3.0 might be a long-term project, NRSCM membership has
corporation will gradually be able to cut down current spending on immediate value for your corporation. From the very beginning NRSCM
monitoring suppliers, creating and enforcing codes of conduct etc. membership enables you to communicate a balanced and front-runner
approach to RSCM. Membership can also help explain lack of further
RSCM 3.0 investment in other approaches to RSCM. Finally, NRSCM membership
CSR Risk Free Sourcing and Investment Zones™ can only be created will in time enable you to reduce costs, as you gradually phase out pos-
through the involvement of local authorities.Thus, the aim is to enable lo- sible outdated, costly and cumbersome RSCM procedures.
cal authorities to implement and monitor basic CSR standards in partici-
pation with relevant stakeholders. In current approaches to responsible THE INITIAL WORK IS TAKEN CARE OF
supply chain management (RSCM) this work is undertaken by individual During the preliminary phases of implementing RSCM 3.0, GLOBAL
corporations. The monitoring will be based on international minimum CSR provides the bulk of the groundwork. We will orchestrate the
standards for business conduct derived from the UN Global Compact. network of corporations participating and supply it with office fa-
As part of the process it will be ensured that local regulation is compat- cilities, expert assistance, research, project management and mutual
ible with such standards. This approach marks a significant shift from the communication services complete with website, information materi-
current value chain oriented use of Codes of Conducts (RSCM 1.0 and als, PR, and documentation of the process.
2.0); and can be called: Responsible Supply Chain Management 3.0. The
approach is in line with recent recommendations from the UN stating GLOBAL CSR will facilitate network meetings and write proposals
that corporations should work with local or central governments to for all documents needed in the process. Consequently, all you have
increase their leverage and practice proper due diligence. to do in order to participate in the first phase of NRSCM is to attend
network meetings and to take part in the on-going dialogue. Should
PILOT PROJECTS the process lead to the realisation of a pilot project in an area of your
The establishment of CSR Risk Free Sourcing and Investment choice, you may want to act as lead corporation thereby becoming
Zones™ is a long-term goal, where the involvement of front-runner the driving force behind a group of corporations with similar interests.
EXPLORATION PHASE PRICE
Prior to the pilots, there will be a six month exploration period in The membership fee is USD 25.000 excl.VAT.The fee covers full mem-
ABOUT GLOBAL CSR
which GLOBAL CSR will facilitate three two-day meetings designed bership of the NRSCM virtual platform for five years, partaking in the
GLOBAL CSR is a leading
to convey insight in the strengths and weaknesses of current RSCM six month exploration phase, including GLOBAL CSR’s facilitation of
Corporate Social Respon-
approaches, and where the concept RSCM 3.0 will be introduced in- the three two-day meetings, venue and dinner.Travel and accommoda-
sibility (CSR) consultancy
depth. The seminars will be visited by keynote speakers representing tion arrangements are to be covered by members.
firm which specializes in
donors, governments, suppliers and representatives from RSCM initia-
creating customised sus-
tives with an explicit interest in the project. The last meeting is sched- JOIN
tainable solutions for pri-
uled to prepare members for a possible RSCM 3.0 pilot. Please contact GLOBAL CSR if you have any questions or wish to join
vate corporations, public
NRSCM. The exploration phase begins when a minimum of six corpo-
authorities and organisa-
The three meetings running over the course of two days will be tak- rations have signed up for NRSCM.
tions. With more than
ing place with a two months interval. All meetings will be held in Co- Contact: firstname.lastname@example.org or (+45) 44995506.
13 years of experience
penhagen, Denmark. By the end of the six months, your corporation
in CSR and an extensive
will have learned more about the opportunities, challenges and costs READ MORE
network of domestic and
associated with different approaches to RSCM, as well as how best to 1 Exploration Phase - Agenda for Meetings
international partners, we
communicate and move forward. Finally, you will have acquired an in- 2 Tentative Process Description - Pilot Phase
are able to provide the
formed foundation for the assessment of, whether or not to take part 3 Concept Note – Background Brief describing the need for RSCM 3.0
most qualified, up-to-date
in a subsequent pilot.
and experienced consul-
tancy. Since 1996, GLOB-
FOUNDING MEMBERS SHAPE THE FUTURE The following three documents regard different aspects of the RSCM
AL CSR has carried out
For now, NRSCM is open for six to ten international corporations, 3.0 concept. Firstly, the NRSCM exploration phase is described and the
assignments in more than
who wish to be first-movers in the field of RSCM. Corporations can preliminary agendas for the three meetings are presented. Secondly,
30 countries in all parts
participate in the exploration phase meetings with two employees, e.g. a tentative process description takes you through the different steps
of the world. For more
CSR or RSCM managers. corporations in partnership with GLOBAL CSR will undertake during
information please confer
the actual pilot projects. Finally, the concept note provides an overview
The six months explorative phase will run continuously, allowing more of the strengths and weaknesses of current approaches to RSCM, as
members to join later and form a new group of corporations. However, well as elaborates on the concept of RSCM 3.0.
as one of the first ten members to sign up, your corporation gains the
status of founding Member. As a founding member you have the op- START A PILOT RIGHT AWAY
portunity to influence the decision making processes, which will shape As an alternative to joining NRSCM, GLOBAL CSR offers your corpo-
the subsequent pilots, ensuring they fit your own corporate strategies. ration the opportunity to initiate a pilot immediately on an individual
basis. If you wish to ensure that a CSR Risk Free Sourcing and Invest-
As a founding member, your corporation may also benefit from media ex- ment Zone™ will be initiated in an area of strategic importance to
posure as front-runner in the evolution of a new approach to responsible your corporation all within a reasonable timeframe, please feel free to
sourcing. As a founding member you must commit to the entire six months contact GLOBAL CSR for more information or any inquiries concern-
exploration phase, but you are not obligated to participate in a pilot project. ing a pilot.
Agenda for Meetings
Agenda for Meetings
EXPLORATION The exploration phase will last for a period of six months, leading to
the founding of a business-led initiative and the establishment of pilot NRSCM EXPLORATION PHASE
PHASE projects. The vision of such an initiative is to ensure that corporate
practices on managing risks connected to suppliers’ and investments’ Discussion of the variety of challenges, opportuni-
Agenda for Meetings CSR performance will contribute to sustainable social, environmental ties, costs and practicalities of current RSCM ap-
and economic development, through the establishment of CSR Risk proaches
Free Sourcing and Investment Zones™.
Exploration of opportunities and solutions through
The NRSCM exploration phase is critical to defining the scope of an RSCM 3.0 approach
the issues corporations are presently facing in regard to their current
RSCM approaches, as well as an opportunity to become familiar and RSCM and its PR and risk management value
comfortable with the suggested approach; RSCM 3.0 (For more on
this see Concept Note). This concept forms the foundation and point Input from keynote speakers who represent im-
of departure for NRSCM, including the exploration phase and subse- portant stakeholders for the development of pilot
quent pilots. projects, as well as experts in the field
TENTATIVE AGENDA FOR MEETINGS Identification of possible geographical areas for pi-
The following is an outline of the tentative content for the three meet- lot project(s)
ings of the exploration phase. GLOBAL CSR will facilitate all of the
meetings and be in charge of several workshops and presentations.
Lunch and refreshments are served at all meetings and on the evening
of the first day of each meeting a joint dinner will be organised for the
EXPLORATION FIRST MEETING
DAY ONE (10 AM – 5 PM)
Agenda for Meetings General introduction to NRSCM and the six months In-depth description of the RSCM 3.0 process:
exploration phase (GLOBAL CSR) The role of corporations, what to do and when to do it,
the phasing in and out of RSCM 1.0, 2.0 and 3.0.
RSCM 3.0 - purpose & concept (GLOBAL CSR) (GLOBAL CSR)
Short presentations on corporation opportunities and Short presentation on the costs of RSCM, nature of
challenges with responsible sourcing impacts, experiences with government cooperation
(corporation representatives) (corporation representatives)
Opportunities and challenges in existing RSCM 1.0 & RSCM Round table discussion
2.0 approaches (GLOBAL CSR)
Communication and RSCM: The PR value and, risk and
Round table discussion on general trends and challenges issue management potential of RSCM 3.0 pilot projects
Mitigation of identified challenges (GLOBAL CSR)
Short process description of RSCM 3.0 (GLOBAL CSR)
DAY TWO (9 AM – 2 PM) DAY TWO
Keynote speaker on the relevance of RSCM 3.0 (government Keynote speaker (representative from possible pilot area)
Keynote speaker (donor representative)
Keynote speaker: RSCM 2.0 representative (E.g. Fair Labour
Association, Better Work (ILO), ETI, etc.) Round table discussion
Round table discussion Criteria for a geographic area for pilots (GLOBAL CSR)
Ideas and preferences for the facilitation of NRSCM What can corporations do to increase the probability of a
(GLOBAL CSR & corporation representatives) pilot’s success? (GLOBAL CSR)
EXPLORATION THIRD MEETING
PHASE Member corporations are expected to identify the level of ambition of
Agenda for Meetings How to work with RSCM 1.0 and RSCM 2.0 informed by their respective corporations between meetings. After each meeting, cor-
the alternative of RSCM 3.0: How to improve what poration representatives will also be asked to look into certain aspects of
corporations are already doing, including possible scenarios their RSCM approach, or prepare a short presentation, which will be used
during the subsequent meetings. GLOBAL CSR will compile a report after
Panel debate, including guests from the UN Global each meeting, which will be made available to participants, allowing you to
Compact and government representatives share knowledge gained throughout the meetings with your colleagues
(possible pilot area) and management. Furthermore a members’ forum will be available on the
website to encourage and facilitate interaction between members and
(ONLY FOR CORPORATIONS WHO ARE INTERESTED IN
CONTINUEING WITH A PILOT PROJECT)
Division of corporations into smaller groups
Discussions leading to final identification of pilot project areas
The geographical area could be an entire country (small),
a state, a province, a large city or even confined to, e.g. a
country’s ‘free trade zones’ (hereinafter referred to as the ‘area’).
NRSCM members deciding to launch pilots can do so together
with other members of the group or individually, in which case
multiple initiatives will be formed and new corporations are
recruited to form part of the pilot project(s).
TENTATIVE The RSCM 3.0 Pilot Projects follow the six months of explorative
work of The Network for Responsible Supply Chain Management
ENGAGING IN AN RSCM 3.0 PILOT
Taking part in a pilot is possible for participants from the exploration
PROCESS (NRSCM). Below, GLOBAL CSR has outlined a tentative process
description for the pilots.
phase, as well as corporations new to the concept. A corporation’s par-
ticipation in the process can vary, in accordance with variations in levels
DESCRIPTION of ambition and the resources available to the individual corporation.
Nevertheless, the corporation’s main tasks concern the identification of
Pilot Phase a pilot area and corporate partners; as well as the co-signing of letters
written to authorities and donors.
BENEFITS FROM JOINING A PILOT However, the more you engage, the more your corporation can benefit
from the advantages of creating best practice RSCM and good rela-
Cost savings when phasing out previous RSCM tions with governments, NGOs, and other stakeholders in the country
processes you source from or invest in. Your supplier or investment may enjoy the
opportunity to be acknowledged as best practice during the initiative.
Increased supply chain management efficiency and Participation creates the foundation for networking and gaining access to
sustainability international and local knowledge and increases opportunities to brand
the corporation on breakthrough RSCM practices.
Better relations and increased trust with suppliers
and local authorities NRSCM COMMUNICATION
During GLOBAL CSR’s facilitation of pilot projects both internal and
Improved business environments in supplier or external communication components will be available to corporate
host countries partners. These services include:
Improved risk management Website explaining the concept, featuring members and partners,
feeding up-dates on project status, graphics, photos, short videos, PDF
Access to knowledge and enhanced networks booklets, member forum, etc.
Increased ability to handle criticism in relation to Sustained presence in social media such as Twitter and Facebook.
Readymade materials for distribution by member corporations, such
Increased opportunity to brand your corporation as graphics, PDF booklets, web pages, newsletter inserts, press releases,
on ‘leading edge’ CSR processes magazine articles, photos, video interviews, reports, explainers, etc.
Increased opportunity to leverage your supplier’s Proactive press contact, press releases, magazine articles, media pres-
or investment’s CSR performance ence.
Comprehensive documentary (if viable).
TENTATIVE THE THREE PHASES OF A PILOT
An RSCM 3.0 pilot process can be expected to take place in the three
PROCESS phases outlined in the figure below. The following describes in greater
detail a possible RSCM 3.0 process for a corporation.
PHASE 1: ESTABLISHMENT
PHASE 2: IMPLEMENTATION
PHASE 3: EVALUATION
AND KNOWLEDGE SHARING
TENTATIVE 1 THE ESTABLISHMENT PHASE
The first phase of the project is concerned with establishing and pro-
VERIFY GEOGRAPHICAL AREA
PROCESS moting the project. The purpose is to create a positive environment,
where local authorities, donor agencies and if appropriate, NGOs, em- A pilot project will be led by either one corporation who takes lead or
DESCRIPTION ployer and employee associations, and more stakeholders all commit a group of corporations who initiate a pilot together.The corporation/s
to the task. The following provides an overview of the activities in- will have identified three geographical areas during the exploration
Pilot Phase volved, the expectations and input needed from corporations, as well phase, from which they are sourcing or in which they have investments
as a description of services provided by GLOBAL CSR during this of some scale.
GLOBAL CSR will make a preliminary screening of the three sug-
gested areas for a pilot project thereby assessing, which of the three
areas has the largest probability of becoming a success.
The evaluation criteria include the size of the economy in question,
the levels of economic development, international trade, governance
(human rights, incl. labour rights; environmental protection; corruption),
political stability, labour market development, and not least, whether
the local political leadership can be expected to commit to achieve
sustainable development for the business environment.
ESTABLISHING CORPORATE PARTNERS
The ideal number of corporations participating in a pilot project is
around six; creating sufficient leverage while enabling smooth collabora-
tion and communication.
GLOBAL CSR can assist in the identification of partners for the pilot
project, by producing a brief to possible corporate partners, including a
letter of commitment and not least the business case or motivation for
the participation of potential partners.
Corporation/s comment on and add to the motivational brief. Some
of the arguments for the business case are outlined above. They will be
modified to reflect the nature of the participating corporations and the
situation of the geographical area in question.
TENTATIVE Subsequently, GLOBAL CSR, in collaboration with the lead corpora-
tion, will identify possible corporate partners that source or invest of
Key indicators on governance in relation to social, environmental
and economic sustainability regarding the business sector, are approved by
PROCESS scale in the chosen area while being committed to CSR. the partners and discussed with key stakeholders, such as DAs.
DESCRIPTION Input is coordinated by GLOBAL CSR. If necessary, GLOBAL CSR
will visit the potential partner corporations to create commitment ASSESSMENT OF AREA
Pilot Phase and ensure such partners’ participation in cost sharing. As an alterna-
tive GLOBAL CSR will convene a meeting between potential part-
ners. After the successful screening and consequent selection of an area,
local authorities are engaged and commitment is achieved.
LETTER OF INTRODUCTION TO LOCAL AUTHORITIES GLOBAL CSR then performs an ‘assessment study’, which implies
assessing the commitment of local authorities, the level of existing
protection, local competences and resources, identifying the most
GLOBAL CSR prepares a letter of introduction addressed to the relevant important stakeholders and which donor organisations function in
authority of the chosen area. the area. Furthermore, GLOBAL CSR assess their appreciation and
requirements, as well as which organisations and people should take
The partner corporations read and comment on the letter of introduction. responsibility for implementation, identify primary risks, challenges
The letter of introduction is co-signed by CEOs or other senior executives of
the participating partners. The assessment study will be conducted by means of two visits to
the area concerned. The aim is to enable local authorities and pos-
sibly other stakeholders, to gather information and make own addi-
DEVELOPING THE KEY INDICATORS NECESSARY FOR A tional assessments in between visits from GLOBAL CSR, so that the
GEOGRAPHICAL AREA TO ACHIEVE THE STATUS AS CSR RISK quality of information gathered is increased. It is paramount for the
FREE SOURCING AND INVESTMENT ZONE TM preparation of a capacity development project to first establish the
baseline and key indicators for measuring management capacities of
local authorities, in relation to CSR.
The objective of the pilot projects is to establish CSR Risk Free
Sourcing and Investment ZonesTM. The key parameters reflecting
adequate governance of social parameters (human and labour ESTABLISHING A BASELINE FOR PROJECT MONITORING
rights), environmental parameters (precautionary principle, basic
responsibility, and new technologies) and economic parameters
(anti-corruption) need to be established, in order to secure trans- The baseline will consist of established, and time bound indicators relating to
parency and ownership by the local authorities. project objectives. Indicators include process and impact.
TENTATIVE EVALUATE LOCAL REGULATION AGAINST INTERNATIONAL
DESCRIPTION Based on the assessment of coherence between local regulations and in-
ternational standards for business conduct (based on the minimum criteria
Pilot Phase derived from the UN Global Compact principles) changes are suggested.
DEVELOPMENT OF PROJECT APPLICATION FOR DAs
GLOBAL CSR facilitates the development of a project application by
the government or local authorities. Partner corporations participate
in the application by showing their support and commitment to the
The development of the project application(s) is expected to last
approximately three months. The visits and collaboration will also in-
clude capacity development with key personnel from implementing
organisation(s) and key stakeholders. It is possible that applications will
be forwarded to more donors or a coalition of donors.
Corporations will read and comment on the Draft Project Application
ENSURE SUPPORT AND COMMITMENT FROM DAs
Converting the project application into an actual project supported by one
or more DAs.
TENTATIVE 2 THE IMPLEMENTATION PHASE
The second phase of the pilot project concerns the actual implemen-
CAPACITY BUILDING OF LOCAL AUTHORITIES
PROCESS tation of the project, which is anticipated to last three to five years,
depending on the existing capacity and governance level. In this phase, DAs will develop local state capacity to carry out monitoring and en-
DESCRIPTION local authorities become key actors as they own the project and thus forcement of regulations compatible with international standards.
follow the implementation of the RSCM 3.0 pilot project through.
The role of corporations in the implementation phase is not expected CAPACITY OF BUSINESS-, WORKERS ASSOCIATIONS AND
to be as extensive as in the establishment phase. Hence, the engage- OTHER KEY STAKEHOLDERS
ment of a corporation can vary depending on the resources that the
individual corporation wishes to devote to the project. It may involve
contributing in kind (e.g. products, systems, training or other services) Where relevant DAs will develop capacity with business- and workers
or financial contributions to capacity development in relation to au- associations and other key stakeholders who play a central role.
thorities, existing suppliers or investments (as best practice examples)
or other stakeholders.
DOCUMENTATION OF PILOT PROCESS
Exactly how the RSCM 3.0 pilot project will be implemented in the
given area and which government or donor representatives will be the
responsible parties depends on the project application developed in GLOBAL CSR will follow the process and document challenges and
cooperation with the local authority. However, the implementation will opportunities and key learning points to be used for other pilots and
most likely include: the continuous improvement of the processes.
TENTATIVE 3 THE EVALUATION AND KNOWLEDGE-SHARING PHASE
The third phase of the project concerns the evaluation of the proj-
PROCESS ect. This will be a continuous exercise throughout the implementation
phase, as well as after finalising the implementation. External evaluation
DESCRIPTION is carried out as routine in most development projects from DAs.
Pilot Phase GLOBAL CSR will seek to ensure that the Terms of Reference for the
evaluation will enable key learning and knowledge sharing points are
collected, in order to allow comparison with RSCM 3.0 pilot projects
carried out in other parts of the world. This will increase the efficiency
for future interventions and facilitate adequate external communica-
tion to businesses, governments and other key stakeholders.
ROLES AND RESPONSIBILITIES
The purpose of the following table is to give an indication and over-
view of the intensity of the roles and responsibilities of the involved
parties in the pilot project, during the different phases and tasks. The
establishment phase has been developed most comprehensively, as it
is difficult to establish more clear roles at this time for the implementa-
tion and evaluation phase, due to the nature of these phases. The key
parties included in the table below are: GLOBAL CSR - main responsi-
bility during establishment phase; corporate partners – main responsi-
bility during establishment phase; local authorities/government – main
responsibility during implementation phase; DAs – main responsibility
during implementation and evaluation phases; other stakeholders, e.g.
local experts, associations, etc. – will take on responsibility at different
intervals, throughout the pilot.
TENTATIVE LEVEL OF ACTIVITY
DESCRIPTION ESTABLISHMENT PHASE
Final identification of
Pilot Phase geographic area
Verification of geographic
Identification of corporate
Motivational brief to
Receive commitment from
Write letter of introduction
to local authorities
Receive commitment from
Conduct assessment of
Establish baseline against which
progress in monitored
Evaluate local regulation against
Develop project application
Read and comment on
project applications for DAs
Ensure support and
commitment from DAs
IMPLEMENTATION PHASE NONE
Capacity building of local
Capacity building of business and
other key stakeholders
Documentation of pilot
To be determined
RESPONSIBLE So-called, sustainable or responsible supply chain management (RSCM)
emerged in the 1990s as an important part of the corporate respon-
Foreign Affairs suggests that existing approaches suffer from short-
comings and may indeed create a barrier to sustainable economic de-
SUPPLY CHAIN sibility (or corporate social responsibility - CSR) discourse. The latter
discourse has evolved considerably during the past few decades. More
velopment. Some of the main challenges identified in the study are
incorporated in the depiction of RSCM 1.0 and 2.0 below.
MANAGEMENT importantly, the core principles developed by the UN Global Compact in
the areas of human rights, labour, environment and anti-corruption; have RSCM 1.0: INDIVIDUAL CODES OF CONDUCT
The Concept gained support from major business associations, civil society organisations RSCM 1.0 is the most widespread approach to RSCM. This approach
and governments around the world. involves a corporation or institution developing a code of conduct
to describe the demands its suppliers are expected to meet. To en-
RSCM primarily emerged as a corporate response to social, environmen- sure compliance to the code of conduct (hereinafter Code), the
tal and economic risks appearing in suppliers’ operations; sweat shops, child corporation will often monitor and audit its suppliers. Regular visits
labour, corruption, environmental degradation and similar violations. Lack at suppliers’ premises by corporation employees trained to assess
of effective governance on these areas in the home state of the suppliers, suppliers’ performance in regard to Code requirements have be-
as well as pressures from stakeholders on the buyers to react have paved come common practice. In addition, some corporations require ex-
the way for RSCM as we observe it to be practised by corporations today. ternal auditing by independent third party CSR auditors; either pro-
Several corporations – buyers as well as suppliers – are currently realis- fessional audit firms like KPMG, PWC, Deloitte and Ernst & Young,
ing that existing approaches to RSCM (codes of conduct, monitoring, more specialized firms such as Bureau Veritas or NGOs.
etc.) may not have the desired effects and thereby work as expensive
and inadequate risk management. Rather, several surveys now indicate Corporations have leverage, economically and contractually, to-
that current approaches may have undesired side-effects causing multiple wards their suppliers; consequently they can exert influence to
problems for suppliers, buyers and local business communities. minimize their risks. In effect, corporate practices with Codes,
monitoring and auditing systems build parallel systems, which
This Concept Note describes the key challenges in current RSCM prac- substitute malfunctioning state governance. These systems are ex-
tices, addressing corporate responsibility risks in the upstream value chain erted with increased rigour, where lack of state governance on hu-
of corporations. In addition, it outlines an alternative approach to RSCM, man rights, environmental protection, and anti-corruption is most
dubbed RSCM 3.0, supplementing current RSCM approaches and eventu- profound.
ally substituting these. Nevertheless, the recent study on the challenges of RSCM 1.0 has
identified several concrete challenges. One of the most pervasive
CURRENT APPROACHES TO RSCM challenges of RSCM 1.0 relates to the concept termed ‘Code Ma-
Today there are several different approaches to RSCM. For the pur- nia’.
pose of clarification these can be divided into two main groups, de-
nominated RSCM Generation 1.0 and 2.0 (RSCM 1.0 and RSCM 2.0). Although the corporation Codes are very similar in content, the un-
Changing Course - A study into Responsible The following will outline what characterizes the two approaches and derlying monitoring and auditing standards tend to differ a lot. Demon-
Supply Chain Management by Søren Jeppe-
sen (Copenhagen Business School) and Sune the challenges related to each of them. strating compliance with all the different codes requires a lot of capac-
Skadegaard Thorsen (GLOBAL CSR), 2010, ity and extra costs amongst suppliers. In addition to traditional market
prepared for the Danish Ministry of Foreign
Affairs (Available for download at:
Current research1 undertaken by GLOBAL CSR and the Copenhagen denominators such as price, volume, delivery time, and quality the ad-
www.global-csr.com/publications.html) Business School (CBS) and partly financed by the Danish Ministry of ditional CSR requirements put a great deal of pressure on suppliers.
RESPONSIBLE Although buyers do not appear to track the exact costs of their RSCM
practices, the basic estimates point to the fact that ‘best practice’
SUPPLY CHAIN RSCM incur considerable annual costs. Compared to the effects on
the ground, which in general is poorly measured in terms of sustain-
The approach where each corporation develops,
MANAGEMENT monitors and audits compliance against its own
able impacts, RSCM 1.0, does not appear cost-efficient. Furthermore,
research indicates that the introduction of Codes in the supply chain
code of conduct
The Concept might not have the positive impact originally anticipated. Findings from
international studies suggest that positive impacts are often limited
in scope, reaching certain workers only (e.g., permanently employed
male workers), while excluding others (e.g., female, migrant workers).
Further limitations stem from the fact that current RSCM practices
only reach first tier suppliers.
Exclusion of SMEs
RSCM 2.0: SHARED CODES OF CONDUCT
RSCM 2.0 is in many ways an attempt to address the pitfalls of the
RSCM 1.0 approach. In RSCM 2.0 corporations abstain from having
their own individual Code and instead make use of a common Code,
Impacts limited in scope
e.g. a Code for an entire industry. Examples of this approach can be
found in Electronic Industry Code of Conduct (EICC) , Business So-
Limited to first tier suppliers
cial Compliance Initiative (BSCI), the Ethical Trading Initiative (ETI),
Social Accountability 8000 (SA 8000) and Fair Labour Association
Inadequate risk coverage in relation to hu-
(FLA). Even though many of these Codes are developed and sustained
through various partnerships (multi-stakeholder initiatives), the state is
not included as the key stakeholder.
Suppliers from developing economies are
often discriminated against
This approach provides clear advantages when compared with RSCM
1.0. It addresses the challenges of code-mania, as suppliers merely have
to comply with a single Code, and buyers can obtain economies of
scale via sharing the costs and experiences of monitoring and audit-
In particular, Small and Medium Sized Enterprises (SMEs) face the risk ing the suppliers. However, in reality, many suppliers still experience
of being pushed out of the global value chains, as they simply do not becoming subject to several RSCM 1.0 and RSCM 2.0 codes simulta-
have the money and/or the human capacity to demonstrate compli- neously.
ance with the numerous different standards. Often it is not possible
for suppliers to implement all code requirements at the same time In addition to creating common Codes, many RSCM 2.0 initiatives also
because of conflicting monitoring or auditing standards (e.g. one pre- shift focus from only monitoring compliance to also building supplier
scribes red emergency exits, while others prescribe yellow). capacity. Often a common “clearing house” is established to take care
RESPONSIBLE of monitoring and accreditation of suppliers. The focus on building ca-
pabilities/capacities instead of strict “pass or fail” audits contributes to a
Finally, present RSCM 1.0 and 2.0 approaches tend to discriminate sup-
pliers based on size and on country of origin. Suppliers from economic
SUPPLY CHAIN higher degree of sustainable development than RSCM 1.0. Neverthe-
less, capacity building in RSCM 2.0 poses a challenge to both corporate
developing countries are discriminated against as they often continue
to be regarded as higher risk than the economic developed country
MANAGEMENT risk management and sustainable development. Corporations, who suppliers; due to the mere fact of their national origin. Smaller suppli-
provide capacity building for suppliers, often have no experience with ers are also considered a higher risk than larger suppliers or; the larger
The Concept such issues and often only focus on the areas they personally identify suppliers are considered ‘risk free’ and hence not in need of being
as important. The knowledge they provide to their suppliers does not monitored. The act of determining which suppliers to engage with is
ensure implementation, as suppliers lack the financial and management thus biased.
resources to do so. Thus, capacity building in RSCM 2.0 guarantees
neither proper risk-aversion nor sustainable development in the local
business community of the supplier.
While RSCM 2.0 approaches address some of the pitfalls of RSCM
1.0 approaches, they do not address all challenges. Most RSCM 2.0 RSCM 2.0
codes of conduct limit themselves to first tier suppliers. The re-
sponsibility of the sub-suppliers to comply with the Codes is placed Industry or multi-stakeholder initiatives which
on first tier suppliers only. Limiting the Codes to first tier suppliers include capacity building of suppliers
reduces the degree of risk management. Furthermore, SME sup-
pliers continue to face the risk of exclusion because of the costs of CHALLENGES
certification and the rigorous and extensive nature of the underlying
Code standards. Limited to first tier suppliers
Both RSCM 1.0 and 2.0 models appear to inadequately cover human Inadequate risk coverage in relation to human
rights, including labour rights. John Ruggie, UN Special Representative rights
of the Secretary-General (SRSG) for Business and Human Rights,
explicitly points to the fact that corporate risks appear in relation to Exclusion of SMEs
all rights included in the International Bill of Human Rights. Thus, ade-
quate risk management would entail that all human rights are includ- Integration of capacity building components
ed in the Codes against which suppliers are being assessed. However,
most Codes are restricted to, or address only seven or eight human Suppliers in developing economies are often
rights; i.e. freedom of association, child labour, forced labour, non- discriminated against
discrimination, maximum working hours, minimum wages, degrading
treatment and safe and healthy working conditions. In response, the Contributing to code mania
UN SRSG will establish some key principles for human rights due
diligence requirements for corporations. If RSCM approaches do not
fulfil these key principles they may risk becoming outmoded.
RESPONSIBLE RSCM 3.0: ADDRESSING THE CHALLENGES OF RSCM 1.0 AND 2.0
The proposed RSCM 3.0 model represents a shift in approach, com-
challenges arise in relation to enforcement. Many governments in
economic developing countries do not have the will or resources
SUPPLY CHAIN pared to RSCM 1.0 and 2.0. Whereas RSCM 1.0 and 2.0 focus on
individual value chains, RSCM 3.0 focuses on creating CSR Risk Free
to build such capacity; but DAs have for decades been engaged in
and willing to support this work.
MANAGEMENT Sourcing and Investment ZonesTM in a demarcated territory. In the
outset of integrating the RSCM 3.0 approach, RSCM 3.0 will act as
The Concept a supplement to RSCM 1.0 and RSCM 2.0, which will eventually be
phased out. Thus, there will be a period where RSCM 1.0, 2.0 and 3.0
will unfold simultaneously.
The development of CSR Risk Free Sourc-
ing and Investment ZonesTM, through geo-
RSCM 3.0 introduces a partnership approach, where the creation
graphically determined partnerships be-
of partnerships between international buyers and primarily local
tween key actors – international
authorities are the target group. International Development Agen-
buyers, local state authorities, and donor
cies (DAs) will be facilitators on the process, but only by invitation
from the local authorities (state, region or district). Depending on
existing governance structures, local businesses, labour and em-
ployers’ associations, civil society and other stakeholders will be
Build local state capacity to carry out mon-
involved as well.
itoring and to ensure compliance with in-
ternational standards derived from the UN
The vision of RSCM 3.0 is to build CSR Risk Free Sourcing and
Global Compact principles.
Investment ZonesTM, from which international buyers can source
without the risk of their suppliers being involved in any kind of
Create areas from which international
violations of internationally agreed standards, derived from the UN
buyers can source without the risk of their
Global Compact principles. By having these CSR Risk Free Sourc-
suppliers being involved in any kind of viola-
ing and Investment ZonesTM, buyers can gradually cut down their
tions of internationally agreed standards.
spending on monitoring suppliers and creating Codes.
Build supplier capacity to improve prac-
A key difference between RSCM 1.0 and 2.0 and RSCM 3.0 is the
tices and working conditions.
crucial inclusion of the state.The inclusion of the state acknowledges
that the duty to protect against human rights violations from busi-
ness lies with governments; similar to international requirements
on environmental protection and eradication of corruption. Hence,
the RSCM 3.0 approach abstains from building competing paral-
lel structures to the traditional state-society relation and rather The establishment of CSR Risk Free Sourcing and Investment ZonesTM
seeks to enable the state to carry out its duty and to enforce its requires the building of local state capacity in order for the local state
legislation. Adequate legislation ensuring that international obliga- to carry out monitoring processes. In addition, ensuring compliance
tions are adhered to is already in place in most countries. However, with local regulations that become internationally compatible, such
RESPONSIBLE activity can be combined with building and enhancing authorities’
skills, for buyers to continue their efforts on building suppliers’ ca-
3.0 efforts and from gaining a more informed approach to RSCM.
Finally, RSCM 3.0 efforts can help explain lack of further invest-
SUPPLY CHAIN pacity to improve performances. Buyer corporations have a great
opportunity to create leverage with local state authorities since
ments in RSCM 1.0 and 2.0 approaches.
MANAGEMENT their willingness to source from, or invest in a specific geographi- The terms RSCM 1.0, 2.0 and 3.0 might lead readers to expect that
cal area, is of great economic importance for the local context. the three approaches function stepwise. However, buyers need not
The Concept Thus, buyer corporations’ role in RSCM 3.0 is primarily to motivate start by practicing RSCM 1.0 then upgrading to RSCM 2.0 and so
local authorities to commit, plan and execute the establishment of forth. Furthermore, the terms 1.0, 2.0 and 3.0 do not indicate that
the CSR Risk Free Sourcing and Investment ZonesTM. Where pos- RSCM 3.0 is the most difficult approach of the three. However, shifting
sible and appropriate, buyer corporations can also encourage own from RSCM 1.0 and 2.0 to RSCM 3.0 may pose a challenge; corporate
suppliers and business associations to constructively participate in management, systems established and professionals taking care of the
the capacity development. The state-capacity building component systems will need time to adapt to a new approach; also, the risks that
is in alignment with the approach of many DAs. Thus, it should be previous systems tried to address still exist and call for mitigation. Thus,
in the interest of the DAs to provide financial, as well as technical change will not be made overnight. It is to be expected that buyer cor-
support, to the development of CSR Risk Free Sourcing and Invest- porations will engage in a period of transition where traditional RSCM
ment ZonesTM. approaches are continued and gradually phased out, while capacities in
relation to RSCM 3.0 are being built.
RSCM 3.0 has the potential to provide buyer corporations with
a long-term and sustainable solution to CSR risk management in
relation to suppliers’ conduct. The approach answers key challeng-
es to the RSCM 1.0 and RSCM 2.0 approaches, as identified above.
In addition, the geographical focus answers the challenge which all
buyer corporations face; the expectation from stakeholders to ad-
dress all tiers of suppliers in their efforts to ensure that basic stan-
dards are met; a ‘mission impossible’ when adopting RSCM 1.0 or
2.0 approaches. In addition, international buyers can look forward
to saving considerable costs with time by shifting to an RSCM 3.0
approach. Corporation expenditures will be limited to a share of
the initial phase of an RSCM 3.0 project and will cease completely,
if so desired, once capacity building financed by DAs starts with the
authorities. If the international buyers wish to maintain a stronger
link to the project, they could choose to participate with in-kind
contributions or the coverage of pre-defined costs during the im-
plementation phase. The establishment of CSR Risk Free Sourcing
and Investment ZonesTM is a long-term project, making RSCM 3.0
an initial supplement to current approaches. Buyer corporations
can, however, benefit from day one by communicating their RSCM