Document Sample
					                              THE NETWORK FOR


                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-
                              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: 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-
                                                                                                                READERS GUIDE
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

         Pilot Phase

       The Concept

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

                      DAY ONE (10 AM – 5 PM)
                                                                                   SECOND MEETING
                                                                                   DAY ONE
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
                                                                                   (GLOBAL CSR)
                      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)

                      DAY ONE
                                                                                              BETWEEN MEETINGS

      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

                      DAY TWO

                      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).

    Pilot Phase

  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.
                          supplier conduct
                                                                                     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).

                  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.
    Pilot Phase

                                 PHASE 1: ESTABLISHMENT

                               PHASE 2: IMPLEMENTATION

                               PHASE 3: EVALUATION
                             AND KNOWLEDGE SHARING

                  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
                                                                                                  and opportunities.
                  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.

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.


                  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
                  for DAs.


                  Converting the project application into an actual project supported by one
                  or more DAs.

                  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.
    Pilot Phase
                  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.

                  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.

                  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

   PROCESS                 Activity

DESCRIPTION                                            ESTABLISHMENT PHASE
                       Final identification of
    Pilot Phase           geographic area
                    Verification of geographic
                    Identification of corporate
                       Motivational brief to
                       corporate partners
                    Receive commitment from
                       corporate partners
                   Write letter of introduction
                       to local authorities
                   Receive commitment from
                        local authorities
                     Conduct assessment of
                         chosen area
                  Establish baseline against which
                      progress in monitored
                   Evaluate local regulation against
                       international standards

                   Develop project application

                     Read and comment on
                   project applications for DAs
                       Ensure support and
                     commitment from DAs

                                                       IMPLEMENTATION PHASE                            NONE
                    Capacity building of local
                           authority                                                                   LOW
                  Capacity building of business and
                      other key stakeholders
                     Documentation of pilot
                                                        EVALUATION PHASE

                        To be determined
                                                                                                       AS DESIRED

    The Concept

     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-         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’
                                              RSCM 1.0
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).
                          Code mania
                                                                                           Further limitations stem from the fact that current RSCM practices
                                                                                           only reach first tier suppliers.
                          Cost effectiveness

                          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
                          man rights
                                                                                           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.

                  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
                                                                                                                       RSCM 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-
                                                                                                                    KEY OBJECTIVES
                  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

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