Affecting change deep into the Supply chain

(Deconstructing the Adidas case study in “Walking the Talk” by Schmdhieny, Watts and Holliday)

What happens when a big influential multinational corporation like Adidas, a manufacturer of sporting goods, goes into local far flung corners of the world – in communities that lack infrastructure or even proper regulatory environment?

Upliftment of standards of living and economic conditions that enable such communities to pull them selves out of poverty is the first positive impact that occurs as a direct result of a large company going in.

So, the questions to ask are:

  • What’s the role of private sector as opposed to government in providing social, educational and health amenities?
  • How deep down the supply chain does a company’s responsibility extend?
  • How should it adapt to local cultures?

Historically, owners and companies have been playing their part in helping build the society in terms of housing, education etc. But with the surge of globalization,  a company can be based in Germany and have hundreds of suppliers making products for them around the world. In this scenario, companies have a much broader role to play in social responsibility.

Adidas Group: A catalyst for change through its supply chain

In 2005, the Adidas group acquired Reebok and sold Salomon  and its associated brands primarily because Salomon products required extensive own production – which is not the group’s core competency.

Any company that operates a complex and large chain of over 1200 independent factories in 69 different countries around the world (as of Dec 2010) has the potential to impact a lot of people and their families – it behooves upon the company whether to make that impact either positive or negative one.

Because of its external supply chain partners, it has relatively less control over conditions that prevail at suppliers factories.

Also read Being morally accountable in emerging markets – Role of MNC’s

To ensure that best practices are followed with regard to quality, on time delivery, worker health and safety etc., the company formed its ‘Workplace Standards” that helps lay a basic framework of reference to deal with issues such as fairness, compliance of labor laws, child labor, discrimination, wages, working hours and other disciplinary practices.

Since 1997, the group has in place the supply chain standards and tools that operate under the cornerstones of Standards and guidelines, Capacity building and outreach, Monitoring and Verification, Rating and Sourcing.

To achieve greater supply chain transparency, the company established a Fair Factories Clearinghouse (FFC) listing its factories that meet its standards.  The group currently has 7 guidelines in the areas of environment, sustainability, and employment among others, to basically do 2 things:

  • To determine whether a supplier is complying with its standards
  • To advise and train its suppliers to improve their own performance

So, what tangible changes take place due to a multi-national engaging deep into its supply chain?

Apart from the educational, medical and infrastructure programs in Pakistan and Vietnam and other community projects in supplier countries world wide, improvements in supply chain can decrease product’s time-to-market substantially, set benchmarks for the entire industry to follow, and enable suppliers to self-regulate and monitor.

A corporate social responsibility (CSR) program that entails supply chain as its major share of  footprint, offers companies a guide on how to approach their responsibilities and turn them into opportunities.

Please share your comments below.

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Trackbacks

  1. […] are not making their practices sustainable – they are. Nike’s Considered Design, Adidas’s ethical supply chains are great examples – but they do it because of an imperative – as a profitable business […]

  2. […] The scope of reach and operations of each of these mammoth global corporations drives home the point that the extended enterprise – its customers, governmental agencies, NGO’s, communities where their business footprint exists, and the biodiversity – is  highly woven in the fabric of their supply chain. […]

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