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Corporate Social Responsibility
News
4.07.2004 ET
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New Report Finds Many UK Companies Struggling To Demonstrate Effective Management Of Supply Chain Labour Standards
(CSRwire) UK - Insight Investment and AccountAbility today publish the first
comprehensive report that compares UK companies' management of supply
chain labour standards.
Gradient: promoting best practice management of supply chain labour
standards analyses in-depth, 35 FTSE 350 companies, in six sectors
which tend to have extensive developing country supply chains: general
retailers, food and drug retailers, food producers, telecommunications,
tobacco and beverages. (See www.gradient-index.net).
The results indicate that, according to their publicly reported
information, most companies are not managing supply chain labour standards
according to emerging best practice. In fact, many fall significantly
short.
Key results- Marks and Spencer stands out with the highest
score of 84 percent - placing it significantly above the next-best
performing company - demonstrating what can be achieved in the management
and reporting of labour standards in supply chains.
- Thirty-one of the 35 companies scored below 50% overall; sixteen
scored below 25 percent. Clearly, many companies are a long way from
achieving best practice.
- Within each sector the leaders were:
- Food and drug retailers:
J Sainsbury
- General retailers: Marks and Spencer
- Telecommunications: BT
- Food producers and processors: Cadbury Schweppes
- Tobacco: British American Tobacco
- Beverages: Diageo
Based on companies' own reports on
corporate responsibility issues, the study offers an indication of how
well UK companies are managing the risks and impacts associated with poor
labour standards in their supply chains. It is the first study to compare
companies' performance within their sectors, on this, one of the most
critical emerging corporate responsibility issues.
Given the growing maturity of corporate responsibility reporting, and
increasing complaints from companies about receiving lengthy
questionnaires from investors and rating agencies, Insight and
AccountAbility opted to use only information published by companies on
this issue. In part, therefore, the report is a measure of whether
corporate responsibility reports can be used by stakeholders to provide a
reliable basis for comparing company performance.
Other key findings include:- Thirty-one of the 35 companies
recognise the importance of ethical, environmental and social issues to
their businesses.
- Fourteen companies either do not disclose a supply chain labour
standards policy or code, or have a weak code that does not reference core
ILO conventions.
- Only one company - Marks & Spencer - reports that it aligns staff
incentives to performance on these issues.
- Twenty-six companies have declared a commitment to auditing programmes
in their supply chains, though only eight commit to auditing the full
supply chain.
- All members of the Ethical Trading Initiative (ETI) included in the
study scored relatively well; taken as a group, their average score is
45%.
- The food retail sector achieves the highest average score.
- Beverage and tobacco sectors score most poorly overall.
Companies
were assessed according to a range of criteria, developed by
AccountAbility, relating to governance and risk management, policies,
resource commitment, stakeholder engagement and auditing suppliers.
Percentage scores were then calculated and companies ranked within their
sector.
Insight and AccountAbility undertook this research in the belief that it
will help companies to improve their management and reporting of labour
standards in their supply chains.
Rachel Crossley, director of investor responsibility, Insight Investment,
said, "This study indicates that many UK companies fall well short of best
practice management of labour standards risks in their supply chains. At
best, companies are failing to inform stakeholders adequately about their
management of the issue; at worst, several companies have a long way to go
before they can demonstrate that these risks and impacts are being managed
effectively.
"Some companies may be exposing themselves to potentially significant
reputational and operational risks in the long-term by not addressing this
issue effectively. Insight will use the information from this study to
extend its engagement with these companies, by encouraging them to meet
best practice on reporting and managing supply chain labour standards
risks."
John Sabapathy, senior research manager, AccountAbility, said, "This study
underscores the variation in different sectors' engagement with this
complex and challenging issue. In particular we hope that our focus on how
mainstream business functions interact with the management of supply chain
labour standards will support joined-up approaches throughout companies.
Aligning these activities helps companies not only to manage labour
standards in factories but also enables them to maximise the operational
efficiency of different parts of their business."
All companies involved in the study were invited to provide input to the
research process. Final results were presented to participants at a
seminar to launch the study prior to its publication.
Notes to editors
1. To access the report, please go to: www.gradient-index.net, which
provides further information about the Gradient methodology and an
interactive tool that allows users to change the weightings used in the
analysis.
2. The assessment was based on information available in the public domain
as at 5th September 2003.
3. The Ethical Trading Initiative (ETI) is made up of companies,
non-governmental organisations (NGOs), and trade union organisations
committed to working together to identify and promote ethical trade - good
practice in the implementation of a code of conduct for good labour
standards. www.ethicaltrade.org
4. Insight Investment Management Limited is the asset manager of HBOS plc.
Registered in England and Wales. Registered office 33 Old Broad Street,
London EC2N 1HZ. Registered no. 02111149. Authorised and regulated by the
Financial Services Authority.
Insight Investment manages funds for institutional and retail clients
across the full range of asset types - equities, bonds, property,
derivatives and private equity. Insight's assets under management as at
31 December 2003 totalled £69.7bn.
Insight Investment is part of the Insurance and Investment Division of
HBOS, together with Clerical Medical, Halifax Financial Services and the
HBOS general insurance businesses.
Insight Investment's web address is www.insightinvestment.com
Some of the companies mentioned in the report may have existing
contractual or other relationships with Insight and/or its affiliates.
Insight confirms, however, that the report has been conducted on an
independent basis and any such existing relationships have not influenced
the outcome of the report in any way.
5. AccountAbility is a leading international organisation committed to
promoting accountability for sustainable development. Established as a not
for profit organisation in 1996 by leading-edge practitioners, NGO's and
businesses, AccountAbility's mission is to promote accountability for
sustainable development.
AccountAbility provides effective assurance and accountability management
tools and standards through its AA1000 Series, offers professional
development and certification, and undertakes leading-edge research and
related public policy advocacy. AccountAbility has embraced an innovative,
multi-stakeholder governance model, enabling the direct participation of
its organisational and individual members who span business, civil society
organisations, and the public sector from different countries across the
world. www.accountability.org.uk
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