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

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.

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

AccountAbility

AccountAbility

AccountAbility is a global consulting and standards firm that works with businesses, investors, governments, and multi-lateral organizations to achieve opportunities, advance responsible business practices, and transform their long-term performance. We focus on delivering practical, effective, and enduring results that enable our clients to succeed.

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