What are the development opportunities and ethical responsibilities for MNCs working with global supply chains today? These topics were the focus of a recent presentation at the Center for Strategic and International Studies (CSIS). The panel discussion featured CREATe.org’s President and CEO Pamela Passman and Ben Heineman, Senior Fellow at the Belfer Center for Science and International Affairs, Harvard University.
Heineman opened the discussion with insights from his High Performance with High Integrity framework. Focusing on ‘high integrity,’ he believes that big multinationals have an obligation to do three things with respect to labor markets and offshoring:
- Develop and enforce labor standards within suppliers. An important first step is to qualify suppliers and also make sure they are enforcing labor standards, at a minimum to local law (i.e., non-discrimination, child labor, minimum wage, limits on hours of work, health and safety, etc.). These actions should be followed up by audits to re-qualify and ensure compliance to standards. He recognized that it’s quite difficult to manage, particularly in remote and developing regions; and also incredibly complex and nuanced by local cultures.
- Ensure safety and quality standards in products. He argues for going beyond what the local law requires and suggests taking ownership of product quality assessments. Each company needs to take on the role of ‘regulator’ because ultimately the corporate reputation is at risk and there is a moral responsibility to ensure product safety.
- Be responsible with employees in home countries. When offshoring and outsourcing, companies should take concern with local employees who are losing their jobs. For large companies, this involves proper severance packages, training and outplacement services; and smaller companies should turn to government programs such as the Trade Adjustment Assistance (TAA).
Passman discussed how CREATe was founded to drive responsible business practices in global supply chains. She highlighted a major issue today: the rule of law and local enforcement have not kept pace with the economic growth of emerging economies. She acknowledged that there are good laws on the books however the local enforcement of laws is very limited. Also, the rules-based trading system is not addressing adequately these issues either.
Today, we’re seeing increases in the misappropriation of trade secrets (the topic of CREATe’s recently launched white paper), a rise in corruption and counterfeit products, which are estimated to be valued at $250 billion/year. On the topic of counterfeits, Passman discussed how they are on the increase across every sector– in pharmaceuticals, auto parts, chemicals, pesticides and even seeds. She shared that in a Congressional hearing last year it was reported that there were 1800 cases of counterfeit electronics in U.S. weapons systems covering more than 1 million suspect parts; and in the semi-conductor industry, counterfeits have cost 11,000 jobs in the USA.
To close, Passman spoke about the offering being developed by CREATe.org: first, a set of Principles which define the issues and commitments by MNCs and suppliers to protect IP and prevent corruption; and second, process-based tools and performance measures that are cost-effective, easy to implement and credible.
If you’d like to hear the full presentation, check out the podcast.