CSR has almost become a cliché and firms are adopting a more focused policy of responsible business conduct.
For businesses with supply chains in Southeast Asia, inspections have been regarded as a necessity.
However, with more firms adopting a policy of responsible business conduct (RBC), the role inspections is coming under greater scrutiny. Nordic businesses with suppliers in Asia are familiar with the need to regularly inspect factories or operations to ensure they meet all required compliance guidelines, both those set forth by the company and local governments. And while the findings of these inspections are widely accepted, this doesn’t mean they are an effective practice.
“There is no such thing as free compliance. There is always someone who pays. The ones paying for non-compliance today are the workers, the local community and the environment,” Ms Gunelie Winum, senior advisor at Responsible Business Advisors, states. “Inspections are not effective. Everyone focuses on inspections, but these don’t find the root cause of the issue. They only serve as a gap analysis,” Ms Winum notes.
She explains that ultimately this process does a disservice to both buyers and suppliers, especially in Southeast Asia where problems keep arising from a desire to keep prices low. In some industries, such as apparel or manufacturing, buyers place pressure on suppliers, which forces them to cut corners or ignore labour and human rights guidelines. Even if the issue turns up in an inspection, it can be difficult to establish why it occurred or how the problem can be rectified.
“There are cases where an inspection finds employees working excessive hours, but doesn’t find out why. In the consumer industry, buyers can be the cause of this because they require rushed orders which squeeze the lead time,” Ms Winum points out. “They may also put pressure on their suppliers by demanding lower prices. The suppliers must find ways to meet these requests and often the solutions infringe on labour rights unless there are systems in place to prevent it from happening.”
The social inspection industry is estimated to be worth USD 15 billion globally, but Ms Winum stresses its size shouldn’t be equated to its effectiveness. In fact, she believes that as the industry as grown, the more convoluted it has become.
One of the largest problems for suppliers is that preparing for inspections can be difficult if they work with multiple buyers. Each buyer tends to look for the same
things during an inspection, but there will be small differences in guidelines and protocol. Suppliers need to focus on what it takes to pass these inspections, neglecting other issues such as implementing safer labour conditions.
“For example, we found a factory in China had undergone 183 inspections in one year. Each inspection takes oneto-three days. This means they are basically being inspected all year round leaving little to no time to work on improvements,” Ms Winum details. Moving to RBC
There are a number of supply chain issues facing firms who have operations in Southeast Asia despite guidelines being set up by both companies and governments to eliminate these. Current problems include labour standards, non-regular employment and forced labour. The troubles vary depending on the industry. For instance, the fishing industry struggles with forced labour among migrant workers while the manufacturing industry has trouble maintaining standard labour conditions.
“Companies need to set clear guidelines on what is acceptable from their suppliers and follow up ensuring the guidelines are understood and followed. The understood part is what many businesses miss,” Ms Winum says. “Legislation and regulations are in place in most countries, but aren’t always followed by suppliers who may not understand these. It’s up to buyers to explain the guidelines to suppliers through training, dialogue and capacity building. Inspections alone cannot do this.” important with cases now being pursued by the Organisation for Economic Cooperation and Development (OCED). National contact points in OCED member countries have been set up for reporting violations of human or labour rights.
Ms Winum explains a Nordic company with suppliers in Southeast Asia must be compliant with all guidelines and regulations. If they are not, they can be reported via OCED contact points in their home country who will investigate these claims. The process is far from perfect, but she stresses it is a step in the right direction.
“Repercussions are slowly starting to happen and we will see more and more of this. If you have systems in place to prevent rights violations, you aren’t likely to be punished. But if you don’t have any systems to check, then you will likely face consequences,” Ms Winum states. The benefits of RBC
Responsible Business Advisors has helped firms from a wide-range of industries make the transition from being inspection and CSR based to RBC focused. The shift from inspections to stakeholder engagement, capacity building and a focus on good practices will require all parties to look at the business benefits.
“Suppliers can save hundreds of thousands of dollars by adopting decent work practices through the help of RBC,” Ms Winum says. “Buyers can benefit because their suppliers will have better reporting data. They will also save resources by eliminating inspections and being more engaged with their suppliers through open dialogue.”
With a dedicated team based in the 100 countries they operate, Responsible Business Advisors is able to work with suppliers continuously and bridge the gap between factories or operation hubs and buyers. Whether it be through online solutions that help improve factory management, worker engagement and reporting, or assisting with on-site capacity building, the firm is dedicated to working with all stakeholders.
“It really comes down to trust. Buyers and suppliers must trust each other and build a long-term relationship. Production management must trust in that engaging workers will benefit their business,” Ms Winum states. “RBC sees all parties involved and engaged in finding a positive solution since each one is invested in the process. This allows issues to be easily resolved and eliminated.”
She continues, “If you look at the big picture, adopting RBC is the only way to identify and eliminate human rights violations, labour issues or other problem that can occur along in own operations or in the supply chain. It is also the best way to create meaningful stakeholder engagement which leads to the tangible improvements all parties want.”
One should, however, not underestimate the complexity of human rights violations, environmental damages and other RBC issues. Current international guidelines strongly recommend the use of external expertise. Responsible Business Advisors is able to help companies implement RBC practices which ensure operations are kept in line with international norms and standards.
Drawing on broad experience in research and evaluations from the development field, Responsible Business Advisors also has the ability to find key performance indicators, monitor performance and impact, complete assessments and carry out other vital tasks that are in line with RBC.
“We encourage all companies to adopt RBC practices. This allows them to operate in ways that are good for business, the supply chain stakeholders as well as local people and the environment,” Ms Winum concludes.
Even with more women wanting to take on management roles and a national willingness to embrace inclusiveness, societal and family challenges must be addressed before it can happen.
Ms Torunn Aass Taralrud, who is Director of Innovation Norway Singapore and Commercial Counsellor at the Royal Norwegian Embassy in Singapore, has witnessed the situation in Singapore first hand. Before embarking on a career in Asia, Ms. Taralrud served as Innovation Norway’s Regional Director for South and Southeast Asia. She has many years of experience with management from her family business, as it grew from being a small local business to a medium-sized international business. She has served as board representative in both public and private companies, and mentored young leaders, especially young women with managerial aspirations.
There is a high ratio of female business leaders in many Asian countries. In your experience, is this also the reality in Singapore?
I have no official report that I can refer to, however, there is no doubt that there is a political and national will to facilitate for a more diversified labour market and increase the proportion of female executives and directors. Today, only 7 % of representatives in boards are women. However, the proportion of female executives is increasing, even in big companies. We find that the largest representation of women is in the banking- and public sectors. This is not so different from the general development we see in other countries.
If so, why is there relatively few female leaders in foreign/Norwegian companies in Asia? female business leaders in Asia?
There is a will to increase the proportion of female leaders. My impression is that there is an increasing number of women who have an ambition of becoming a leader and want a career in leadership. It is in general perceived as positive, though the traditional gender roles are still very much present in the perception of women as leaders. At the same time, the Asian culture is also characterized by an age hierarchy. It is probably more difficult for older workers to have younger leaders, regardless of whether they are women or men.
Are there any good reasons for women not to lead business operations in Asia?
Norway has one of the best welfare systems in the world. It allows both parents to have a career. The system secures the family economy and takes care of the practical issues such as childcare. In Singapore, the child’s mother is entitled to 12-16 weeks of maternity leave. There is no system that secures the right to proper childcare, so this must be organized within the home. In addition, many people also have old parents / in-laws, and it is expected that the family will take care them. This means that women to a large extent have to care for both their children and the elderly, with the result that their professional career is delayed. This is the main reason why women have fewer opportunities for a managerial career in larger companies. However, many women in Singapore choose to start their own business within sectors where you can have an office at home and with flexible working hours. This may be the reason why there is a relatively higher proportion of female managers in small businesses.