Responsible Supply Chain Management
Referenter: Linlin Liu and Chenxing Zhu
Background and Introduction 1
Presentation from KappAhl 3
Presentation from Vietnam Business for Sustainable Development
Discussion held by IEH 7
Responsible supply chain management:
How to improve human rights, labor rights and environmental aspects in the
Parallel session 24th Nov 2005 – 13.15 – 14.45
Content and Focus
There is substantial evidence that companies sourcing goods from low-income
countries are facing a great risk of human/labor rights abuses in their supply chain.
Thus, one very important aspect of Corporate Responsibility entails Responsible
Supply Chain Management. An increasing number of companies do this by adopting
so-called Codes of Conduct which puts requirements to the supplier on wages,
overtime, prohibition of child labor, workers’ rights to form and join trade unions,
health and safety conditions and alike.
Setting up a Code of Conduct is absolutely necessary, but only the first step towards
Responsible Supply Chain Management. This session will elaborate on what the next
steps should be. It will exemplify that Responsible Supply Chain Management is not
only applicable to large international companies, but also can and should be managed
by Scandinavian companies.
Because poor workplace conditions stems from many, and complex reasons,
successful Responsible Supply Chain Management goes far beyond brand and
reputation management. The session will also present how western companies can
work together with local partners in training factory management and workers to
achieve sustainable improvements in workplace conditions.
About the presenters and hostess
1) KappAhl is a Swedish fashion retailer with stores in Norway, Sweden, Finland
and Poland. KappAhl adopted a Code of Conduct in 1997. All KappAhl’s products
are manufactured by independent suppliers in Asia and Europe, for whom KappAhl
is merely one customer among many.
2) Vietnam Business Links Initiative (VBLI) is a Vietnamese initiated partnership
working to ensure sustainable improvement in workplace conditions in Vietnamese
footwear and textile factories. They provide training and capacity building both for
management and workers.
3) IEH, Ethical Trading Initiative- Norway (ETI-N) is a multiparty initiative involving
companies, employers’ organizations, trade unions and NGOs.
13.15 – 13.45 Ann-Marie Heinonen, CSR and Information Manager, KappAhl
13.45 – 15.15 Nguyen Quang Vihn, Director, Vietnam Business Links Initiative
15.15 – 15.45 Discussion hled by IEH :
“From Compliance Focus to Improvement Focus”
Background introduction: Supply chain and Supply chain management
A supply chain is a network of facilities and distribution options that performs the
functions of procurement of materials, transformation of these materials into
intermediate and finished products, and the distribution of these finished products to
customers. Supply chains exist in both service and manufacturing organizations,
although the complexity of the chain may vary greatly from industry to industry and
firm to firm.
Supply chain management is typically viewed to lie between fully vertically
integrated firms, where the entire material flow is owned by a single firm, and those
where each channel member operates independently. Therefore coordination between
the various players in the chain is key in its effective management. Cooper and Ellram
 compare supply chain management to a well-balanced and well-practiced relay
team. Such a team is more competitive when each player knows how to be positioned
for the hand-off. The relationships are the strongest between players who directly pass
the baton, but the entire team needs to make a coordinated effort to win the race.
”Value-for-money fashion with a wide appeal”
----KappAhl Business idea
1. Introduction of KappAhl
1. 1997 KappAhl imported a code of conduct based on ILO’s convention and
UN’s declaration on human rights.
2. All products sold by KappAhl are manufactured by independent suppliers in
Asia and Europe.1997 KappAhl bought from more than 1 000 suppliers.
3. The buyers were free to choose suppliers and purchasing markets.
4. KappAhl recognizes that it has a responsibility for working conditions in
those factories where its products are manufactured. All workers who produce
goods manufactured for and sold by KappAhl must receive a reasonable wage
and enjoy decent working conditions.
5. Now KappAhl has 250 stores in Sweden, Norway, Finland and Poland.
2. Action on supply chain management according to CSR
1. Reduce the number of suppliers and markets:
Now KappAhl only purchases from 170 suppliers.
2. Include the code in purchasing terms and negotiate the terms with all
3. Train staff in social auditing
4. Set up a data base for evaluation
3. Business Advantage of CSR
1. Purchasing strategy must be applied
2. Good and long lasting relations with suppliers
3. Create a “win-win” solution
4. Knowledge of production capacity with each supplier
4. Achievement of past years
1. Health and safety in factories are improved
2. “Basic Standard” of CSR has been set up
3. Product quality is improved
4. Knowledge of labor laws and regulations have been enhanced
5. KappAhl’s employees are proud of their CSR and environmental work
1. A dialogue with the supplier is far more fruitful than forced action plans
2. It takes time to implement all the CSR ideas
3. Change of attitude is crucial
4. There must be a cooperation and coordination of standards and codes
6. 2004 KappAhl becomes member of BSCI
(Business Social Compliance Initiative)
1) Auditing only does not improve conditions
2) Part of a European association gives strength to change attitudes
3) One code, one standard and one audit better for all parties
7. Cornerstones of BSCI
1) Internationally applicable social standard suitable for practical use
2) Flexible vis-à-vis companies’ philosophies
3) Dialogue with stakeholders
4) Transparency and independency through outside audit companies (to be
accredited by SAI)
5) Synergy and acceleration effects for all actors involved
6) Development of social performance of suppliers
2. Vietnam Business Links Initiative:
Vietnam Business For Sustainable Development
1. The social dimension of successful globalization
Co mpe titive ne s s
2) Why social standards?
- Workers seek decent workplaces and sustainable jobs to support their families
- Companies seek to gain a competitive advantage and financial benefits
through better social practices
- Governments seek to promote economic development which benefits all
members of society
- Consumers seek to make informed purchasing decisions
3) Multi-stakeholders’ engagement
Human Rights WORKERS SUPPLY CHAIN
CERTIFYING BODIES CONSUMERS
2. Vietnamese experiences with CSR
1) Vietnam Business Links Initiative (VBLI)
To assist footwear and apparel industries in achieving sustainable development
through Common problems
- OHS improvement: Establishing a OHS forum led by Vietnamese partners
- Environmental management
- CSR achievements: Improved awareness of the importance of health, safety
and environment issues in businesses
a) More attention is being paid by factory leaders
b) Positive change in awareness among OHS official and workers
c) Priority given to working condition improvement
2) CSR Round Tables
a) Raising awareness on CSR
b) Encouraging to apply CSR terms and articles at the workplace
- Contents concentrated on:
c) Strengthening communication
d) Providing recommendations to create enabling working environment
- Follow-up activities:
e) Carrying out specific measures to implement CSR and improve the
3) Business Office for Sustainable Development
Develop a Vietnam business community of sustainable development and
successful integration in 21st century, pioneering in:
a) Economic growth,
b) Social progress, hunger eradication and poverty elimination,
c) Environment protection
d) Make significant contribution to the success in sustainable development
of Vietnam business community
K- KappAhl, V: Vietnam Business Links Initiative, I: IEH hostess
Q1(1) What kind of support will KappAhl provide to suppliers during “transition
K: We don’t have a 3-year transition period. Our experts will go to the factories to
Q1(2) Then what happened after 3 year period?
K: We need a promise and showing a good will: we are improving. If there is no
interest of showing improvement, the supplier will be kicked out. As long as
improvement can be found, we will not give up. We have to cooperate with
suppliers all the way. When there are needs, we are there.
I: Therefore, there are continuous needs of help. We need supports from other
Q2(1) So far the discussion and the presentation have been leading us to labor
condition and ethical trading; but as to a responsible supply chain
management, which is also, where the focus are up to the environmental
aspects as to recycling and garbage sorting? Have you any focus on that on,
when you are making the product, discussions with the suppliers on what kind
of materials do we use, what is the effect for the Norwegian market afterwards
when those are being used here?
K: We have very much focus; we have joined ISO since 1991; we have assessment
for environmental questions for CSR; and we have assessment factory guide
which all the suppliers have to adhere to; and we have collaboration with
laboratories all over the world. Buyers, they pick what items to test, in what
order; random test for chemicals. All the garments are up to national laws over
Switzerland, Finland, and Poland. Apart from that, our own chemical
regulations are stronger than different countries;
Q2(2) So we can expect that produced clothes at KappAhl can be delivered pretest?
K: No problem. All the regulations follow the same standards, you can use baby
wear without washing it.
Q3 Nike published the list of all their suppliers. How strong do you think the
transparency will help in your influence?
K: We don’t want to do that. We have reduced our suppliers to170, and put money
on them. The list of suppliers is one of the best assets of the company. We don’t
want to show our treasure to our competitors. We disagree that audit will help.
It’s a transparency fashion.
I: The intention of showing the list is to say we are not shame of showing them,
instead of stimulating audit people to go there, which might be harmful to them.
Auditors just come and go away, without solving any problems; what really
help factories is the practical help, is improvement.
V: There are no perfect factories. Important thing is the company is committed to
improve the situation. While the audit just go away.
K: The worst factories were in London and Paris, not in Asia. Many people going to
visit the factories don’t know what to compare with.
Q4 Let’s look outside factories. What about Logistics, and Transportation.
K: We have been working on reducing the effect on climate, and try to transport
everything in most environmental friendly way. From Asia 90% of product are
transported by boats; 60% by train from Nordic countries (Finland and
Poland). We also demand all the transportation companies working for us have
to have environmental education for the drivers.
Q5 What are the 2 biggest challenges in improving labor conditions?
V: First is the awareness of the owners; second is Knowledge of how to improve.
K: Especially the awareness of the floor management, they are still shouting at the
workers; and, how to make it more efficient to reduce overtime working.
I: At least, ensure workers are paid for their overwork.