Understanding Supply ChainsUnderstanding Supply Chainsand CSRand CSR

Ruth Rosenbaum, TC PhDRuth Rosenbaum, TC PhDCREACREA

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Question: Who is Responsible?Question: Who is Responsible?

In many countries, local and national In many countries, local and national governments are responsible for the labor governments are responsible for the labor laws and the environmental laws under laws and the environmental laws under which factories operate and workers work.which factories operate and workers work.

BUT in many other countries, governments BUT in many other countries, governments do not govern to protect their people (the do not govern to protect their people (the workers and their communities) and the workers and their communities) and the environment. environment.

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CSR Tool: Shareholder ResolutionsCSR Tool: Shareholder Resolutions

Shareholder Resolutions have 2 purposes:Shareholder Resolutions have 2 purposes:

1. Inform investors about an issue or situation1. Inform investors about an issue or situation

2. Bring about change in company actions2. Bring about change in company actions

Reminder: Shareholder votes are leverage, nothingReminder: Shareholder votes are leverage, nothing more. They are not binding. more. They are not binding.

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Bringing about Change in Company Bringing about Change in Company in Policies, Programs and Practices in Policies, Programs and Practices

1. Many of the things we want changed are 1. Many of the things we want changed are not simple. Change requires time and not simple. Change requires time and workwork

2. To work with companies to bring about 2. To work with companies to bring about change requires knowledge and expertisechange requires knowledge and expertise

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Supply ChainsSupply Chains

Raw materialsRaw materials Processing of materialsProcessing of materials Production sitesProduction sites Assembly plantsAssembly plants Distribution locationsDistribution locations

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Cotton Supply ChainCotton Supply Chain

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Impact Across the Supply Impact Across the Supply ChainChain

OEMs

Tier 1 Factories

Sub-Tiers

Tier 1 HQ

Corporate-Level Engagement

Site-Level Trainings

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Question of ResponsibilityQuestion of Responsibility

When governments do not govern to protect When governments do not govern to protect workers and the environment, the question workers and the environment, the question arises: who has the power to create the arises: who has the power to create the standards under which factories and businesses standards under which factories and businesses operate?operate?

The whole system of Codes of Conduct, social The whole system of Codes of Conduct, social compliance programs, audits, etc. is needed compliance programs, audits, etc. is needed BECAUSE governments do not govern to BECAUSE governments do not govern to protect their people, their communities and the protect their people, their communities and the environment. environment.

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Power of the CorporationsPower of the Corporations

We require corporations to be accountable We require corporations to be accountable for this “governing” because:for this “governing” because:

1. They have the power to effect 1. They have the power to effect change.change.2. They benefit from the supply chains2. They benefit from the supply chains

Shareholders and consumers hold them Shareholders and consumers hold them accountable.accountable.

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Why we are interested in supply Why we are interested in supply chainschains

Years ago, companies owned and Years ago, companies owned and operated the factories and systems which operated the factories and systems which produced their products. produced their products.

They could decide and enforce the labor They could decide and enforce the labor standards within those factories.standards within those factories.

However even then, these companies did However even then, these companies did not produce the materials from which their not produce the materials from which their products were made.products were made.

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The Old Apparel IndustryThe Old Apparel Industry

Company X owned the factories and mills that Company X owned the factories and mills that manufactured their products. Even then, manufactured their products. Even then, however, they bought the buttons, zippers, however, they bought the buttons, zippers, thread, etc. from other companies. thread, etc. from other companies.

These other companies were their suppliersThese other companies were their suppliers However because these suppliers were However because these suppliers were

relatively local, the apparel company know how relatively local, the apparel company know how these other factories were being run. these other factories were being run.

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Supply Chains in Supply Chains in the Global Economythe Global Economy

Materials can originate almost anywhere Materials can originate almost anywhere in the world.in the world.

Assembly can take place almost any place Assembly can take place almost any place in the world.in the world.

In the apparel sector, a garment is marked In the apparel sector, a garment is marked “made in country x”. It is simple.“made in country x”. It is simple.

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EXAMPLE: There is nothing simple EXAMPLE: There is nothing simple about the Electronics Sectorabout the Electronics Sector

Electronic instruments, e.g. computers, can only Electronic instruments, e.g. computers, can only be marked “assembled in country x”.be marked “assembled in country x”.

Essentially the inside of any computer is like the Essentially the inside of any computer is like the United Nations.United Nations.

To illustrate the complexity of the Electronics To illustrate the complexity of the Electronics Supply Chain, CREA staff disassembled an old Supply Chain, CREA staff disassembled an old computer to see who made which components computer to see who made which components where.where.

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The ComputerThe Computer CD drive

Floppy Drive

Gateway computer

Intel Chip

CD/DVD writer

CaseFan

Power Supply

Ports attached to motherboard

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Once we go inside, we see…Once we go inside, we see…

Motherboard Wire harness

Power Supply

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Major Computer ComponentsMajor Computer ComponentsPower Supply

Hard drive

Floppy Drive

CD/DVD writer CD drive

Mother Board

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Complexities inside the ComponentsComplexities inside the Components

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And then there is the monitor…And then there is the monitor…

Gateway monitor

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But again, when we opened it…But again, when we opened it…

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Going deeper, we found…Going deeper, we found…

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Major Components Major Components

Hard drives:Hard drives: Seagate, Western DigitalSeagate, Western Digital CD/DVD drives: LiteonitCD/DVD drives: Liteonit Motherboards: Motherboards: Batteries: Maxell (Hitachi)Batteries: Maxell (Hitachi) Wire harnesses: LucentWire harnesses: Lucent Processor Chips: AMD, IntelProcessor Chips: AMD, Intel Memory (RAM):Memory (RAM):

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Major ManufacturersMajor Manufacturers

SeagateSeagate FlextronicsFlextronicsWestern DigitalWestern Digital Solectron SolectronLite-On-ItLite-On-It JabilJabilHitachiHitachi FoxconnFoxconnLucentLucent CelesticaCelesticaAMDAMD SCI SanminaSCI SanminaIntelIntel Elta ElectronicsElta Electronics

and others…and others…

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Supply Chain ExampleSupply Chain Example

Computer

Assembly

DVD/CD Hard disk Motherboard Wire HarnessOther

Components

Components

Capacitors Chips CircuitsMemory

With separate supply chains for the monitors, keyboards, mice, etc.

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What has the Brand Name on it What has the Brand Name on it is the result of the work is the result of the work

of many workersof many workersin many countries.in many countries.

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The Underlying ProblemsThe Underlying Problems

The labor issues found in any assembly The labor issues found in any assembly factory in any industry: wages, working factory in any industry: wages, working hours, etc.hours, etc.

Health issues related to:Health issues related to: Repetitive motion injuriesRepetitive motion injuries Exposure to solvents during assemblyExposure to solvents during assembly Exposure to other chemicals, including heavy Exposure to other chemicals, including heavy

metals, during assemblymetals, during assembly

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Environmental IssuesEnvironmental Issuesduring assemblyduring assembly

Exposure of workers to chemicals used in Exposure of workers to chemicals used in assembly processassembly process

Disposal of chemicals used during assembly – Disposal of chemicals used during assembly – possible environmental and community possible environmental and community contaminationcontamination

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Toxic Chemical Exposure Toxic Chemical Exposure during productionduring production

Many toxic substances are used during the Many toxic substances are used during the production of electronics components.production of electronics components.

These include, but are not limited to:These include, but are not limited to:brominated flame, retardants, cadmium, mercury, brominated flame, retardants, cadmium, mercury,

lead, tantalum, epoxy, copper, isopropyl alcohol, lead, tantalum, epoxy, copper, isopropyl alcohol, hexavalent chromium.hexavalent chromium.

Effects of exposure can include cancer, nervous Effects of exposure can include cancer, nervous system problems, brain damage, blood system problems, brain damage, blood diseases, etc. diseases, etc.

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Environmental IssuesEnvironmental IssuesDisposal Disposal

Disposal of plastics (non-biodegradability)Disposal of plastics (non-biodegradability)

Disposal of hazardous wastesDisposal of hazardous wastes

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RECYCLINGRECYCLINGrealities and questionsrealities and questions

Some computers are recycled to groups Some computers are recycled to groups and communities who are beginners on and communities who are beginners on computers.computers.

Basic computers differ only in terms of Basic computers differ only in terms of speed, storage space and RAM (think of it speed, storage space and RAM (think of it as desk top space)as desk top space)

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SoftwareSoftware

Different programs require different Different programs require different speeds, sizes of hard drives (storage) and speeds, sizes of hard drives (storage) and RAM (space for active working).RAM (space for active working).

As programs become more complex, the As programs become more complex, the computers needed to run them must be computers needed to run them must be more complex.more complex.

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Computer Operating Systems: Computer Operating Systems: Windows, et alWindows, et al

In addition, each operating systems In addition, each operating systems version, whether for Windows for Apple, version, whether for Windows for Apple, places demands on the speed, storage places demands on the speed, storage and RAM of the computers. and RAM of the computers.

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Effect on RecyclingEffect on Recycling

While some components are recycle-able, While some components are recycle-able, many are not, simply because computers many are not, simply because computers need the operating systems and software need the operating systems and software to run them. to run them.

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Types of RecyclingTypes of Recycling

ComponentsComponents Use of whole systems Use of whole systems

by groupsby groups Export of computers Export of computers

to developing to developing countriescountries

NOTE: This last NOTE: This last requires requires LOTS OF LOTS OF ATTENTION!ATTENTION!

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Recycled computers Recycled computers in developing countriesin developing countries

Many computers and components are not Many computers and components are not usable.usable.

Unusable computers and components end Unusable computers and components end up in garbage dumps.up in garbage dumps.

Heavy metals in computer components Heavy metals in computer components contaminate the communities’ land and contaminate the communities’ land and water.water.

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Our Work in the Electronics SectorOur Work in the Electronics Sector

Labor rights issuesLabor rights issues Environmental exposure issues during Environmental exposure issues during

productionproduction Environmental issues related to waste disposal Environmental issues related to waste disposal

during productionduring production Environmental issues related to recyclingEnvironmental issues related to recycling Examining the programs, policies and practices Examining the programs, policies and practices

of the companies from which we buy our of the companies from which we buy our computers and other electronics equipmentcomputers and other electronics equipment

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These are not just contract These are not just contract supplier issues but also issues supplier issues but also issues related torelated to

- Human Rights- Human Rights- Environmental Justice - Environmental Justice - Sustainability- Sustainability

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Core QuestionsCore Questions

To whom does the EICC apply?To whom does the EICC apply? If the suppliers of components are If the suppliers of components are

multinational corporations themselves, multinational corporations themselves, how do we influence these corporations?how do we influence these corporations?

How far down an electronics supply chain How far down an electronics supply chain does a brand have influence? power? does a brand have influence? power? control? control?

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These are not just These are not just questions of which questions of which companies are in which companies are in which tiers but rather getting at tiers but rather getting at the locations in the the locations in the manufacture/assembly/ manufacture/assembly/ supply chainsupply chain

where we can realistically where we can realistically have influence. have influence.

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Supply Chain WorkSupply Chain WorkConnects to Other WorkConnects to Other Work

Cocoa workCocoa work Child laborChild labor Forced LaborForced Labor Human TraffickingHuman Trafficking Human RightsHuman Rights Labor RightsLabor Rights SustainabilitySustainability Other….Other….

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Remaining QuestionsRemaining Questions

How do we help each other to see both How do we help each other to see both the big picture and the specifics?the big picture and the specifics?

How do we grow in our ability to see How do we grow in our ability to see beyond the immediate?beyond the immediate?

How do we deepen our ability to question How do we deepen our ability to question and seek truth?and seek truth?

Others……?Others……?