Hong Kong Echo: Sourcing sustainably?

Sustainability starts before an order is even placed, says Joyce Chau, Asia Pacific Director, amfori.

HKE: Sustainability is top of mind across all industries today – but it wasn’t always many companies’ focus. What changed? 

JC: Quite right. We were formed in 1977 as a humble trade organisation which was essentially a group of German brands, retailers, and buyers. Back in the 70s, the global market’s focus was largely around anti-dumping issues, reducing tariffs, and eliminating trade barriers. That began to transform by the early 2000s, when our member companies started to be increasingly challenged about labour rights by consumers, new expectations from NGOs, increasing governmental regulations, and so on. In response to the evolving needs, we set up our Business Social Compliance Initiative (BSCI) in 2003, requiring commitment from our members to follow a common Code of Conduct in responsible supply chain requirements which match with international labour conventions. Today it’s the biggest cross-sector social responsibility auditing system in the world covering 21 sectors in the Fast-Moving Consumer Goods industry recognised by global buyers with combined turnover of €1.7 billion from over 40 countries.  

HKE: Then came the environmental concerns… 

JC: Yes, in the following decade, environmental topics had become increasingly important. In 2013 we launched our Business Environmental Performance Initiative (BEPI) – again, the idea being to give our members the framework and tools to increase supply chain transparency in compliance with global standards.  

HKE: What do we actually mean when we talk about sustainability or ‘more responsible’ sourcing? 

JC: Personally, I tend to come back to the United Nations definition of 1987, a most popular version, which describes meeting the needs of the present without compromising the ability of future generations to meet their own needs. Today’s buzzword is ESG or ‘environmental, social and corporate governance,’ which is nothing new but consistent with the common vision of all, by the way.  

HKE: Is your work largely around auditing? 

JC: Auditing is just one pillar. We work with global auditing partners – to maintain neutrality we don’t do any of it ourselves but focus on standard and audit quality monitoring – to deliver around 25,000 social compliance audits every year (over 85% of which are done in Greater China). We provide training or capacity building for our members, as well as facilitate stakeholder engagement through dialogue with governments. If you take our BSCI as an example, there are 11 aspects of the code of conduct – we seldom have companies that can score perfectly across them, and some may have room for improvement. Our role is to provide training and try to find solutions to remediate. We run workshops on addressing multiple social compliance issues with respect to global standards and local laws. Take an example of fair remuneration: the considerations in India might be different to Cambodia, for example. Or, sometimes companies may not know how to cover the legal overtime premium rate in the different parts within the same country.  

HKE: In that sense, incentives are better than punitive measures for continuous improvement. 

JC: Yes, whereas in the past the approach was quite punitive. We have found that the best way forward is to provide the training, tools, and solutions for companies to improve their non-compliance. In the past many companies put the quantity of social audits of suppliers above all else, but today there are stringent auditing requirements to be followed which prove that training programmes have been undertaken. Rewarding the ones with good performance with business incentives can better drive common growth. And for some areas, there is guidance for identifying, remediating and preventing zero-tolerance cases such as for child labour. 

HKE: You mentioned stakeholder engagement earlier, how does this complement your work? 

JC: It’s important to work towards improvements together with multi-stakeholders such as professional bodies, NGOs, and governments. Our role is to facilitate dialogue and to communicate the principles of our compliance initiatives, best practices, as well as the challenges. In Hong Kong we have previously written letters to the Chief Executive to promote sustainability in the government agenda. Two or three years ago it was barely mentioned in the annual Policy Address, and versus other neighbouring countries, such as Thailand, where national action plans to embed the United Nations guiding principles for business and human rights had been introduced into policy. This year we saw some progress and so that’s positive. amfori also implemented a responsible recruitment training project for Thai export suppliers which was funded by the Thai Government. 

 

HKE: How about elsewhere in the region? 

JC: The dialogue is quite diverse. Recently we completed the Women Empowerment Project in our three top sourcing countries: Bangladesh, India and China, which is part of amfori’s Gender Equality and Women’s Empowerment Strategy echoing the UN Sustainable Development Goals and aims to assist companies in promoting gender equality and empowering women in their global supply chains and workplaces. While in May this year, we set out an integrity journey in India with Alliance for Integrity to provide trainings on anti-bribery for SMEs. In Asia, we work closely with UN Women, the UN International Organisation for Migration, ILO, UNDP, and GIZ on driving responsible supply chains, especially for the protection of migrant workers. 

HKE: Given how complex today’s supply chains are, is it possible to have total transparency? 

JC: In absolute terms, no. It’s not possible. You have to set some boundaries as to what we mean by transparency. In the past it was unthinkable for a buying office in Europe, for example, to know all the details of who are the actual producers supplying to them. In recent years, knowing with whom you trade with is not enough. Rather, you must look at how to work on the same level of sustainability compliance, which requires openness across all supply chain actors. The requirement of transparency is becoming more sophisticated but also more challenging. It requires mutual respect of among all parties. Not just give and take. 

HKE: Technology has also been billed as a saviour for some of these issues. 

JC: Sure, and it can certainly help. But we have to be careful with buzzword concepts. I met a startup developing a blockchain-based solution to help protect workers’ rights whereby labourers can upload their contracts to the blockchain for buyers to know that they are being treated fairly. This is a good intention but at the same time it can also generate concerns for personal data protection of workers and employers. What happens to their information when they cease working there? How do we authenticate the original contracts? Et cetera. There are legal liabilities that cannot be solved just through new technology, even if the intentions are honourable. 

HKE: Where can companies do better around transparency? 

JC: Transparency is also about companies doing the right market research to determine what their customers really need. That is where we can reduce excessive demand and supply, avoid last minute orders, and thus eliminate the consequent wasting of natural resources and labour rights issues such as overtime work. Today, we all need to jointly improve in this area. 

HKE: That’s not just the case for the likes of fashion and apparel, right? 

JC: Precisely. The service industry – for example logistics, hotels, and catering – is one where social compliance concerns and labour protection issues have often been underplayed or simply neglected. The food and beverage sector is another one facing problems that are less visible. We have been told by food scientists that a major portion of waste is generated along the supply chain, such as food and water waste before goods are put into retail shelves or served to consumers. Again, recycling receives a lot of attention, but impulsive consumption, over supply, and waste are just as vital. We must get past the idea that less production means less business. We need to rethink a sustainable way of living and then we know how to go forward for sustainable business.