Understanding Supply Chains and CSR Ruth Rosenbaum TC

Understanding Supply Chains and CSR Ruth Rosenbaum, TC Ph. D CREA

Question: Who is Responsible? In many countries, local and national governments are responsible for the labor laws and the environmental laws under which factories operate and workers work. BUT in many other countries, governments do not govern to protect their people (the workers and their communities) and the environment. 2

CSR Tool: Shareholder Resolutions have 2 purposes: 1. Inform investors about an issue or situation 2. Bring about change in company actions Reminder: Shareholder votes are leverage, nothing more. They are not binding. 3

Bringing about Change in Company in Policies, Programs and Practices 1. Many of the things we want changed are not simple. Change requires time and work 2. To work with companies to bring about change requires knowledge and expertise 4

Supply Chains Raw materials Processing of materials Production sites Assembly plants Distribution locations 5

Cotton Supply Chain 6

7

8

Impact Across the Supply Chain Corporate-Level Engagement OEMs Tier 1 HQ Site-Level Trainings Tier 1 Factories Sub-Tiers 9

Question of Responsibility n n When governments do not govern to protect workers and the environment, the question arises: who has the power to create the standards under which factories and businesses operate? The whole system of Codes of Conduct, social compliance programs, audits, etc. is needed BECAUSE governments do not govern to protect their people, their communities and the environment. 10

Power of the Corporations We require corporations to be accountable for this “governing” because: 1. They have the power to effect change. 2. They benefit from the supply chains Shareholders and consumers hold them accountable. 11

Why we are interested in supply chains n n n Years ago, companies owned and operated the factories and systems which produced their products. They could decide and enforce the labor standards within those factories. However even then, these companies did not produce the materials from which their products were made. 12

The Old Apparel Industry n n n Company X owned the factories and mills that manufactured their products. Even then, however, they bought the buttons, zippers, thread, etc. from other companies. These other companies were their suppliers However because these suppliers were relatively local, the apparel company know how these other factories were being run. 13

Supply Chains in the Global Economy n n n Materials can originate almost anywhere in the world. Assembly can take place almost any place in the world. In the apparel sector, a garment is marked “made in country x”. It is simple. 14

EXAMPLE: There is nothing simple about the Electronics Sector n n n Electronic instruments, e. g. computers, can only be marked “assembled in country x”. Essentially the inside of any computer is like the United Nations. To illustrate the complexity of the Electronics Supply Chain, CREA staff disassembled an old computer to see who made which components where. 15

The Computer CD drive CD/DVD writer Power Supply Floppy Drive Intel Chip Ports attached to motherboard Gateway computer Fan Case 16

Once we go inside, we see… Power Supply Motherboard Wire harness 17

Power Supply Major Computer. CD/DVD writer CD drive Components Hard drive Floppy Drive Mother Board 18

Complexities inside the Components 19

And then there is the monitor… Gateway monitor 20

But again, when we opened it… 21

Going deeper, we found… 22

Major Components n n n n Hard drives: Seagate, Western Digital CD/DVD drives: Liteonit Motherboards: Batteries: Maxell (Hitachi) Wire harnesses: Lucent Processor Chips: AMD, Intel Memory (RAM): 23

Major Manufacturers Seagate Western Digital Lite-On-It Hitachi Lucent AMD Intel and others… Flextronics Solectron Jabil Foxconn Celestica SCI Sanmina Elta Electronics 24

Supply Chain Example Computer Assembly DVD/CD Hard disk Motherboard Wire Harness Other Components Capacitors Chips Circuits Memory With separate supply chains for the monitors, keyboards, mice, etc. 25

What has the Brand Name on it is the result of the work of many workers in many countries. 26

The Underlying Problems n n The labor issues found in any assembly factory in any industry: wages, working hours, etc. Health issues related to: Repetitive motion injuries n Exposure to solvents during assembly n Exposure to other chemicals, including heavy metals, during assembly n 27

Environmental Issues during assembly n n Exposure of workers to chemicals used in assembly process Disposal of chemicals used during assembly – possible environmental and community contamination 28

Toxic Chemical Exposure during production Many toxic substances are used during the production of electronics components. These include, but are not limited to: brominated flame, retardants, cadmium, mercury, lead, tantalum, epoxy, copper, isopropyl alcohol, hexavalent chromium. Effects of exposure can include cancer, nervous system problems, brain damage, blood diseases, etc. 29

Environmental Issues Disposal of plastics (non-biodegradability) Disposal of hazardous wastes 30

RECYCLING realities and questions n n Some computers are recycled to groups and communities who are beginners on computers. Basic computers differ only in terms of speed, storage space and RAM (think of it as desk top space) 31

Software n n Different programs require different speeds, sizes of hard drives (storage) and RAM (space for active working). As programs become more complex, the computers needed to run them must be more complex. 32

Computer Operating Systems: Windows, et al n In addition, each operating systems version, whether for Windows for Apple, places demands on the speed, storage and RAM of the computers. 33

Effect on Recycling n While some components are recycle-able, many are not, simply because computers need the operating systems and software to run them. 34

Types of Recycling n n n Components Use of whole systems by groups Export of computers to developing countries NOTE: This last requires LOTS OF ATTENTION! 35

Recycled computers in developing countries n n n Many computers and components are not usable. Unusable computers and components end up in garbage dumps. Heavy metals in computer components contaminate the communities’ land water. 36

Our Work in the Electronics Sector n n n Labor rights issues Environmental exposure issues during production Environmental issues related to waste disposal during production Environmental issues related to recycling Examining the programs, policies and practices of the companies from which we buy our computers and other electronics equipment 37

These are not just contract supplier issues but also issues related to - Human Rights - Environmental Justice - Sustainability 38

Core Questions n n n To whom does the EICC apply? If the suppliers of components are multinational corporations themselves, how do we influence these corporations? How far down an electronics supply chain does a brand have influence? power? control? 39

These are not just questions of which companies are in which tiers but rather getting at the locations in the manufacture/assembly/ supply chain where we can realistically have influence. 40

Supply Chain Work Connects to Other Work n n n n Cocoa work Child labor Forced Labor Human Trafficking Human Rights Labor Rights Sustainability Other…. 41

Remaining Questions n n How do we help each other to see both the big picture and the specifics? How do we grow in our ability to see beyond the immediate? How do we deepen our ability to question and seek truth? Others……? 42