Supply-Chain Managers, Corporate Responsibility Folks Increasingly Speaking the Same Language
Levels of corporate transparency—such as disclosing the source of company products—that were at one time voluntary are now mandated under U.S. laws such as Dodd-Frank.
Corporate social responsibility efforts, such as accessing local content, that we were once considered good public relations are now required under the laws of a growing number of countries.
The result has been that corporate social actors and supply-chain professionals have had to increasingly learn to speak the same language.
These were some of the issues discussed by a panel convened by the Center for Strategic and International Studies (CSIS), a think tank, in Washington, DC, last week.
“The supply chain is changing in a number of industries, including the extractive and agriculture industries,” said Daniel Runde, head of international development studies at CSIS.
“Local content is now often baked into contracts,” said Paula Luff, vice president for corporate social responsibility at Hess Corporation, a New York-based energy company.
Ghana recently passed a local content law requiring 90 percent local content in government contracts within 10 years. Nigeria’s local content law requires 100-percent local content in areas such as welding and inland shipping.
“Supply chain people aren’t trained to go local,” said Luff. “They go out and get bids. With local content requirements, the contract doesn’t always go to the best bidder and sometimes also involves investing in local vendor capacity.”
The result is that the concerns of corporate responsibility people and supply-chain people increasingly overlap, according to Alejandro Escobar, lead agribusiness specialist at the Multilateral Investment Fund. “Businesses want to make sure their social impact is there,” he said. “There is an increasing demand for traceability of products. People want to know where their bananas and mangoes are coming from.”
Escobar has noticed a trend among corporations to increasingly bring their supply chain people into their social responsibility conversations. “Supply chain managers don’t usually have the edge on social understanding but do have a good understanding of what needs to be done to get the company its supply of commodities over the next five to ten years. That has opened a lot of doors for conversation about these issues. Governments, NGOs, brokers, and traders are increasingly speaking the same language.”
Local content rules may be mooted by WTO rulings, however. Several complaints now pending before the World Trade Organization challenge local content rules in Indonesia, Russia, India, China, and Turkey.
According to the WTO website, under the Agreement on Trade-Related Investment Measures (TRIMS) “WTO members may not apply any measure that discriminates against foreign products…A list of prohibited TRIMS, such as local content requirements, is part of the agreement.”