Sound Businesses: Profiles of companies and business models we are keeping an eye on.
“Here be dragons!”
According to lore, that epithet once marked ancient charts of the world’s oceans, a warning from mariners of the perils of the deepest, darkest seas. Today, that label might well be affixed to global supply chains. As beneficial as globalized production has been to affluent consumers on the retail end of the chain, too often abuses and outright atrocities pepper the other end – the business end – where environmental degradation, sexual abuse, and indentured and child labor are rife.
That is what Transparentem exists to battle. Ben Skinner, founder and president of the Brooklyn-based nonprofit, describes his organization as “an intelligence unit that uses frontline reporting ethics and forensic methods to understand where severe environmental, social, and governance violations and crimes happen upstream in corporate supply chains.”
Skinner is a former investigative reporter whose grant-funded model represents a new twist on the “name and shame” model pursued by high-profile watchdog groups like Human Rights Watch or Greenpeace.
“Instead of publishing what we find right away and using negative publicity to force global multinationals to pay attention, we compile a detailed report on the abuses in question and send copies to the board members, CEOs, general counsels and marketing officers of the companies sourcing from these places,” he explains.
The days are long gone when corporations in advanced economies could plead ignorance to such abuses by arguing that they are not responsible for the actions of subcontractors or sub-subcontractors. Such “third party risk” that permeates supply chains or misconduct in any part of a company’s logistics line can draw penalties under the U.S. Foreign Corrupt Practices Act (FCPA), European anti-slavery codes and various United Nations protocols.
“The idea here is not so much to embarrass someone or to prove how brave and upright we are in pointing these things out,” Skinner says. “We’d rather demand a mitigation plan from those involved and then go back and make sure it’s being implemented. In the long run, we think that is the greater good.”
Skinner spoke to Karma Network Contributing Editor Michael Moran.
Michael Moran: The global nature of modern supply chains means that companies may be working with subcontractors and sub-subcontractors they don’t even know about. What kind of issues can arise when there isn’t sufficient knowledge at that level?
Ben Skinner: So if I were a business owner that had, for example, a trade in consumer goods and I wasn’t manufacturing those goods either in part or on hold myself, I would be enormously interested in understanding where some of the legal and also some of the ethical risks were upstream and in my own supply chain.
If you’re sourcing manufactured goods from a country where the manufacturing base relies heavily on low-wage migrant labor, and if that country happens to be a country with very restrictive immigration policies, I would be looking to make sure that those workers aren’t paying fees, aren’t going into debt, aren’t working in debt bondage, don’t have their passports confiscated in the supplier.
If I’m sourcing materials from a country with a shoddy environmental record, I would be very careful about some of the regulations in Europe that govern the environmental provenance of the production of those goods.
It would behoove anybody who has a stake in that, in a consumer goods business or any business, be it extractives, electronics manufacturing or otherwise, to understand what goes on upstream and in their supply chains.
As we like to say, you may not be interested in transparency, but transparency is interested in you.
Michael Moran: How to you approach these investigations?
Skinner: So we begin by looking upstream at what we consider likely to be endemic problems, i.e. problems that go beyond a single facility or go beyond, in many cases, a single industry, in a country and possibly extending to other countries, and our hope as a public service organization is that we can catalyze broader change by focusing on a few specific incidents of those violations within that endemic sphere.
So for example, we will focus on five or six factories that have forced labor or what we usually refer to as indicators of forced labor, and those five or six factories will by no means be anomalies in a particular country or in a particular industry.
But we want to connect the issues there to brands and retailers that will be responsive, we hope, on a broader level and to look across their entire supply chain at all factories that kind of fit that criteria.