Understanding Supply Understanding Supply ChainsChains

and CSRand CSR

Ruth Rosenbaum, TC PhDRuth Rosenbaum, TC PhD

CREACREA

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

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

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, Reminder: Shareholder votes are leverage, nothingnothing

more. They are not binding. more. They are not binding.

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

and Practices and Practices 1. Many of the things we want 1. Many of the things we want

changed are not simple. Change changed are not simple. Change requires time and workrequires time and work

2. To work with companies to bring 2. To work with companies to bring about change requires knowledge about change requires knowledge and expertiseand 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 Impact Across the Supply ChainSupply Chain

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

The whole system of Codes of Conduct, The whole system of Codes of Conduct, social compliance programs, audits, etc. is social compliance programs, audits, etc. is needed BECAUSE governments do not needed BECAUSE governments do not govern to protect their people, their govern to protect their people, their communities and the environment. communities and the 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 2. They benefit from the supply

chainschains

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

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Why we are interested in Why we are interested in supply chainssupply chains

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

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

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

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The Old Apparel IndustryThe Old Apparel Industry

Company X owned the factories and mills Company X owned the factories and mills that manufactured their products. Even that manufactured their products. Even then, however, they bought the buttons, then, however, they bought the buttons, zippers, thread, etc. from other companies. zippers, 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 relatively local, the apparel company know how these other factories were being run. how 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 Materials can originate almost anywhere in the world.anywhere in the world.

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

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

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

SectorSector Electronic instruments, e.g. computers, Electronic instruments, e.g. computers,

can only be marked “assembled in country can only be marked “assembled in country x”.x”.

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

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

Power Supply

Hard drive

Floppy Drive

CD/DVD writer

CD drive

Mother Board

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Complexities inside the Complexities inside the ComponentsComponents

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

Gateway monitor

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

Western DigitalWestern Digital Solectron Solectron

Lite-On-ItLite-On-It JabilJabil

HitachiHitachi FoxconnFoxconn

LucentLucent CelesticaCelestica

AMDAMD SCI SanminaSCI Sanmina

IntelIntel 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 workers

in many countries.in many countries.

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The Underlying ProblemsThe Underlying Problems

The labor issues found in any The labor issues found in any assembly factory in any industry: assembly factory in any industry: wages, working hours, etc.wages, working 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 Exposure to other chemicals, including

heavy metals, during assemblyheavy metals, during assembly

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Environmental IssuesEnvironmental Issuesduring assemblyduring assembly

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

Disposal of chemicals used during Disposal of chemicals used during assembly – possible environmental and assembly – possible environmental and community contaminationcommunity contamination

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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, brominated flame, retardants, cadmium,

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

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

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Environmental IssuesEnvironmental IssuesDisposal Disposal

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

Disposal of hazardous wastesDisposal of hazardous wastes

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RECYCLINGRECYCLINGrealities and questionsrealities and questions

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

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

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SoftwareSoftware

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

As programs become more complex, As programs become more complex, the computers needed to run them the computers needed to run them must be more complex.must be 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 version, whether for Windows for Apple, places demands on the speed, Apple, places demands on the speed, storage and RAM of the computers. storage and RAM of the computers.

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Effect on RecyclingEffect on Recycling

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

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Types of RecyclingTypes of Recycling

ComponentsComponents Use of whole Use of whole

systems by groupssystems by groups Export of computers Export of computers

to developing to developing countriescountries

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

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Recycled computers Recycled computers in developing countriesin developing countries

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

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

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

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Our Work in the Electronics Our Work in the Electronics SectorSector

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

productionproduction Environmental issues related to waste Environmental issues related to waste

disposal during productiondisposal during production Environmental issues related to recyclingEnvironmental issues related to recycling Examining the programs, policies and Examining the programs, policies and

practices of the companies from which we practices of the companies from which we buy our computers and other electronics buy our computers and other electronics equipmentequipment

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

- Human Rights- Human Rights

- Environmental - Environmental Justice 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 multinational corporations themselves, how do we influence themselves, how do we influence these corporations?these corporations?

How far down an electronics supply How far down an electronics supply chain does a brand have influence? chain does a brand have influence? power? control? power? 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 tiers but rather getting at the locations in the at the locations in the manufacture/assembly/ manufacture/assembly/ supply chainsupply chain

where we can where we can realistically have realistically have influence. 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 How do we help each other to see both the big picture and the specifics?both 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 How do we deepen our ability to question and seek truth?question and seek truth?

Others……?Others……?