GSC Web Meeting: Supply Chains that Empower Communities: Impact Sourcing (Part 1)

Workers perform final testing and QA before sending drives off to customers on its 2.5-inch notebook lines. (Photo: Robert Scoble, 6 November 2008)

Workers perform final testing and QA before sending drives off to customers on its 2.5-inch notebook lines. (Photo: Robert Scoble, 6 November 2008)

In today’s world of increasingly socially-conscious consumers, companies are recognizing that cutting their production costs is no longer the key priority. In the global village many organizations recognize their responsibility to be a significant presence wherever their operations take place, not only out of an obligation towards corporate social responsibility, but also because responsible sourcing practices are appreciated and rewarded by an increasing number of consumers. Western companies can have a huge impact on small service and labor providers in South and South-East Asia, Africa or South America. And many today make a conscious choice to produce profit with a purpose.

Impact Sourcing

Impact Sourcing is cost-effective way to deliver high-quality digital solutions to enterprises, while providing work and opportunity for some of the world’s poorest citizens. It is a segment of the Business Process Outsourcing (BPO) industry that benefits disadvantaged individuals in low employment areas. Impact Sourcing looks beyond the common source of supply for traditional outsourcing to provide higher-income employment, skill development, and access to new income opportunities to individuals who might not otherwise be employed in this sector. Impact Sourcing supports the workforce demands of the growing BPO industry, while empowering individuals to create better futures through training and work experience in the BPO industry.

This is the first webinar in a series about Supply Chains that Empower Communities.
Prepare questions! The panel will end with a Q&A with the audience!

 

PANELISTS:

KEVIN PARIKHKevin S. Parikh, Esq.  |  CEO, Sr. Partner at Avasant

Kevin Parikh is the Global CEO and Sr. Partner at Avasant. Prior to joining Avasant, Mr. Parikh led the Global IT Sourcing practice for Gartner Consulting. Mr. Parikh specializes in IT and business process outsourcing (BPO), contract and service‑level negotiations, joint ventures, captive centers, strategic management, business risk evaluation and software licensing. His practice engages in both nearshore and offshore sourcing solutions. Mr. Parikh is based in Los Angeles, California.

Over his career, Mr. Parikh has been involved in more than 350 IT sourcing and business transactions. These deals have ranged from US$20 million to US$2.5 billion, involving major Tier 1 and Tier 2 service providers. Mr. Parikh has also worked closely in support of government clients that seek to increase foreign direct investment (FDI). In this regard, he works on a global basis with the World Bank, the Rockefeller Foundation, the U.S. Government, and other United Nations funded and driven projects. As an attorney by training, he specializes in negotiating complex and global transactions where he works toward bridging the gaps between legal counsel and business team objectives. He was also a U.S. Presidential appointee in the Clinton Administration for the One America Commission.

Mr. Parikh is author of a recent article in Outsource Magazine, “Making an Impact.”

Michael_ChertokMichael Chertok | Co-founder and Chief Development Officer at Digital Divide Data (DDD)

Mr. Chertok also serves as a Director on DDD’s board. Previously, he served as Program Officer in the Global Development Program of the Bill & Melinda Gates Foundation. Michael has also worked as a consultant on philanthropy and international development to other private foundations–and was a Digital Vision Fellow at Stanford University. Michael was the co-founder and Managing Director of Global Catalyst Foundation, the philanthropic arm of a Silicon Valley venture capital firm. Prior to this, he helped start the non-profit organization Schools Online to bring Internet access and training to more than 5,000 schools around the world. Michael holds a BA in Russian Studies from Yale University and an MBA and a Certificate in Public Management from the Stanford Graduate School of Business.

MODERATOR:

Bharat RamaniBharat Ramani | Board Member at the Global Sourcing Council

Global strategist and entrepreneur with 27 years experience in building and managing a multinational corporation. He’s an expert in creating strategic alliances, partnerships, collaboration, business restructuring and turnarounds in cross border environments and an accomplished executive who promoted, grew and exited, a listed company – Melstar Information Technologies Ltd in India. The company had operations in India, Europe and U.S. and was acquired by the Birla Group. He was involved in setting up IT Application Outsourcing Centers for Fortune 500 companies in Mid 1990′s. He has lived and setup operations in US, India,Russia, UK, Germany and Hongkong.

ISSP Conference 2013

May 8 -10, 2013
Millennium Knickerbocker Hotel
Chicago, Illinois

ISSP is hosting its next face-to-face summit of ISSP members and other sustainability professionals from May 8–10, 2013 at the Millennium Knickerbocker Hotel in Chicago, Illinois. Speakers from GRI, Alaska Airlines, The Nature Conservancy, The City of Chicago and other top flight organizations will address conference attendees. Sustainable Urban Communities, Integrated Reporting, Sustainability In the Industrial Sector and Green Architecture are just a sampling of the great content that will be presented.

Three pre-conference workshops are planned for May 8: Leadership Skills for Change Agents, taught by ISSP Hall of Fame Inductee Bob Willard; A Sustainability Consultants Cohort led by Jennifer Woofter; and Accounting for a Sustainable Future, led by Marisa Mackey
, Associate Director, Education 
Sustainability Accounting Standards Board (SASB)
.

As part of ISSP Conference 2013, a new group of inductees will be installed into the ISSP Sustainability Hall of Fame and a vendor expo will showcase the latest in tools, products and services of interest to sustainability professionals. Come network with 250 of your peers from around the world. For more information, visit bit.ly/QUYATc.

[VIDEO] GSC WEB MEETING: Social Investment (Part 2): Financial Inclusion

GSC Web Meeting: Social Investment (Part 2): Financial Inclusion

Hear experts from Accion’s Center for Financial Inclusion, IBM’s Human Ability & Accessibility Center and Social Accountability International (a pioneer non-profit) discuss the importance and business advantages of hiring and empowering underprivileged individuals. According to IBM: “Making your organization more accessible to citizens, employees and other businesses is as promising as it is challenging.” Listen to our experts discuss why it should be not only proper but profitable for businesses to source their employees from places others might not look into – how to discover a great pool of concealed talent among people with disabilities and otherwise underprivileged individuals.

Prepare questions! The panel will end with a Q&A with the audience!

Panelists:

Joshua Goldstein | Principal Director for Economic Citizenship & Disability Inclusion at Center for Financial Inclusion at ACCION

Joshua Goldstein

Josh Goldstein – Principal Director for Economic Citizenship & Disability Inclusion. Mr. Goldstein is the program manager for the Center’s Financial Inclusion for Persons with Disabilities initiative, which was launched three years ago. Mr. Goldstein speaks about disability rights, and the importance of inclusion, at conferences around the world. He also manages the Center’s Advisory and Faculty councils. He writes regular blog posts for the Center as “Mr. Provocative.” Mr. Goldstein began his career in international development by running a small nonprofit, Timoun Haiti, to help that country’s poor servant children and mount other relief efforts. Mr. Goldstein is a graduate of Yale University.

The Center for Financial Inclusion at Accion (CFI) was launched in 2008 to help bring about the conditions to achieve full financial inclusion around the world. Constructing a financial inclusion sector that reaches everyone with quality services will require the combined efforts of many actors. CFI contributes to full inclusion by collaborating with sector participants to tackle challenges beyond the scope of any one actor, using a toolkit that moves from thought leadership to action.

The Center defines full financial inclusion as a state in which everyone who can use them has access to a full suite of quality financial services, provided at affordable prices, in a convenient manner, with respect and dignity. Financial services are delivered by a range of providers, in a stable, competitive market to financially capable clients.

www.centerforfinancialinclusion.org 

 

K. Anne-Rivers Forcke | IBM Certified Project Executive, IBM Research – Human Ability & Accessibility Center

Anne-Rivers ForckeMs. Forcke is an experienced global program manager, today providing business and market analysis and strategic focus for a variety of programs within IBM Research. As a certified IBM Project Executive, she brings a strong business acumen and outstanding communication and presentation skills to Research projects focused on enhancing productivity and business value through improved cognitive interactions, contextual computing and improved customer experiences. Ms. Forcke is a persistent contributor to process and methods development, thought-leadership and analytical tools within, and outside of, IBM.

For more than 20 years, Ms. Forcke has provided effective relationship management, marketing and business strategy, and program management for global, multi-cultural and remote teams addressing complex markets and information and communication technology (ICT) solutions. Her clients span IT organizations, Government, Telecommunications, Education, Media and Manufacturing.

As IBM’s representative to the Board of Directors of the Telecommunications Industry Association (TIA) from 2000-2006, Ms. Forcke was active in several standards and policy projects, including the current development of recommendation for the technical standards revision to Section 508 and Section 255 regulating the accessibility of Information and Communication Technologies. From 2004-2006 she also represents IBM on the Board of Governors for the Electronics Industry Association (EIA) and is an Associate Professor of Business Communications at the Elliott School of International Affairs, George Washington University in Washington, DC.

 

Alice Tepper Marlin | President and CEO of Social Accountability International (SAI)

Alice Tepper Marlin

Ms. Tepper Marlin is the President and Founder of Social Accountability International. She has held this position since 1997, upon the founding of SAI. Ms. Tepper Marlin has received numerous awards (e.g. 2010 Top 100 Thought Leaders in Trustworthy Business Behavior by Trust Across America, Adweek and Mademoiselle Woman of the Year, Japan Society Fellow, Ashoka, Right Livelihood Award, Wellesley college Alumna of the Year), been profiled in various newspapers and magazines around the world (e.g. New York Times, People, Time, Le Monde) and has also been interviewed on numerous television and radio programs (e.g. Today Show, Good Morning America, CNN). READ MORE

 

 

Letter From (New) GSC President – Diana d’Ambra

Diana d'Ambra

by Diana d’Ambra

To start, I wish to deeply thank those who both nominated and elected me as President of the Global Sourcing Council. It is truly an honor.

As you can see, we have a new design for our website as well as some new columns and features. May I draw your attention to “Ask the Expert” feature? Now our readers can ask experts in their field questions about responsible and sustainable sourcing. Todd Yaney, Manager, Supply Chain Sustainability, Chrysler Group LLC at Chrysler and a board member started off this exciting feature. This month we also have particularly interesting and timely articles, one on Conflict Minerals, namely how the legislation to report on their use will work and another on Social Investments and Its Trends.

Readers interested in sustainable sourcing as both a field and a necessity, how do we engage the interest of the public on these issues? The publicity surrounding conflict minerals definitely was a contributing factor leading to the legislation. But what else can we do and what else has worked?

Here I’d like to share some observations and ideas with you. Sometimes technology, especially those involving pictures, stationary or moving, creates its own reality and change in perception. The reality depicted by technology always can be questioned, for example, the 1963 Zapruder 8MM film of the Kennedy assassination is still being debated while the jury’s interpretation of the 1991 Rodney King video lead to both the acquittal of the police officers and to the riots the next year. But the technology, from film in 1963 to video in 1991, keeps improving, becoming more cost effective and more widely available. Recently, I was watching the first appearance of Pope Francis on the balcony of Saint Peter’s Basilica on television but at a distance. I was stunned by the nearly everyone in the audience seeming to be holding and waving something.  I was trying to think of the religious significance when I realized that people were holding their phones, IPads as well as a few camcorders and even old fashioned cameras. Thousands of people were recording this event, each able to create his or her own personal memories that now could be shared not only with friends but online with millions of people. Where 100 years ago, perhaps a few photographs would have been taken in a studio, now thousands of people are recording this event.

How does this relate to sourcing? Videos are inexpensive and powerful. As part of the application submission to the 3S Awards, the Global Sourcing Council requests videos. When Jacob Riis photographed the slums of New York City, he was able to share the reality of what words and even sketches could not portray adequately, namely the misery and squalor of the slums of New York.

Now, Smartphones or at least phones smart enough to have camcorders embedded are ubiquitous. Everyone can not only take videos of the Pope, but the substandard conditions in a factory, the dirty water or the war and results of buying conflict diamonds. And this is fostering greater awareness of the issues related to sustainable sourcing. A person looking an IPhone no longer will just see the phone, but the factory in China that produces the phone. Inexpensive clothing at major stores now has a linkage to the factory fires in Bangladesh and the horrific photos.

As we understanding of the interconnectedness of the supply chain and the consumer, one major result is an increased ability to link and see what beforehand was abstract or theoretical, the human and business side of sustainable and reliable sourcing.

[author image=”http://gscouncil.org/main/wp-content/uploads/2013/02/Diana-dAmbra.png” ]The newsletter editor is Diana d’Ambra, President of the Global Sourcing Council. She is consultant at Cortelyou Consulting. She may be contacted at diana.dambra@gmail.com[/author]

 

Dodd-Frank Act and the SEC Ruling on Conflict Minerals: What it Means for Companies?

by Dr. Wanda Lopuch and Warsame Galaydh

 

Introduction

In July 2010, President Obama signed the Dodd-Frank Act in order to change the regulation of America’s financial institutions. One aspect of the act, the § 1502 provision of Dodd-Frank, requires companies to disclose the origin of so called “conflict minerals” and report on the source of these minerals.  The reporting requirement itself will presumably encourage switching supply of these minerals to “conflict-free” sources.

Four minerals are labeled conflict minerals –  tin, tungsten, tantalum, and gold.  Their mining and trade may support groups fueling conflict in the Democratic Republic of the Congo. The US government, acting in the interest of a broad group of stakeholders, intends to implement more economic transparency and use economic forces of global corporations to limit the impact of armed groups in the DRC.

Various armed groups control mining, processing, and trade of natural resources in the DRC.  Prior to Dodd-Frank, using conflict minerals had neither legal nor economic ramifications.   The ultimate goal of the Dodd-Frank Act is to prevent the use of conflict minerals as a source of economic support for the armed conflict.

Upon enacting the Dodd-Frank Act, the Senate requested the Securities and Exchange Commission (SEC) to issue the operational rules. The SEC issued a final ruling on Dodd Frank   § 1502 provision on August 22nd 2012; the first reports are due January 2014. During this interim period, public companies that are subject to SEC ruling are required to adhere to the SEC Final Ruling.

SEC Final Ruling

The SEC Final Ruling has a multi-tiered process for companies in determining the use of conflict minerals.  These are:

  • Companies should determine if  they are subject to the conflict minerals Statutory Provision
  • Did the conflict minerals originate from the covered countries?
  • Company must publish a conflict minerals report if minerals originated from the covered countries
  • A specialized disclosure form should be completed alongside the conflict minerals report
  • An independent auditor should monitor the steps taken with the conflict minerals report and specialized disclosure form
  • Cost of non-compliance is high: the greatest risk of non-compliance is an issuer losing its eligibility to use Form S-3 if it fails to file the Specialized Disclosure Form on a timely basis or its disclosure is non-compliant with the rule

This interim period will last for two years for large companies and four years for smaller reporting companies.  During the interim period, companies must determine if they use conflict minerals during the production process. The difference during the interim period is that companies do not have to have their conflict minerals reports independently audited.

The first step for companies is to find out whether or not they are subject to the Conflict Minerals Statutory Provision. A company is subject to the statutory provision if it uses conflict minerals in a way that are necessary to the functionality or production of a product manufactured.  Conflict minerals are necessary to the functionality or production of a product if the mineral is contained in the product and necessary to the product’s production.

The second step in the process is to see if the conflict minerals originated from the covered countries. Companies move on to the second step if the conflict minerals they use are necessary to production. If the company determines that the conflict minerals did not originate from the covered countries (pre-determined as the Democratic Republic of the Congo and neighboring countries), it should be included in their annual report and published on its Internet website.  A crucial element of the conflict minerals report that must be included by companies taking either the prolonged or route is including a description of its products manufactured or contracted to be manufactured containing conflict minerals that it was unable to determine did not directly or indirectly finance or benefit armed groups in the aforementioned covered countries.

If the company determines that the conflict minerals originated from the covered countries the more prolonged route is taken. The prolonged route includes the specialized disclosure form and the independent audit. The quicker route ends with the publication of the conflict minerals report. The first step in the prolonged process is publishing a conflict minerals report (alongside a certified independent private sector audit report) making the conflict minerals report available on the Internet, and providing the Internet address of that site.

According to the EICC (Electronic Industry Citizenship Coalition) an independent auditor will assess the following during the onsite audit: conflict minerals policy, “mass balance” of materials, and procurement and incoming materials documentation. An auditor calculates a mass balance of materials by summing all the inputs minus all the outputs. The particular smelter or refinery must document their inventory for all incoming material and list then in a line-item summary in preparation for the mass balance of materials.

On top of crafting a conflict minerals report, the company must also furnish a specialized disclosure form including the conflict minerals information.  The SD form should be filed under the Exchange Act is subject to potential Exchange Act Section 18 liability.  Moreover, a company violates Section 18 of the Exchange Act if the due diligence process is found to be unreliable and if the conflict minerals report failed to satisfy the proposed rules.

However, if through the process a company discovers that it does not use conflict minerals through its global sourcing process, it is still required to submit the SD form, the results of the aforementioned inquiry, and due diligence efforts. According to the SEC, the framework recommended is the OECD due diligence framework.

Cost of Implementation

Indeed, the SEC has estimated the cost of compliance running as high as $71.2 million. A Tulane University study estimated the compliance at $7.93 billion and the National Association of Manufacturers said the total cost would run between $9 billion and $16 billion. The same study estimated that half of the compliance would go to personnel while the other half would go to third-parties for consulting, information technology systems and audits. One member of the National Association of Manufacturers estimated the cost of compliance at $10 million per company.  The breakdown of the cost of compliance would mainly be used for hiring 50 full-time employees to review supplier conflict mineral certifications.

Dissenting Points On SEC Ruling

On January 16, 2013, Sidley Austin LLP filed an opening brief on behalf of the National Association of Manufacturers, the Chamber of Commerce of the United States, and Business Roundtable against the SEC. The two main aspects of the legal challenge are the cost-benefits argument and the potential First Amendment violation. The amendment violation argument is that if a company is unable to trace its minerals back to the DRC and label them conflict free companies are falsely associating themselves with human rights abuses; the rule compels speech in violation of the First Amendment.

In the purview of some companies, the interim period is not long enough time as a transition period to undergo independent audits and compliance. Companies believe that the SEC’s estimate is underestimating the cost of independent audits and compliance because it fails to include the supply chain paradigm of companies in a globalized international community. For example, Rory King, director of supply chain product marketing at IHS states, “Large electronic original equipment manufacturers (OEMs) use tens of thousands of parts that must be examined to determine their conflict mineral content. The next nineteen months really is not very much to communicate, collect, analyze, and prepare information on mineral sources across a globally diverse, multi tier value chain.”

Business-Based Solutions

Even though some companies disagree with the Final Rule, some larger companies, supply- chains, and manufacturers have taken the initiative to make sure the use conflict free minerals in the region. In July 2011, Motorola Solutions Inc announced the Solutions for Hope Project. The project utilizes a closed supply line and a defined set of key suppliers: mines, smelter/processor, component manufacturer and end user.  Initiatives made by Motorola Solutions clearly indicate that companies understand that the issue is pressing even with the cost of compliance. By taking initiative now, companies have a greater short term cost; however, in the long run the cost of compliance will be shrink as the intermediary period ends and most if not all companies are complying with the Final Rule.                                                                                                                                                                                      

 

[author ] WarsameWarsame Galaydh is a graduate student at NYU specializing in International Relations. He focuses on the areas of Pakistan, Afghanistan, and general questions related to International Relations Theory and Political Philosophy. Warsame grew up in Syracuse, New York before moving to Dubai and finally settled in Minnesota where he attended both high school, Mounds Park Academy and college, Carleton College. [/author]
[author ]WandaWanda Lopuch passionately advocates sustainable global development, and oversees many strategic initiatives focused on promoting best practices in socially responsible sourcing. She is the President of MDA Associates, Inc., a consulting organization focusing on “greening” the global operations and their supply chains while improving economic outcomes of businesses in the life sciences, IT, and financial sectors. With 20 years of experience in the pharmaceutical and telecommunication sectors spanning across the United States, Europe, and East Asia, Dr. Lopuch guided international teams for maximizing performance in multinational, multicultural and multi-functional projects. Prior to establishing MDA Associates Inc., Dr. Lopuch was the president of Medical Data Management Inc., the company she founded and grew into a multi-million dollar business with locations in 7 countries. Dr. Lopuch holds a Ph.D. in Administration and Supervision from Marquette University, Milwaukee, WI, and an MS in Computer Sciences from the Wroclaw University of Technology in Wroclaw, Poland. She lectures on various aspects of sustainable and socially responsible business. [/author]