From the President May 2013

Diana d'Ambra, President of the Global Sourcing Council

Diana d’Ambra, President of the Global Sourcing Council

Last month I this column I wrote about technology creating its own reality and change in perception. And one of the examples I cited is the linkage between inexpensive clothing at major stores and chains linking to factory fires in Bangladesh and accompanying horrific photos.

As we all know, in the time in-between publication and this article, we have had yet another factory fire in Bangladesh. This fire with 1,127 victims is the worst industrial accident since Bhopal. The pictures of this horror jumpstarted a conversation about supply chain, albeit it may not have been labeled as such in the media. But how we buy clothing the advent of “fast clothing”, a view towards building codes, minimum wage in Bangladesh and other countries, the signing of firms to the Fire and Building Safety in Bangladesh, the positions and reasoning of the 14 North American retailors that declined to participate – all these factors were played out day after day. The concepts of sustainability and corporate responsibility were themes throughout these articles and certainly are now on consumer’s radars as they shop and think about where their clothing comes from and how and where it is made. Whether articles in the New York Times or postings on my local town blog site asking how we can buy clothing responsibility.

Turning to this issue, Randy Lewis, who was our keynote speaker at the 3S Awards, and Joe Tillman, talk about Empowering People and Randy’s experience at Walgreen’s. As part of our program to support our 3SAward winners, the University of Tennessee offered winners its course on Vested Outsourcing. A report on the course including an interview with Ajay Chaturvedi, founder of HarVa, offers insight into how vested applies to non-profits, governmental agencies and NGOs as well as for profit businesses. And an article about the 2013 3SAwards continues our mandate to support and sponsor sustainable and responsible sourcing.

Vested Outsourcing – Key to Winning Business Relationships

Vested Outsourcing – Key to Winning Business Relationships

Vested OutsourcingBy Diana d’Ambra

The Global Sourcing Council’s board strongly believes in continuing support and education of our 3S Awards winners.  As part of this effort, through the generosity of the University of Tennessee’s Vested Outsourcing program, winners of the awards were offered a three day executive education course on this topic, for which the University of Tennessee is not only a thought leader, but world famous.

This year, a winner of a 3S Award for Empowered Woman, Ajay Chaturvedi, founder of HarVa, attended the three day highly course along with the president of the GSC, Diana d’Ambra.

Vested outsourcing is a structured approach for companies to work together in a high strategic manner with business partners.  Creating a “what’s-in-it-for-me” approach to business sourcing relationships, this course explored the application to this approach using case studies with P&G, McDonald’s and Microsoft.  But the win-win formula is not just for them, or even smaller corporations.  It is just as applicable for governmental agencies, having actually started with work that Kate Vitasek did with the US Air Force and for non-profits.

Five principles that apply to all companies, agencies and non-profits are:

  1. Focus on outcomes, not transactions.
  2. Focus on the what, not the how.
  3. Clearly defined and measurable desired outcomes.
  4. Pricing model with incentives.
  5. Insight versus oversight governance.

Perhaps of special interest to the readers of the Source, the course covered the application of the Vested Principles to a non-profit, Denver based, Water for People.  This NGO helps people in developing countries improve their quality of life by supporting the development of locally sustainable drinking water resources, sanitation facilities, and hygiene education programs.

Water for People believes that access to clean water is a basic human right.  And, as with nearly all NGOs, they are passionate and committed to this goal.   Using the Vested approach, following the Five Rules described above, Water for People has focused on long-term sustainable solutions.

Focusing on outcomes, Vested Rule No. 1, fosters partnerships with local governments and communities that maximize the partner’s ability to solve their own water challenges.  Prior to Water for People’s solution, the countryside in many developing countries were littered with broken wells and pumps, where no local entity or people have the knowledge or skills to repair a broken well.  By focusing on how each local government and community will solve its water problem, setting it up so that from the start how the partners will install, monitor, maintain and repair their water pumps, rather than just install them without the engagement foreseen and planned.

Vested Rule 2 maximizes the partners’ ability to solve their own water problems. This operational model has defined and measurable outcomes.  Water for People, relying on their knowledge of the wider range of water problems, helps create the framework but the solution is tailored, specific and local relying upon the local partners including not only governmental agencies but social agencies such as a PTA. But the local partners determine how to solve the water problems along with Water for People, not Water for People alone.

Vested Rule 3 has Water for People and the local partners measure success with a limited number of strategic, long-term results at three, six and ten years from the start.  Water for People uses technology to make sure that water is still running, the pumps are still working and the agreements among the parties are still in force.

Vested Rule 4 focuses on pricing, so that each party benefits from success.  To some extent, Water for People works to limit their role over time and responsibilities shifts to the other parties.   And to make sure that the governmental and other parties have a financial stake and obtain financial benefit at all points.

A strategy of focusing on insight rather than oversight is the Vested Rule 5.  Here Water for People has multiple agreements with governments, NGOs, and individuals.  Each agreement shows shared risks, investments and commitments with the goal of independence and sustainability.  The offices are run and staffed mostly by local employees who are most intimately familiar with the politics, culture, language and community.

And, having attended this course, here is a brief interview with Ajay Chaturvedi:

What about the course was of greatest interest?

The idea of “Vested” interest in any business relationship is intriguing and fascinating because it makes longevity and mutual benefits interdependent. Given the business that HarVa is in, we engage with clients who we would like to be vested in our growth and vice-versa we in theirs. Thinking at a conceptual level is one thing, being able to do it is another and being able to replicate it time and time again across industry verticals and clients, is a totally different ballgame. For me the course was a way to get into the mindsets of the clients, while being a huge networking opportunity.

What surprised you most about the course?

I was expecting some fluid case studies and some softer aspects of discussion which are mostly inexplicable and usually subjective. However after getting there, the most surprising part was the objectivity that was used to define and make understand the idea of vested outsourcing and relationships involved. In most cases when people speak of emotional detachment while making the toughest decisions, they focus more on the importance of making tough decisions and rarely on how to cut the emotional attachment. This was one class where a step-by-step approach was provided on actually focusing on the root of the solution and how to start it.

What did you take away as your most valuable finding?

Vested outsourcing might not be the immediate solution but a long-term must. The sooner buyers and suppliers start embracing it, the better it is for the whole eco-system and sustainability.

Empowering People

RandyLewis-HighRes2010Joe TillmanEmpowering People

By Randy Lewis and Joe Tillman

Don’t look now but there’s more to the cottage industry that’s corporate social responsibility reporting (CSR) than just setting recycling, reduced energy usage and other related sustainability goals.

What about sustaining the brand? And what about social responsibility beyond the environment—to your workforce, your partners and the community?

When the sustainability revolution took shape in the early part of the last decade, for many distribution centers and warehouses the focus was on how to be green—without costing a lot of money. Recycling plans were implemented to properly dispose of waste, light bulbs were changed to energy efficient LEDs, or facilities layouts were altered to reduce travel times by battery powered forklifts. For many companies it was driving environmental initiatives that had a direct impact on their ROI (return on investment).

Over the years several reports have found that favorable sustainability perception has been more positively correlated with companies that show strong elements of social sustainability as part of their “way of doing business” rather than a single-minded focus on environmental sustainability.[1]

However, few companies focused on the people part and helping them be the best they can be. That was until 2007, when Walgreens opened its distribution center in Anderson, South Carolina with a goal to employ more than 40 percent of the workforce there with disabled people.

The overall goal of CSR is to embrace responsibility for a company’s actions and encourage a positive impact through its activities on the community, customers, environment, employees, and shareholders. In essence, CSR is a guide to what the company stands for and will uphold for its customers.

While CSR was a term first coined in the 1960s and early 1970s, its popularity in the industry did not expand until the late 1990s. It was during the 1990s that the focus on environmental stewardship started taking shape in the supply chain area.

Distribution and warehousing are not industries that many first think about when considering how to solve the world’s problems. But, several companies are changing that view:  Walgreens, Lowe’s, Best Buy and Toys R’ Us, to name a few.

While 2007 does not seem so long ago, in terms of CSR’s evolution and development it’s practically the dark ages, which is why Walgreen’s approach for its new DC was ground-breaking and worthy of note.

Walgreens takes a five-pronged approach to social responsibility, giving equal weight to community, environmental sustainability, diversity, supplier diversity and disability inclusion.

On the supplier diversity front, many companies such as Apple, Xerox and P&G have supplier diversity programs, but Walgreens actually issued an annual report[2] on that specific subject in 2010. The company says Supplier Diversity, “isn’t just good business; it’s good for business. When Walgreens began its supplier diversity initiative, the goal was to increase the purchase of goods and services (also known as “spend”) from diverse and small businesses. This objective has grown into a winning initiative that is strengthening not only Walgreens business, but the communities represented by diverse business owners.”

Walgreens says its goal is to spend at least $1 billion annually with diverse suppliers. For example, the Community Corner program, which began in 2010 featuring African-American suppliers in 1,180 stores generated a 12 percent increase across the total chain in sales among its 17 featured products, and an estimated 42,000 consumer baskets contained at least one of those featured products. Sales of those products increased by about 9 to 43 percent year-over-year.

Walgreens is a passionate and driving force in the warehousing industry on social sustainability issues, particularly with its disability inclusion program. It is ensuring the company’s social responsibility vision, and especially the best practices learned from their hiring program that was implemented in the Anderson South Carolina DC (Distribution Center) in 2007, is being replicated by others in the warehousing and distribution space.

The $175 million, 700,000-squarefoot facility, employs about 335 workers, 47 percent of whom have a physical or cognitive disability like autism or mental retardation. The program is about giving people a chance to prove themselves.  People with disabilities die a death of 1,000 cuts. The unkindest cut is the belief that people with disabilities cannot do the job.

Since 2007, Walgreens has spread the program to other DCs and warehouses in its network. Then in 2012, Walgreens moved from the backroom of warehouses to the storefront by developing a program to hire people with disabilities to work in the more than 8,000 Walgreens stores across the United States.

In addition, companies such as Lowe’s, Best Buy and others have journeyed to Walgreens’ Anderson South Carolina DC to learn how to implement and lead a disability inclusion program in their warehouses. Lowe’s has been one of Walgreens greatest partners in developing and leading the change that is now occurring in the distribution and warehousing industry – a true focus on improving the lives of their employees and community.

However, with the ever-changing landscape of leadership in companies those are passionately driving social initiatives and the fact that CSR is still going through growing pains, who will take up the social responsibility banner with the same drive and passion? Who will keep alive the social part of social responsibility?

It could be the younger generation of professionals in the supply chain industry as they rise through the ranks into positions of influence. Generation Y, also known as the Millennial Generation—basically those born from the latter 1970s or from the early 1980s to the early 2000s—apparently see business playing a major role on societal development.

In 2011, a Deloitte Touche Tohmatsu survey “Business Society – Millennial Survey 2011[3]” found that 92 percent of millennials believe that a company’s success should be measured by more than profit, and more than 50 percent said they think businesses would have a greater impact than any other societal segment—including government—on solving the world’s biggest challenges.

The Harvard Business Review Stat, which showcased the survey said: “In a survey of more than 1,000 of its employees born after 1981, Deloitte Touche Tohmatsu found that when respondents were asked to name three terms that encapsulate the purpose of business, 51 percent cited societal development and only 39 percent cited profit.”

For fans of CSR, those are some heartening numbers.

[box type=”shadow” ]Randy Lewis is past senior vice president of Supply Chain and Logistics for Walgreens in Deerfield, Illinois. He was responsible for the design and operation of Walgreens supply chain network including operations, engineering, IT systems, and inventory management. In addition to imports, Lewis oversaw Walgreens’ domestic network of fifteen automated distribution centers and one of the U.S.’s largest private fleets to supply its 7,000 stores throughout the U.S. and Puerto Rico.[/box]

[box type=”shadow” ]Joe Tillman is a senior researcher with Supply Chain Visions, a boutique consulting firm specializing in supply chain management. His keen interest in all thing supply chain and his high-energy approach to life find him authoring articles for industry publications, a blog “The New Generation” for DC Velocity magazine, a subject matter expert for APQC–a not for profit benchmarking organization–and speaking at numerous industry events. Joe is the lead co-author to the Warehousing Education and Research Council’s influential annual benchmarking study, “DC Measures.” He is certified in transportation and logistics by AST&L and SCOR-Professional certified by the Supply Chain Council. As a practitioner, Joe has extensive operational experience in import and regional distribution centers while working for Wal-Mart Logistics. He has an in depth understanding and knowledge of order management and fulfillment techniques.[/box]

[divider]

[1] See “Perception Versus Reality in Sustainability Performance,” (Dec. 2012), available at http://www.sustainablebrands.com/news_and_views/articles/perception-versus-reality-sustainability-performance?utm_source=newsletter&utm_medium=research&utm_campaign=dec20

The article cites this study by brandlogic and CRD Analytics, “Learn from the Leaders: 2012 Sustainability Leadership Report,” available at http://www.sustainabilityleadershipreport.com/

Also see the The Hartman Group’s 2007 study, “Sustainability from a Consumer Perspective,” available at http://www.fmi.org/docs/sustainability/hartman_group_sustainability_fmi_task_forceBEFD066AFCD9.pdf?sfvrsn=2

[2] Walgreens Annual Report “Nurturing the Business of Diversity” (2010). Report available at http://www.walgreens.com/images/pdfs/sr/Walgreens_Diversity_AR_2010_FINAL.pdf

[3] Deloitte Touche Tohmatsu “Business Society – Millennial Survey 2011” (2011). Report available for download at http://www.deloitte.com/view/en_GX/global/about/business-society/7db3b035c93d4310VgnVCM2000001b56f00aRCRD.htm?id=gx_tw_130212_1505

The Human Face of CSR – 3S Awards 2013

TECHNO BRAIN OFFICE
The Human Face of CSR – 3S Awards 2013

Awards in Sustainable & Socially Responsible Sourcing

By Luiza Oleszczuk

The Global Sourcing Council (GSC) believes that CSR is more than a company report noting that all government regulations were met—CSR has a human face.   It’s enough to look at the faces shown on the videos submitted by participants of 3S Awards (Link to: http://gsc3sawards.com/nominees ) to get an understanding what I mean.

Economic development and poverty eradication are usually associated with faces of starving children in the ‘third world’.   CSR’s image in our minds is often of people in suits and slick corporate offices.  But the two have more in common than most tend to think.

The GSC believes that developing sustainable, responsible global business is the best way to eradicate poverty and lead – in the quickest way – to an equitable global economic development.  It is with this in mind that the GSC created a program supporting businesses and organizations of all sizes that are leaders in creating sustainable supply chains that empower local communities, women, and create employment for those otherwise deprived of a chance of being employed.

3S_logo_2013 cropped SMALLWhether it’s a company hiring handicapped workers, a BPO center training and employing women, an educational institution training those with no access to education elsewhere or a fair trade product buyer, 3S companies are part of the future of global supply chains.

“Social and environmental responsibility do not stop at our company’s doors. It is essential that we take responsibility all the way through our supply chain on the impacts our business decisions have on the people and environments where our products are made,” says Pam Theodosakis, co-founder of PrAna, a green, responsible apparel maker and winner of the 2012 3S Out-Of-The-Box Award.

Established in 2008, the GSC 3S Awards program recognizes exceptional achievements in the global sourcing marketplace, shown by individuals and organizations that exhibit a combination of positive social and economic leadership.

Candidates submit a three-minute video showcasing the 3S practices of their company or organization. Winners gain unique exposure to world media and c-suite global business people from across sectors; they are also rewarded with a year-long 3S Boot Camp  http://gsc3sawards.com/3s-boot-camp participation consisting of training sessions and conferences that help their company improve its responsible business practices.

The 3S Award categories are:

  • Community Engagement Award
  • Employee Engagement Award
  • Empowered Woman Award
  • Out-of-the-Box Award (awarded by judges)
  • People’s Choice Award (based on online voting)

Business people are increasingly realizing that CSR is more than meeting regulations. It’s going beyond them, not only for the sake of ethics, but also for the sake of sustainability of business.

“Leading by example – this means emphasizing all three elements of CSR: people, planet and profits,” says Jeanne Cloutier of Alter Eco, a fair-trade food importer and winner of the 2012 3S Community Engagement Award. “The more revenue we can generate, the more sales increase for us, the more revenue is generated for our farmers. Success breeds success all the way down the chain. Alleviating poverty through fair trade is the basis of our business”

“I understand Corporate Social Responsibility (CSR) as being a company’s deed of going beyond what may be required by regulators or environmental protection groups to effectively carry out commercial obligations to its stakeholders and end-consumers,” agrees Jose Alejandro Flores, founder of VOS Flaps, an extremely socially-conscious and sustainable shoemaker.  VOS won the 2012 3S Employee Engagement award and the company’s staff continues to engage with the community in South America. “It (CSR) encompasses initiatives which assess and take responsibility for a company’s effects on the environment and impact on social welfare.”

Another 3S 2012 winner agrees that CSR should go beyond the board room. Ajay Chaturvedi is the founder of HarVa, a rural start-up that focuses primarily on skill development, BPO, community-based farming and microfinance.  This company won the 3S Empowered Woman award for hiring women that would otherwise not have the skills to work in a BPO center.

“We’ve all recently seen the ‘sustainability mandate’ in all private corporations but I believe that is something of core importance and had been overlooked till now,” Ajay argues. “Even in present day CSR is an agenda for corporations but not a sense of co-operation.”

The BPO model in developing countries has been pick up by several 3S start-ups, including a company called Digital Divide Data (DDD), which “helps companies demonstrate CSR in the way in which they source business process services,” in the words of the company founder, Jeremy Hockenstein.

“By sourcing a range of content processing services from DDD, companies receive quality services at a competitive price—and their sourcing business contributes to developing the skills of youth in developing and emerging market countries,” he reminded.

DDD was voted the smartest and most impactful idea by the global sourcing community and received the 2012 3S People’s Choice Award.

Become a 3S Awards Nominee:

Join the best crowd of CSR leaders of tomorrow – those who understand the meaning of social responsibility, not just follow the guidelines.

All nominees additionally gain:

  • Unparalleled global visibility and media exposure in the sourcing community and outside of it – (cost-free). View past media coverage: http://gsc3sawards.com/media
  • Credibility – leadership in the field of Sustainability and Socially responsible Sourcing
  • Prestige & Networking – recognition amongst peers for your 3S practices
  • Year-long training under the main award: 3S Boot Camp

HOW TO APPLY:

Contact:

Luiza Oleszczuk, Development Director at Global Sourcing Council

E-mail: Luiza.Oleszczuk@gscouncil.org

Or Apply directly via:

http://gsc3sawards.com/how-to-apply

www.gsc3SAwards.com

www.gscouncil.org

Twitter: @3S Awards  |  @globalsourcing