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March 12, 2010
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In this Issue
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From the Desk of the President
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 Wanda Lopuch, President, GSC
WE CAME A LONG WAY BABY – LET’S CELEBRATE…
“Citizens against Nike’s sweatshops” movement in the 70’s started one of the first waves of global social responsibility activism, which took most of Corporate America by surprise: “Who are these leftist radicals” – a profit-oriented responsible business management asked. “What do they want? We are simply maximizing returns on shareholders’ investment.” Renowned economists, from both “liberal” and free-market camps asked “what’s the big fuss about the sweatshop. These employees in the sweatshops work hard, but they have far better working conditions and make far more money than their countryman and women” – argued profit-chasing, dedicated managers.
• Nike has implemented one of the most progressive social programs for its brand
• Walmart has instituted an internal “secret sustainability police”, which enforces Walmart social standards throughout its supply chain
• HP has established one of the most progressive electronic recycling systems.
Well, you came a long way baby!
Yes, we have!
All of these socially responsible initiatives have one common denominator: they are economically justifiable. For
Nike, and Walmart and HP, and many other global companies, it simply pays to be socially responsible.
However, the task of embracing social responsibility in global business is far from being accomplished. Methods have changed as social activists of the 20th century are being replaced by business analysts of the 21st century. Solutions to the seemingly irresolvable contradiction of maximizing profit in a socially responsible fashion are being successfully implemented, e.g. there is an explosion of socially responsible investments, the micro-loan models in India and Africa are improving, and there is increasing growth of certified “Corporation B” companies. But, what about the outsourcing sector?
The concept of social responsibility needs far more serious attention in the global sourcing sector, which has historically evolved from the promise of economic benefits based on the labor arbitrage and cheap natural resources. Does the fundamental lure of global sourcing discredit investments in social programs?
Those global sourcing players who are willing to experiment with smart social innovations, are benefitting by strengthening their competitive positioning, improving productivity, unleashing the intellectual power and creativity of their labor force, increasing loyalty among employees, consumers and customers alike – just to name few benefits. Profit will follow, as it always does in the case of smart strategies that are well executed. Just look at Ben & Jerry, or Google.
To celebrate achievements in socially responsible global sourcing, and promote new ways of thinking about global sourcing, the GSC is re-instituting the AWARD IN SOCIALLY RESPONSIBLE SOURCING.
Companies are encouraged to submit entries in the following categories:
1. Best in the Class: Socially Responsible Sourcing Strategy
2. Best in the Class: Community Engagement Programs in Global Sourcing
3. Best in the Class: Most Innovative Socially Responsible Employee Program
Applications will be submitted on line including a 3 minute (maximum) video supporting your case. Review your existing CSR programs or implement new programs. Describe the program that you are most proud of and submit the video clip by October 1st. Stay tuned for more information!
A panel of judges consisting of practitioners from various sectors in global sourcing will choose the winners for the “Best-in-the-class” awards.
The website viewers will vote for the overall winner of “Global Sourcing Corporate Citizen – 2010.”
The winners, in addition to publicity and special promotion, will receive grants to further enhance socially responsible programs in their global workplaces.
The winners will be honored during the Award Dinner, which will follow the annual meeting of the Global Sourcing Council on Wednesday, November 17th, 2010.
Join us in celebrating socially responsible sourcing achievements.
Wanda R. Lopuch, President of Global Sourcing Council
Fast forward 30 years and at least 3 generations of global sourcing: |
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GSC Certification Inaugural Class in May
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 Christine Bullen, Chair, GSC
From employment practices to relationship management, from cultural sensitivity to supply chain management – social responsibility crosses all functional and strategic business areas in the marketplace of global sourcing.
To provide tools for implementing principles of socially responsible sourcing (SRS), and to bring social responsibility into the core of the outsourcing profession, the Global Sourcing Council is introducing the Certification in Socially Responsible Sourcing.
To apply for admission to the inaugural class, fill in the required information HEREFor more information about the Certification in SRS, contact Christine Bullen or 914-479-5016 In 2010 socially responsible sourcing is far more than a PR slogan in an annual report. The winners will adapt quickly to the demands of the 21st century, embracing sustainable business practices throughout their supply chain. Certification in Socially Responsible Sourcing offers tools to execute this strategy.The first class – at the Associate Level (for people with at least 3 years of experience in global sourcing) - will be held May 13-14, 2010 in New York. The class will consist of 1 ½ days of intensive face-to-face classroom discussions plus a final project. Successful completion of the class and project will result in achieving the certification. Contact Christine Bullen (914-479-5016) for details on the special pricing options for this pilot program.The certification program has been developed by an international team of practitioners and experts led by Professor Christine Bullen - the Director of The IT Outsourcing Program at the Stevens University of Technology in NJ, USA. The certification program consists of 20 hours of collaborative instructions, interactive exercises and practical assignments, supported by study materials either in a classroom setting or on-line.Outsourcing professionals from both buyers and providers, will benefit from the unique and stimulating curriculum focusing on real-world examples and proven practices on how to be successful in global sourcing and practice socially responsible processes. |
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Webinar Summary: February E-Waste Recycling
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 Yvonne Contreras, Program Chair, GSC
UNICOR recycling computers and electronics while giving individuals another chance
On February 24th the GSC was joined by UNICOR in a discussion around their comprehensive eWaste recycling program. It was hosted by Bob Tonetti who became General Manager of the Recycling Group at UNICOR, Federal Bureau of Prisons, in spring 2009. At UNICOR, Bob is responsible for the vocational training and inmate employment program involving electronics refurbishment and recycling. Prior to UNICOR, Bob spent 32 years in EPA’s Office of Solid Waste in Washington, DC, where his focus for 8 years was on the environmentally sound reuse and recycling of used and scrap electronics. Bob developed the guidelines under EPA's Plug-In to eCycling program for the sound management of e-waste and was the lead author of international guidelines on the reuse and recycling of computers for the Organization for Economic Cooperation and Development (OECD). He also led guideline development efforts under the Basel Convention partnership program. Bob has been involved with the development of many of EPA’s regulations under the Resource Conservation and Recovery Act. It is this U.S. and international environmental regulatory and policy experience that he brings to his new position as General Manager of UNICOR’s recycling program.
Below are some interesting facts we learned about their successful program:
Access the recordingFor more fascinating information along with facts and figures, go to the Global Sourcing Council's website and you can watch the webinar again and have access to amazing data around this socially responsible program and how you can get involved.- UNICOR has engaged professional, independent organizations to conduct third-party inspections and verify environmental compliance efforts. UNICOR factories have undergone intensive technical reviews of their ability to perform effective, responsible recycling activities, including safety procedures, and materials handling and disposition.- The Recycling Business Group provides essential training to its inmate workers. This valuable training includes hazardous materials handling, identification and segregation of electronic components, proper operation of equipment, electronics assessment, and the opportunity to obtain their GED and A+ Certification.- UNICOR's recycling program gives approximately 950 federal inmates an opportunity to voluntarily participate in a work program. While developing job skills, these inmates improve their self-worth and prepare for release. Inmates use their earnings to pay victim restitution and court-ordered fines, as well as family and child support obligations.- UNICOR's goal is to be a responsible steward of the environment by ensuring recycling operations meet all national standards.- UNICOR turns scrap into a commodity. Nonfunctioning equipment is broken down into its component parts, which are segregated and sold to reprocessors. These commodities, in turn, are sold to carefully screened buyers who use the base materials in the manufacture of new products. The recycling of these materials saves precious resources.- UNICOR ensures security and integrity through traceability. All hard drives are cleaned in accordance with Department of Defense high-level security wiping procedures.
- UNICOR's processing methods begin with receiving, testing, and evaluating the equipment. Equipment is first assessed to determine whether it can be used for its original purpose. If reuse is not an option, the equipment is then de-manufactured for recycling. To ensure that donors are not open to liability, functioning equipment is cleaned, hard drives are wiped, and all drives are checked for media before the equipment is sold to other companies or donated to local schools for reuse.Through ISO and IAER Certification processes, UNICOR's operational procedures comply with all laws and regulations, demonstrate commitment to pollution prevention, are environmentally sound and conserve resources.With nationwide locations and approximately 950 highly trained workers, UNICOR offers exceptional value and competitive pricing. UNICOR provides recycling activities to federal, state, and local governments, schools, non-profit organizations and private industry while protecting the environment.Bob shared how UNICOR's unique, full service recycling program is an integrated part of a national e-scrap solution. UNICOR's commitment to the environment extends to its vendors, who are required to sign no-landfill certifications, follow a restrictive export policy, and agree to site inspections. |
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Webinar Summary: March, Partnering for Conflict-Free Electronics
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 Patricia Jurewicz, Director of the
Responsible Sourcing Network
Partnering for Conflict-Free Electronics: Taking Controversy Out of Your Computer
Our computers and cell-phones, among countless other electronics products, contain precious minerals sourced from conflict areas in eastern Democratic Republic of the Congo. Unbeknownst to many, a gruesome war has been raging in this region for the past 12 years, claiming upwards of six million lives. Unfortunately, the vast mineral wealth of the Congo, with its long history of exploitation, today arms the warring groups causing the violence.
Over the past two years, a number of non-governmental organizations (NGOs) have called on information, communications and technology (ICT) companies to help improve the situation, since these minerals end up in ICT finished products. Although there were calls for companies to remove Congolese tantalum from their products back in 2001, calls today are for companies to continue purchasing Congolese minerals, but to trace their path from verified mines, and ensure revenues do not go to the rebel groups. Over the past year, socially responsible and faith-based investors have joined in the call for companies to get involved. Recently, several ICT companies have taken direct action by funding research and pilot projects. Most of these activities have taken place through two industry groups: the Electronics Industry Citizenship Coalition (EICC) and the Global e-Sustainability Initiative (GeSI).
The webinar hosted by the Global Sourcing Council on March 4th offered a comprehensive look at the history of the Congo, the investor perspective, an overview of EICC and GeSI activities, and suggestions on how various stakeholders can work together to address the atrocities. Patricia Jurewicz, Director of the Responsible Sourcing Network, a project of As You Sow, set the stage with a brief overview of the multiple strategies being used by NGOs, investors and companies, and the benefits of working together.
Maurice Carney, Executive Director of Friends of the Congo, presented an in-depth history of the exploitation of Congo’s wealth starting in 1884 with King Leopold II of Belgium and addressing the many challenges the Congolese have endured over the years such as slavery, colonialism, assassinations, dictatorship, kleptocracy, systematic rape, and the smuggling of minerals today to Rawanda and Uganda. Maurice pointed out the five key areas to understanding the Congo:
1. The affairs of the Congo have not been determined by the people of the Congo
2. Congo is trapped in the midst of a geo-strategic battle for its resources
3. Congo’s challenge is both internal and external
4. Congo is central to the future of the African continent
5. Congo is blessed with enormous natural and human potential
Given Congo’s current organizational deficiency, Maurice recommends stakeholders focus on 1) global diplomatic and political engagement; and 2) strengthening local institutions.
In addition to companies ensuring the raw materials they use do not contribute to the conflict, Maurice sees the need for companies to leverage their influence and encourage the U.S. government to increase its focus on the Congo and press for peace talks. Maurice also recommends that companies contribute to empowering people on the ground through philanthropic assistance or in-kind donations.
Lauren Compere, Senior Vice President/Director of Shareholder Engagement at Boston Common Asset Management, highlighted the concerns by shareholders about companies sourcing minerals in the Congo. The most recent action by shareholders in January 2010 was to release an “investor statement” that over 60 investors signed. The statement recommends companies:
· Make public statements condemning the use of mineral revenues that fuel the ongoing conflict in the DRC and explain the steps they are taking to address the issue.
· Develop policies and procedures to identify where the raw materials in their products originate and ensure conflict minerals are not entering into the supply chain.
· Work with suppliers throughout their entire supply chain to ensure policies on sourcing conflict minerals are being adhered to.
· Work with NGOs, industry associations, investors and other stakeholders to support various diplomatic, political and economic strategies that will help end the root causes of the ongoing conflict.
Investors are now focused on using the statement to encourage other companies from the automotive, aerospace, medical device and mining industries to join the existing multi-stakeholder initiatives.
Representing the industry associations EICC and GeSI, Jerry Meyers, Materials Engineer at Intel Corporation, highlighted activities by the ICT industries. In addition to funding a project to map the ICT supply chains, there has been an effort to visit the largest mineral smelters. Visits to the smelters revealed a number of gaps to address to trace the supply chain, and it was determined that smelters can trace ore purchases back to the mines of origin. In addition, a pilot project has started to trace and certify tantalum mines.
There is no silver bullet that will bring peace to the Congo. It will take diplomacy, supply chain responsibility and local empowerment to end the conflict and create prosperity its citizens. Fortunately, these “uncommon bedfellows” have started to work together and are committed to translating ideas into action.
Access the Recording
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Upcoming Events
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Why Walmart Matters More Than Kyoto or Copenhagen
 John Howley, President & CEO
Davies Energy Systems, Inc.
Walmart has required 100,000 of its vendors to complete a sustainability survey disclosing just how "Green" they are. This is the first step in developing a Sustainability Index that will allow purchasers to measure and compare the sustainable practices at different vendors. This webinar will review what the Walmart Sustainability looks like today and what the company hopes it will become in the future. It will also look at the larger trend of different sustainability indexes and reporting requirements, what this means for companies and their suppliers, the opportunities this creates for consultants and contractors, and the pros and cons of having environmental, energy and water policies driven by a patchwork of public and private indexes and reporting requirements.
The GSC is helping to promote this exciting webinar on March 29 from Noon to 1PM (EDT). REGISTER to reserve your slot!
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GSC Webinar: Poland - Another Central European Outsourcing Destination where Economic Results Meet Socially Responsible Development
 Michal Urbankowski, Consul, Trade & Investment
Consulate General of the Republic of Poland
In the recent AT Kearney ranking, Poland went up from 22nd to 6th position in the degree of confidence of foreign investors as measured in the Foreign Direct Investment (FDI) Confidence Index. The FDI Confidence Index assesses the current situation and future forecasts of international financial flows. In the 2009 Tholons Ranking of Top 50 Emerging Global Outsourcing Cities, Krakow (Poland) went from 16th to 4th position, after Cebu City (Philippines), Shanghai (China) and Beijing (China). During this interactive webinar, Economic Consul Michal Urbankowski will lead a panel of regional economic leaders and outsourcing practitioners, discussing drivers, as well as challenges of such a dynamic development. Representatives of Krakow Special Economic Zone will outline their long-term growth agenda which incorporates financial incentives coupled with a “green, clean and socially responsible” development platform. A representative of Motorola Krakow will share the global manufacturer’s experience in operating one of its hubs in this historic center of Poland.
REGISTER to reserve your slot in this global sourcing destination webinar
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Best Practices: PLI
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 Ian Pollard, International Professions Practice Manager
Vice President, Chartis International
Professional Liability protection: Why should IT and BPO Companies be concerned?
Professional Liability Insurance (also known as Professional Indemnity or Errors and Omissions Insurance) is a specialized insurance product once bought only by the “traditional” professions – Medical, Legal and Accountancy.
Professional Liability Insurance has been widely bought in many jurisdictions for over three decades. However, the growth in global sourcing has driven demand for this specialized insurance in diverse territories such as India, China, Brazil, South East Asia, Latin America, Eastern Europe, Africa and Middle East in the Information Technology (IT) and Business Process Outsourcing (BPO) sectors.
The growth of the IT and BPO sectors is well documented. A study by Frost & Sullivan estimated the worldwide market at US$930 billion in 2006 and US$1,430 billion by the end of 2009. Many commentators expect the most recent global economic downturn to fuel the growth of outsourcing. The growth and globalization of such exposures informs the way businesses in the emerging markets look at risk control and mitigation and augments demand for Professional Liability Insurance.
A number of drivers contribute to IT and BPO sector demand for Professional Liability Insurance .
1. Foreign clients demanding high standards of protection as a contractual condition.
Increasingly, Professional Liability Insurance is a prerequisite when tendering for business with overseas companies, especially in litigious environments such as the USA, Europe, the UK and Australasia.
Clients/third parties seek to mitigate their potential loss by ensuring that a successful recovery in any action based on a service provider’s negligence does not depend solely on the resources of that provider. This is where Professional Liability Insurance can provide great value as a “shield” - by indemnifying the third party claimant/client.
2. Professional Liability Insurance as a key component of business
Professional Liability Insurance assists smaller companies in negotiating contracts. By providing financial support, this insurance alleviates the need to tie up capital (in escrow), minimizes management distractions and helps avoid or reduce the impact of aggressive litigation.
3. Frequency and cost of claims
Exposure to litigation and claims is rising in major trading blocks around the world. Emerging markets / off shoring / outsourcing centers are not immune. Heavy reliance on effective IT and BPO for commercial, industrial and governmental clients is leading to a keen interest on how best they can pursue counterparty when a contract goes “off track”. There is an escalation in the number of claims and in the level of damages. So too is the often overlooked cost of investigating the claim, determining next steps and arriving at an agreement through legal advisors. High profile cases and precedents are beginning to be set in Asia particularly.
4. Expert advice on complex claims situations
Faced with a claim from a major customer, many firms struggle to deploy the specific legal expertise that can help resolve issues favorably for the service provider. An expert insurer, experienced in handling major claims in the IT / BPO area, will increase the likelihood of a satisfactory conclusion for the insured.
Typical claims in the IT/BPO sector
Many claims we have covered share in the following common themes:
1. The cost of investigating and defending computer-related claims is particularly high and complex due to their inherently intangible nature.
2. Many companies find themselves in expensive disputes without even realizing they have done something wrong.
3. Failing to defend these allegations properly can cause irreparable damage to the reputation and financial stability of a business: Simply having a Professional Liability Insurance cover demonstrates the insured has gone through the risk management process of buying insurance; further, solving and settling claims quickly with expert advice from an experienced insurer can improve outcomes and lessen reputation impairment of difficult potential litigation.
Typical claims made against IT / BPO companies include:
How can IT / BPO Companies mitigate risk?
IT and BPO companies confront globalised industry claims and litigation trends spreading from the USA, the UK, Europe and Australia, as well as ever-increasing domestic litigation and claims in Asia, Latin America, Eastern Europe, Middle East and Africa.
Following some basic risk management principles below and incorporating them as common practice will help firms understand and mitigate exposure to these growing risks:
· Have a clear written contract in place for all client / customer transactions explicitly charting the IT / BPO companies’ obligations. IT / BPO companies are often sued for breach of contract; managing the drafting and carefully limiting liabilities, can dramatically reduce this risk.
· Have standard and non-standard contract forms drafted and regularly reviewed by an experienced in IT / BPO and IPR lawyer; contract certainty applies not only to “inward” transactions – but also to “outward” transactions with suppliers or subcontractors
· Clearly document amendments made to a contract or project during the contractual period. Changing client requirements and resultant (mis)communication is a common source of dispute. If not resolved these disputes can escalate into time consuming litigation. Any amendments should be verified by the client and legally documented to reduce this risk.
· A simple complaints procedure helps resolve issues quickly and prevents an escalation of the problem.
· Risk management is a critical internal business function, but there is always the chance something could go wrong. Once basic risk management ingredients are in place, IT / BPO firms can then think about risk through a Professional Liability Insurance Policy.
Coverage available in market
A range of insurance solutions in the emerging markets help businesses mitigate exposures to Professional Liability Insurance for IT and BPO companies. Policies address a multitude of exposures ordinarily excluded under other available commercial insurances: Comprehensive Commercial General Liability, Public Liability, Products Liability, Directors and Officers Liability. Professional Liability Insurance wordings should respond to: negligent acts, errors or omissions; defense costs; intellectual property rights infringement; breach of data protection legislation; defamation; loss of Computer Records; and employee dishonesty. Exposures are evolving and emerging constantly, such as cloud computing, data protection and increased sophistication of technology – insurance solutions are evolving to further mitigate such growing perils. This underscores why IT/BPO industries should consider purchasing professional liability insurance to protect balance sheets, reputation and provides businesses with peace of mind. This allows IT/BPO businesses to focus on improved and cost effective services for their clients.
The optimum risk prevention strategy will combine risk transfer and incorporate comprehensive risk management. Risk transfer insurance provides the “shield” and risk management allows an insured to reduce their costs in the long run: by proactively reducing the exposure to any policy deductible and by premium savings due to lower claims frequency and severity.
Why do IT and BPO companies need Professional Liability Insurance in emerging markets?Industry Growth |
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We are looking forward to hearing from you. Please contact Wanda Lopuch if you would like to participate in the work of committees or contribute your time, talent or resources in other ways.
Join the Global Sourcing Council
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