As consumers, we are conditioned to shop for the best deals — to get a high-quality product at the lowest possible price. Frankly, I know I don’t often think about how something was made or who made it, only that it’s available at a price that I’m satisfied with.
But almost everything we purchase or consume requires a complex matrix of suppliers, often invisible even to the companies whose name is on the final product. And that’s the problem.
The unending pressure to lower costs or maximize profits can cause even the most prestigious companies to make decisions that might result in unfair or unsafe behavior, forcing employees (even children) to work in unhealthy or forced labor conditions.
An estimated 40 million people work under some kind of forced-labor conditions today, many of them producing things we purchase or use every day, such as makeup glitter, automobile paint, and seafood, to name a few.
Partnership for Change
A large manufacturer may rely on tens of thousands of suppliers, many of them through indirect or third-party relationships, to source their components and raw materials. Until now, manufacturers might not have known that some of their suppliers engaged in forced labor practices. In some situations, they may have turned a blind eye to questionable suppliers.
Today however, new laws and regulations necessitate that businesses have more visibility into their supply chains — and certify that they adhere to fair labor practices. Globally, efforts are underway to eliminate forced-labor working conditions.
SAP Ariba has a partnership with Made in a Free World, a San Francisco-based company with an application called FRDM (read: Freedom) that makes it easier for companies to identify forced-labor problems in their supply chain.
FRDM is a SaaS platform that measures social risks in supply chains and has worked closely with the Obama administration, United Nations, Google, and others to reduce the impact child- and forced-labor has worldwide, according to Justin Dillon, CEO of Made in a Free World.
“We give our customers a way to measure social risk like slavery, like a heat map all the way down to raw materials, then they can work with their suppliers on any challenges,” Dillon said.
Made in a Free World keeps a federated, proprietary database that tracks supplier names, categories, product taxonomies, and spend amounts to determine if the products and services a supplier sells might be considered a risk.
For example, an airplane manufacturer might not have direct visibility into who works to produce rubber in Malaysia used for wheels. SAP Ariba and FRDM can determine if that remote supplier’s business deserves deeper due diligence.
“We can provide detailed analytics from which they can escalate an action or take appropriate steps,” Dillon said. “Three years ago, there was no way to measure your entire supply chain. Companies were Googling, or going to published Department of Labor lists. Now we offer customers compliance assurance because regulations require knowing risk in your supply chain beyond tier-one suppliers.”
Procurement with Purpose
Enterprises today increasingly are looking to embrace more corporate social responsibilities, which combined with social compliance regulations makes innovative supply chain applications even more important to the market. Made in a Free World has helped some of the largest companies on the planet proactively improve their supply chain practices.
“The world hasn’t really thought as much about the social life cycle of a product. We’ve made admirable strides for the environment, but less so on the social aspect of manufacturing,” Dillon said. “When I was starting down this path, one of my mentors asked me if our product, FRDM, was medicine or vitamins. That is, do we want to be something you only take when you’re in pain, or do we want to do something that makes you better. It turns out FRDM is both.”
Partnering with SAP has helped “detoxify” the conversation around social risk within many enterprises, Dillon said: “Five years ago, nobody wanted to talk with us about this problem. We had to go in through the back door. Now, companies are saying this is a big priority for them and with the tools that exist they can take it on. Popes, presidents, and investment portfolio managers like Blackrock’s Laurence Fink have elevated the need. It’s a true sea change.”
Made in a Free World has been a key partner in helping raise awareness with the SAP Ariba community toward social change, said James Marland, vice president of network growth at SAP Ariba.
“Real social change needs corporate collaboration to embrace social responsibility because most commerce is conducted business-to-business, not business-to-consumer,” Marland said. “You can boycott your local shop but that won’t impact a large buyer of steel or soybeans. You have to persuade companies that it’s not just the right thing to do but that it’s also better business.”
Large enterprises already monitor their supply chains to ensure inventories are available, and they also monitor suppliers for quality. Adding an ethical component is the next step, he said.
“In some places, like here in the U.K., it’s the law, but consumers are increasingly aware and it really could affect your brand. Enterprises want to take action before something catastrophic happens and they face tremendous backlash against their brands,” Marland said.
Through the efforts of Made in a Free World, enterprises are looking to engage in fair labor practices and employees around the world benefit.
“The conversation has moved from ‘Gotcha’ to “Let’s build a better system around this.’ Our mission is simply to help companies buy better and build a marketplace network that we can be proud of,” said Dillon. “Partners like SAP help us achieve this mission.”
SAP and our partners. Improving lives. That is our purpose.