- Step 1: Engage Stakeholders and Partners
- Step 2: Assess risks and impacts
- Step 3: Develop code of conduct
- Step 4: Communicate and Train across your supply chain
- Step 5: Monitor compliance
- Step 6: Remediate violations
- Step 7: Independent review
- Step 8: Report performance
Why Produce Public Reporting?
Until recently, public reporting on social compliance was largely voluntary, although some industry and multi-stakeholder groups required public disclosure of audit findings and other program elements as conditions for membership. But recent statutes at both the state and federal levels, including the California Transparency in Supply Chains Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act, have mandated certain disclosures for companies covered by those laws. Though most reporting is still voluntary, a growing number of consumers, shareholder groups and non-governmental organizations (NGOs) have come to expect companies to share social compliance information with the public – and increasing numbers of companies have undertaken sharing such information to demonstrate engagement and leadership in their policies and programs.
Public reporting offers a variety of benefits, both internal and external:
- Employee Education and Buy-In
- External Input
Social compliance reporting helps educate everyone in the company about the program, which in turn can foster a greater commitment across the company to support social compliance and bolster loyalty among employees who value issues related to worker rights.
The process of putting together a report requires the social compliance team to reexamine its Key Performance Indicators (KPIs) and assess progress against them, as well as benchmark progress against their peer companies. The team should examine issues that have come up throughout the year, the approaches that were taken to address them, and whether those approaches were successful. The team should also consider whether its overall program has had any unintended consequences, and, if so, evaluate those.
Reporting should offer clear processes through which important stakeholders, including workers and local community members, can provide feedback. Responses to the report can also include media coverage and use of report material in NGO campaigns. Whatever form they take, external responses help your company to evaluate and continuously improve the system, including the structure and process for future reporting.
Public reporting should clearly state the goals of the social compliance program, how the company is pursuing those goals, how it measures progress against the goals and the degree of progress to date. This promotes greater accountability both within the company itself and with important external stakeholders.
Key Performance Indicators (KPI) for Investors to Assess Labor and Human Rights Risks Faced by Global Corporations in Supply Chains
“The Harvard Law School’s Pension and Capital Stewardship Project has partnered with the Fair Labor Association (FLA) to develop key performance indicators (KPIs) for investors to assess labor and human rights risks in global corporations’ supply chains.
After the 2011 completion of the draft KPIs, which was created in consultation with more than 100 global asset owners and asset managers, the project began Stage 2 – testing with nine companies. These companies collectively source from 1,755 factories that employ around 1.8 million workers in 62 countries. The KPIs are:
- Code of Conduct – issues such as child labor, freedom of association, health and safety.
- Supplier and Managers Training on Code of Conduct
- Corporate Commitment to Code of Conduct
- Suppliers with Confidential Reporting Channels for Worker Grievances
- Suppliers Monitored At Least Annually for Code Compliance
- Suppliers Subject to Independent Verification by External Monitors
- Sourcing Countries in Which Company Consults with Civil Society Groups
- Percentage of Successful Remediation of Code Violations
Ultimately, the results of these tests will help formulate standardized KPIs. Standardized KPIs would enable third parties to determine which companies operate in challenging industries and countries, and identify those companies who are making the most progress toward reducing operational and reputational risk.”
Source: The Pensions and Capital Stewardship Project, Harvard Law School, and the Fair Labor Association, Key Performance Indicators for Investors to Assess Labor & Human Rights Risks Faced by Global Corporations in Supply Chains: Stage 1 Summary Report, January 2012.
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