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Challenges in Measuring Supply Chain Social Sustainability
November 28th, 2012
As Sustainable Brands readers know, there is growing interest in achieving sustainable production systems. This has been attributed to many factors, including: increasing costs of energy and resources, risks associated with material availability and use, consumer demands, government regulations, and altruistic interest in reducing the negative environmental and social impacts of production. However, challenges to establishing sustainable production systems exist. As noted in a National Institute of Standards and Technology (NIST) industry workshop report: “Industry is unable to measure economic, social, and environmental consequences of their activities and products accurately during the entire life cycle and across their supplier network1.”
While there are challenges in measuring attributes of the three pillars of sustainability (i.e., economic, environmental, and social), tracking the financial implications of different scenarios is an implicit part of doing business. There has been increase in attention on the environmental pillar of sustainability over the past several decades. As a result, tools, concepts, and principles such as life-cycle assessment, carbon footprint estimation, design for the environment, and product stewardship are becoming commonplace. Decision-makers in industry (from the board room to the drawing board) now often consider such measures of performance as greenhouse gas emissions (GHG), resource consumption, solid waste discharges, liquid effluent wastes and toxic emissions. Without performance measures such as these, it is difficult to judge how a change to a product or production system affects environmental sustainability. These metrics and associated decision-making tools are critical to enabling an organization to measure its progress toward sustainability and communicate its progress to others.
The social dimension of sustainability is also important to many organizations; however, there are many challenges to measuring the social sustainability of production systems. Four interrelated challenges are: establishing metrics, prioritizing issues, identifying and tracking issues in the supply chain, and developing strategies to address social impacts. Essentially, the questions are:
- What metrics of social performance have been established?
- What metrics should be used within an organization?
- How can these metrics be used in an organization and throughout its supply chain?
- Once issues are identified, what can be done to improve?
Two common issues are associated with elements of a company's supply chain, for example material handling problems and associated impacts or labor practice. Nike's problems with labor, including alleged child labor practices, were raised some years ago are still not completely resolved; years later, in this 2008 article Nike stated that improving the working conditions for workers in its supply chain "continues to be one of our greatest priorities."
Ford, for example, has a supply chain sustainability group that is charged with maintaining long-term relationships and trying to understand and "align" with their suppliers on a wide range of sustainability related issues such as "greenhouse gas emissions management and human rights." This organization is also working to build into the company's purchasing functions the ability to identify and deal with sustainability issues as part of their routine business processes.
Further, the auto industry, as have many industries, has also had to address the issue of conflict minerals entering the supply chain. Numerous minerals on the conflict list are present in automotive components and they enter the vehicle through often complex supply chain interactions.
But these three examples, representing clear social impacts in terms of labor and human rights, are in fact relatively "simple" examples. The real issue of achieving sustainable production systems, and not just specific (albeit important) elements, is still a daunting challenge.
There are many possible social impacts to consider within a production system. One place to start is with labor and human rights. The United Nations and International Labor Organization (ILO) have developed documents that outline basic expectations for how individuals generally and workers in particular will be treated. The ILO’s eight core conventions address forced labor, child labor, discrimination and freedom of association and collective bargaining. Even these issues, which are considered by many to be fundamental, are contentious. In the United States, there are vocal supporters and opponents to the right to associate and bargain collectively; this topic is the subject of an ongoing political discussion.
Defining child labor as having negative social impact also poses challenges. On one level, there is disagreement about what age marks the transition from childhood to adulthood. On another level, there is disagreement about how to deal with difficult circumstances — in a situation where a child must work for a family to be economically viable, is it better for the child to be in a manufacturing facility or a potentially less monitored and less safe environment? Most of the readers of this article would likely agree that the best place for child to be is in school, and the challenges associated with that option will be addressed shortly.
Beyond the fundamental rights discussed so far, organizations may want to consider metrics that address a broad range of stakeholders or that are specific to their products. Community impacts such as improvements to infrastructure or education may be of interest. It may be important to address consumer health and safety considerations for particular products — in this case, some impacts may be positive (e.g., impact of vitamins or vaccines). Some ambitious organizations may attempt to address the social and psychological impacts of products on consumers (e.g., impacts of smartphones on social behaviors, the impacts of some fashion dolls on young girls). However, in light of the difficulty we have in agreeing on “fundamental” rights, addressing impacts on a broad range of stakeholders at a number of levels seems incredibly daunting.
As the discussion of metrics implies, there are a large number of metrics of social performance used and promoted by various organizations. A nearly infinite amount of human and financial resources would be required to measure and track all the possible social impacts of a particular production system. Therefore, some method of prioritization is necessary.
For the purposes of making comparisons between different products or production systems, it would be useful if all businesses were generating and maintaining data on the same impacts using the same measurements. Organizations such as the Global Reporting Initiative (GRI) and the Global Social Compliance Program (GSCP) are taking steps toward that goal, but their mission is far from complete. It has been difficult to develop metrics that are appropriate and meaningful in all circumstances.
In the absence of a broadly accepted and applicable metrics, businesses must choose which metrics are right for their purposes. They may choose to prioritize based on the impacts they have the most control over — their “sphere of influence” — which may be determined by proximity within the supply chain, geographic proximity or financial factors. The gravity of impacts may also be considered when prioritization takes place. For example, use of conflict minerals is a serious concern for the electronics sector and steps are being taken industry-wide to resolve the issue. Finally, the time between an action being taken and the resulting social impact may also contribute to the priority an organization places on that impact.
Measuring and Tracking Social Sustainability
Once metrics of social performance have been selected, the next challenge is to measure them. There is a strong preference toward quantifiable metrics among business decision makers. In some cases the unit of measurement is clear; again, GRI and GSCP have been working to address this issue. However, determining the appropriate unit of measure is not trivial in many cases. Recall the previous discussion about child labor and the difficulty in simply determining what a “child” is.
Additionally, the relationship between activity within a supply chain and social impacts is not well understood. There may be actions that have been taken by a number of organizations (e.g., business, government) as well as long-standing socio-cultural circumstances that contributed to the emergence of a particular social impact. How does an organization assess its responsibility?
Improving Social Sustainability Performance
It is not always clear what constitutes improvement. While unsafe working conditions are clearly undesirable, is it an improvement to move injury rates toward zero by transforming entire assembly lines to complete automation? Not unlike environmental sustainability metrics, several measures of social performance must be considered to effectively assess a product or production system. As previously discussed, one of the related challenges is determining which metrics need to be assessed for a complete picture of social performance.
In the case of child labor, an organization may choose to address the issue of children working in its supply chain or it may choose to address the issue of children not being in school in the communities in which its suppliers are located. The former issue is challenging — the supply chain will have to be identified (a real challenge for many businesses), and a method for auditing will likely be needed, as well as effective communication and follow-up. The latter issue — of children not being in school — is arguably a bigger challenge as it requires partnering with organizations outside of the supply chain, but in the communities of concern. Developing the relationships and creating the physical and social infrastructure necessary to ensure children are in school is a serious undertaking.
Although there are challenges in assessing the social sustainability of supply chains, the challenges are not insurmountable and many organizations are taking steps to overcoming them. Several initiatives are underway to identify the key metrics of social performance and establish methodology for their measurement. However, individual organizations must ensure that these metrics are appropriate within the context of their supply chains and, in many cases, prioritize these metrics along with others that relate more specifically to their supply chains or products. There is also a need for coordinated tracking to enable information sharing throughout production systems. Finally, the greatest challenge (and ultimate goal for sustainability) is to figure out how to shift from being “less bad” to being “more good.”
1 Rachuri, S.; Sriram, R.; Narayanan, A.; Sarkar, P.; Lee, J.; Lyons, K.; and Kemmerer S. (2010) “Sustainable Manufacturing: Metrics, Standards, and Infrastructure - Workshop Summary,” in Proceedings of The 6th annual IEEE Conference on Automation Science and Engineering (IEEE CASE) 2010, Toronto, Ontario.