Understanding Supply Chains and CSR Ruth Rosenbaum, TC PhD CREA

2 Question: Who is Responsible? In many countries, local and national governments are responsible for the labor laws and the environmental laws under which factories operate and workers work. BUT in many other countries, governments do not govern to protect their people (the workers and their communities) and the environment.

3 CSR Tool: Shareholder Resolutions Shareholder Resolutions have 2 purposes: 1. Inform investors about an issue or situation 2. Bring about change in company actions Reminder: Shareholder votes are leverage, nothing more. They are not binding. more. They are not binding.

4 Bringing about Change in Company in Policies, Programs and Practices 1. Many of the things we want changed are not simple. Change requires time and work 1. Many of the things we want changed are not simple. Change requires time and work 2. To work with companies to bring about change requires knowledge and expertise

5 Supply Chains Raw materials Raw materials Processing of materials Processing of materials Production sites Production sites Assembly plants Assembly plants Distribution locations Distribution locations

6 Cotton Supply Chain

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9 Impact Across the Supply Chain OEMs Tier 1 Factories Sub-Tiers Tier 1 HQ Corporate-Level Engagement Site-Level Trainings

10 Question of Responsibility When governments do not govern to protect workers and the environment, the question arises: who has the power to create the standards under which factories and businesses operate? When governments do not govern to protect workers and the environment, the question arises: who has the power to create the standards under which factories and businesses operate? The whole system of Codes of Conduct, social compliance programs, audits, etc. is needed BECAUSE governments do not govern to protect their people, their communities and the environment. The whole system of Codes of Conduct, social compliance programs, audits, etc. is needed BECAUSE governments do not govern to protect their people, their communities and the environment.

11 Power of the Corporations We require corporations to be accountable for this “governing” because: 1. They have the power to effect change. change. 2. They benefit from the supply chains Shareholders and consumers hold them accountable. Shareholders and consumers hold them accountable.

12 Why we are interested in supply chains Years ago, companies owned and operated the factories and systems which produced their products. Years ago, companies owned and operated the factories and systems which produced their products. They could decide and enforce the labor standards within those factories. They could decide and enforce the labor standards within those factories. However even then, these companies did not produce the materials from which their products were made. However even then, these companies did not produce the materials from which their products were made.

13 The Old Apparel Industry Company X owned the factories and mills that manufactured their products. Even then, however, they bought the buttons, zippers, thread, etc. from other companies. Company X owned the factories and mills that manufactured their products. Even then, however, they bought the buttons, zippers, thread, etc. from other companies. These other companies were their suppliers These other companies were their suppliers However because these suppliers were relatively local, the apparel company know how these other factories were being run. However because these suppliers were relatively local, the apparel company know how these other factories were being run.

14 Supply Chains in the Global Economy Materials can originate almost anywhere in the world. Materials can originate almost anywhere in the world. Assembly can take place almost any place in the world. Assembly can take place almost any place in the world. In the apparel sector, a garment is marked “made in country x”. It is simple. In the apparel sector, a garment is marked “made in country x”. It is simple.

15 EXAMPLE: There is nothing simple about the Electronics Sector Electronic instruments, e.g. computers, can only be marked “assembled in country x”. Electronic instruments, e.g. computers, can only be marked “assembled in country x”. Essentially the inside of any computer is like the United Nations. Essentially the inside of any computer is like the United Nations. To illustrate the complexity of the Electronics Supply Chain, CREA staff disassembled an old computer to see who made which components where. To illustrate the complexity of the Electronics Supply Chain, CREA staff disassembled an old computer to see who made which components where.

16 The Computer CD drive Floppy Drive Gateway computer Intel Chip CD/DVD writer CaseFan Power Supply Ports attached to motherboard

17 Once we go inside, we see… Motherboard Wire harness Power Supply

18 Major Computer Components Power Supply Hard drive Floppy Drive CD/DVD writerCD drive Mother Board

19 Complexities inside the Components

20 And then there is the monitor… Gateway monitor

21 But again, when we opened it…

22 Going deeper, we found…

23 Major Components Hard drives:Seagate, Western Digital Hard drives:Seagate, Western Digital CD/DVD drives: Liteonit CD/DVD drives: Liteonit Motherboards: Motherboards: Batteries: Maxell (Hitachi) Batteries: Maxell (Hitachi) Wire harnesses: Lucent Wire harnesses: Lucent Processor Chips: AMD, Intel Processor Chips: AMD, Intel Memory (RAM): Memory (RAM):

24 Major Manufacturers SeagateFlextronics Western Digital Solectron Lite-On-ItJabil HitachiFoxconn LucentCelestica AMDSCI Sanmina IntelElta Electronics and others…

25 Supply Chain Example Computer Assembly DVD/CDHard diskMotherboardWire Harness Other Components Capacitors ChipsCircuitsMemory With separate supply chains for the monitors, keyboards, mice, etc.

26 What has the Brand Name on it is the result of the work of many workers in many countries.

27 The Underlying Problems The labor issues found in any assembly factory in any industry: wages, working hours, etc. The labor issues found in any assembly factory in any industry: wages, working hours, etc. Health issues related to: Health issues related to: Repetitive motion injuries Repetitive motion injuries Exposure to solvents during assembly Exposure to solvents during assembly Exposure to other chemicals, including heavy metals, during assembly Exposure to other chemicals, including heavy metals, during assembly

28 Environmental Issues during assembly Exposure of workers to chemicals used in assembly process Exposure of workers to chemicals used in assembly process Disposal of chemicals used during assembly – possible environmental and community contamination Disposal of chemicals used during assembly – possible environmental and community contamination

29 Toxic Chemical Exposure during production Many toxic substances are used during the production of electronics components. These include, but are not limited to: brominated flame, retardants, cadmium, mercury, lead, tantalum, epoxy, copper, isopropyl alcohol, hexavalent chromium. Effects of exposure can include cancer, nervous system problems, brain damage, blood diseases, etc.

30 Environmental Issues Disposal Disposal of plastics (non-biodegradability) Disposal of hazardous wastes

31 RECYCLING realities and questions Some computers are recycled to groups and communities who are beginners on computers. Some computers are recycled to groups and communities who are beginners on computers. Basic computers differ only in terms of speed, storage space and RAM (think of it as desk top space) Basic computers differ only in terms of speed, storage space and RAM (think of it as desk top space)

32 Software Different programs require different speeds, sizes of hard drives (storage) and RAM (space for active working). Different programs require different speeds, sizes of hard drives (storage) and RAM (space for active working). As programs become more complex, the computers needed to run them must be more complex. As programs become more complex, the computers needed to run them must be more complex.

33 Computer Operating Systems: Windows, et al In addition, each operating systems version, whether for Windows for Apple, places demands on the speed, storage and RAM of the computers. In addition, each operating systems version, whether for Windows for Apple, places demands on the speed, storage and RAM of the computers.

34 Effect on Recycling While some components are recycle-able, many are not, simply because computers need the operating systems and software to run them. While some components are recycle-able, many are not, simply because computers need the operating systems and software to run them.

35 Types of Recycling Components Components Use of whole systems by groups Use of whole systems by groups Export of computers to developing countries Export of computers to developing countries NOTE: This last requires LOTS OF ATTENTION!

36 Recycled computers in developing countries Many computers and components are not usable. Many computers and components are not usable. Unusable computers and components end up in garbage dumps. Unusable computers and components end up in garbage dumps. Heavy metals in computer components contaminate the communities’ land and water. Heavy metals in computer components contaminate the communities’ land and water.

37 Our Work in the Electronics Sector Labor rights issues Labor rights issues Environmental exposure issues during production Environmental exposure issues during production Environmental issues related to waste disposal during production Environmental issues related to waste disposal during production Environmental issues related to recycling Environmental issues related to recycling Examining the programs, policies and practices of the companies from which we buy our computers and other electronics equipment Examining the programs, policies and practices of the companies from which we buy our computers and other electronics equipment

38 These are not just contract supplier issues but also issues related to - Human Rights - Environmental Justice - Sustainability

39 Core Questions To whom does the EICC apply? To whom does the EICC apply? If the suppliers of components are multinational corporations themselves, how do we influence these corporations? If the suppliers of components are multinational corporations themselves, how do we influence these corporations? How far down an electronics supply chain does a brand have influence? power? control? How far down an electronics supply chain does a brand have influence? power? control?

40 These are not just questions of which companies are in which tiers but rather getting at the locations in the manufacture/assembly/ supply chain These are not just questions of which companies are in which tiers but rather getting at the locations in the manufacture/assembly/ supply chain where we can realistically have influence. where we can realistically have influence.

41 Supply Chain Work Connects to Other Work Cocoa work Cocoa work Child labor Child labor Forced Labor Forced Labor Human Trafficking Human Trafficking Human Rights Human Rights Labor Rights Labor Rights Sustainability Sustainability Other…. Other….

42 Remaining Questions How do we help each other to see both the big picture and the specifics? How do we help each other to see both the big picture and the specifics? How do we grow in our ability to see beyond the immediate? How do we grow in our ability to see beyond the immediate? How do we deepen our ability to question and seek truth? How do we deepen our ability to question and seek truth? Others……? Others……?