Risk management program

Risk Management And Corporate Social Responsibility: How Protecting Supplier Employees Protects Your Brand

Written by

Many organizations think of both risk management and corporate social responsibility (CSR) as “check the box” activities. And that tactical approach hurts them – both in terms of negative events still occurring and in terms of losing out on opportunities to grow.

Let’s look at an area where risk management and CSR intersect – integrity and worker safety within supplier organizations. On February 7, 2016, an earthquake of magnitude 6.4 struck Tainan, a city in southern Taiwan, leaving 116 people dead. A 17-storey building collapsed during the earthquake and an investigation by the newly elected government found that the builder had used tin cans as construction filler in the metal beams in the foundation of the complex. The building was constructed in 1989 and since the beginning residents living in the building reported issues like falling tiles and frequent breaking down of the elevators. The builders have been taken into custody and are presently undergoing trial for professional negligence. While it’s easy to say that validating structural integrity of buildings goes beyond supplier risk management’s purview, the bigger point is that doing due diligence around worker safety is not only an important CSR activity, but one that mitigates risks to your brand.

Remember the Bangladesh factory fire? On November 24, 2012 in a factory in Dhaka, Bangladesh a fire at the Tazreen Fashion factory killed 117 people and injured hundreds more. The casualties highlighted unsafe practices in the facility and led to a number of reforms in Bangladesh to prioritize business safety laws and workers’ rights. In addition to the loss of life and disruption to supply chains, organizations such as Walmart, Li & Fung, and even the United States Marines suffered as customers realized they used the services of the factory. Even though these organizations were not responsible for the fire and subsequent casualties, their brands still suffered as consumers realized they were using suppliers with poor worker safety practices.

In these days where natural disasters and fires make news around the world, and as consumers become more socially conscious in their buying decisions, companies need to be more structured and thorough in validating the worker health and safety practices of their suppliers. This allows companies to “check the box” of their compliance requirements but much more importantly allows them to protect their brands while improving the lives of people who are (even indirectly) working for them.

Incorporating CSR is a hallmark of mature supplier risk programs. For further ideas on how to improve the maturity of your supplier risk management efforts, download our white paper.