The Old Switcheroo

Sustainable production – from both a more social and environmental standpoint – is becoming an increasingly important factor for consumers. However, some companies struggle to ensure sustainable production – even when they want to implement it. This is usually because of complex global supply chains.

Shortly before Y2K, the United Nations initiated the Global Compact with the goal of winning over as many companies as possible for more sustainable globalization. Those who entered into the pact with the UN commit to promote and uphold human rights, worker’s rights, environmental protection, and corruption prevention in all states in which they are active. This pact on minimum standards was signed by over 12,000 parties in 2017. Due to rising global demand, it is worthwhile for companies to assume a great deal of corporate social responsibility (CSR) for purely commercial reasons alone. Global supply chains are becoming increasingly important within this context.

Over 270 suppliers

That’s because these chains represent an element of global commerce where a lot of important modifications can be made. Let’s take the supply chain behind clothing – a deceptively simple consumer good – as an example. Standard jeans cover around 50,000 kilometers on average along their production route. Child labor and inhumane working conditions are hotly debated topics, and not just in the textiles industry. Supply chains in this industry can usually be developed in an ethical way if companies ensure that their suppliers as well as the suppliers’ suppliers are audited, thereby creating transparency for customers. This process is far more complicated in the electronics industry. For example, a typical smartphone is made of components from around 270 suppliers, which makes it practically impossible to trace the entire supply chain. This particularly applies for the conditions of production involving rare earth elements. Coltan, which is refined to make the tantalum that is indispensable in the electronics industry, is classified as a conflict mineral, primarily due to the countless reprehensible coltan mines in the Democratic Republic of Congo. These mines are hazardous to human health, and employ child laborers. Moreover, Congolese warlords use earnings from these mines to pay for weapons and soldiers, exacerbating the warring state of the country. An ethical electronics supply chain and fair trade cell phones are impossible to produce within the current global market structure. However, it would be helpful if a radical change could be made by setting up new supply chains altogether; after all, the largest known deposits of rare earth elements are located in China, Australia, and Canada.

China serves as the nexus

Generally speaking, when it comes to commercial production there are hardly any supply chains that don’t include at least one stop in China. Even though China is turning into a consumer market, its reputation as the ‘workbench of the world’ is still valid. Although goods produced in China have flooded the global market, they have a dubious reputation in Western nations since they are disproportionately cheap and of poor quality. With the help of the Internet, though, companies from all over China now have the opportunity to serve as reliable suppliers for the global market. “Alibaba is planning to set up a platform that will only trade in goods with the proper certificates,” says Frank Holzmann, an e-commerce expert at TÜV Rheinland. This platform represents another step that will help make supply chains more fair and transparent.

Picture credit: TÜV Rheinland/Werner Müller Gestaltung