Ahead of The 2016 SharingValueAsia Summit, PublicAffairsAsia asks FleishmanHillard’s Laura Tyson how companies should act to ensure their supply chains meet the demands of increasingly active and inquisitive consumers
QUESTION: Corporations need to pay far more attention to their supply chains these days. What’s changed to make that such a critical issue for their reputation?
LAURA TYSON: One thing is that people are far more educated and inquisitive about the provenance of their products, be it food, clothing, electronic goods. Secondly, anyone can be an investigative journalist, armed with a camera. There are many, many channels to push the content out, so there’s a far greater spotlight on supply chains. And thirdly, there’s much more regulation: we’ve seen anti-slavery legislation in the UK and California, anti-bribery acts in the US, UK and most recently Korea.
QUESTION: Should companies have a default position of proactivity?
LAURA TYSON: I think this increased activism by consumers and investors is part of natural evolution, it’s almost the next stage of industrial development. Recently I had a manufacturing client who had a big investment fund knocking on their factory door asking to look round. Typically, factories wouldn’t let in anyone who wasn’t a customer. I haven’t seen that level of proactivity until quite recently. There’s a mix of pressure from regulators, shareholders, consumers, NGOs, media; and by some there’s certainly a genuine desire to improve things. Standing still is no longer an option.
QUESTION: Which companies that have really embraced this?
LAURA TYSON: Many of the larger companies, H&M, Nike, Adidas, Unilever, M&S who by their nature, have the most complex supply chains, are making great strides and seem genuinely (and publicly) committed. But the more brands go out on these sorts of issues, the more you’re bashed. That causes some reticence among smaller brands, who just don’t feel equipped to be outspoken on these issues. In terms of raising standards across the board, there’s a fine balance between NGOs holding these companies to account – and that’s obviously very important – whilst not deterring others from greater self-regulation and aiming for higher standards.
QUESTION: It’s obviously worthwhile companies doing this, even if they’re not promoting the fact, since then they have this insurance policy against being attacked if anything occurs.
LAURA TYSON: Yes, but then there’s no education of the consumer. Nowadays we know what organic food is and will pay extra for it. If companies are too reticent, they can’t educate their consumers, who won’t then understand the potential cost implications.
QUESTION: What’s the function of the communications and corporate affairs professionals in this process?
LAURA TYSON: For the brands it tends to be external, because internally much of it is done contractually. Suppliers are told “you must comply with our codes of conduct, we’ll come and audit”. A lot of the work we do is with manufacturers. They have spent many years (required by their customers) never saying anything to the media! Very few have a comms function or even done much internally. Then suddenly, in the last few years, they’ve found themselves named on the brands’ websites, as “one of our primary suppliers”. Many manufacturers are ill-prepared for the spotlight. So we’ve been helping them get better at communicating. There are simple things, like having a website in English, but also effective internal communications to embed standards, mitigate risk and cascade that through the company.
QUESTION: How do you justify the expenditure? Do you use the carrot and stick?
LAURA TYSON: For manufacturers it’s both. Internally communications can play a key role in risk mitigation. Externally brands are looking for complementary partners as they seek to consolidate their manufacturing base. Those manufacturers that espouse similar messaging and standards stand a better chance of winning the business.
QUESTION: If you come up against resistance within companies, what is their objection to this more transparent environment?
LAURA TYSON: It’s mostly fear! For manufacturers this is very, very new and it’s not a natural environment for them. I don’t think they’re ever going to be out there shouting about what they’re doing, but there’s definitely a need to be a bit more open, to tell people about the business and the standards they adhere to. For the brands, I think it comes back to what I was saying about the hesitancy of putting yourself out there and the fear of extra scrutiny that brings.
QUESTION: What about companies who invest time and money but don’t really change?
LAURA TYSON: They do at their peril. Companies needs to take responsibility for their supply chain. NGOs play an important and effective role monitoring and holding companies to account. That said, for NGOs, the ultimate goal is to raise standards across the board. To achieve this they need to tread a fine line – too much bashing of companies who are doing their best to make improvements could be counterproductive.
QUESTION: If you can get the investor community mobilised to force companies to change, does that top-down influence exert more pressure?
LAURA TYSON: Ultimately consumers still want reasonably priced goods combined with a level of trust that no harm has been done in producing them. As long as that trust is ticking over nicely they will be happy to keep buying without taking a great deal of interest in the nitty-gritty of the supply chain. The most acute risk for investors and brands alike is an erosion of that trust. Both would be foolhardy not to try and mitigate against that.
QUESTION: To what extent are you trying to effect a culture change in companies where “ignorance is bliss”? If they don’t ask too many questions of the suppliers, they don’t feel culpable for their actions.
LAURA TYSON: That’s not a realistic position any more. Slowly but surely regulation is requiring that much more attention be paid to the supply chain and the risks are heightened by social media.
Laura Tyson is Senior Vice President at FleishmanHillard in Hong Kong
The Thought Leaders Series is Supported by FleishmanHillard
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