Maintaining Brand Equity in Extended Supply Chains

Corporate Social Responsibility (CSR) reporting has become commonplace at big companies. A press release from the Governance & Accountability Institute reported that 81 percent of companies listed in the S&P 500 Index published a sustainability or corporate responsibility report. In 2011, that number was less than 20 percent.

There are as many ways to approach corporate social responsibility as there are companies. But a key driver is almost always focusing on the issues that could be most injurious to that company’s brand equity. For large apparel and retail companies, the treatment of labor in sweat shops in third world countries, unconscionable factory safety issues (fires and building collapses have killed thousands in Bangladesh alone over the past few years), the use of child labor, and the use of slave labor are all issues that have caused negative publicity for a number of companies including Nike, Walmart, and Nordstrom.


The black holes in these companies extended supply chains often occurred at the subcontractor level. While major retailers have written contracts with an estimated 2,000 contracted factories, that is not the case with sub-contracted factories. Too often, the contracted companies would not have the capacity to handle surges in demand and would turn to subcontractors for fear of losing contracts. The rather poor oversight that historically occurred even at the contractor level was completely absent at the subcontractor level.

Apparel brands and major retailers responded by creating associations committed to fair labor practices. Usually the major tool of these associations are factory audits. But are factory audits sufficient?

Not according to Kohl Gill, the CEO of LaborVoices. Mr. Gill gave a presentation at APICS 2016 conference where he explained that many auditors are poorly trained, often being certified to conduct an audit after as little as five days training. Further, workers are often afraid to speak to the auditors. And audits often occur just once a year; even if a garment shop passes that audit, what is to say that their treatment of labor doesn’t degenerate thereafter?

So what is the solution? LaborVoices took a crowd sourcing approach to the problem. Workers use their mobile phones to anonymously call into LaborVoices SmartLine free of charge and answer a series of questions of interest to the brand owner including wages, health & safety, child labor, and abuse. They use their keypads to answer the questions, which allows this application to scale much more efficiently than hot lines using operators. They claim good results from their beta of the tool

But it is their plans for the next generation app that caught my attention. Workers will report their wages and working conditions and in return learn about the garment shops in the area with the best working conditions. In effect, they are taking the concept of curation, key to the success of platform companies like UBER and Facebook, and applying that framework to corporate responsibility. I like it!

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