Social unrest in China makes the business case for better factories

Improving corporate supply chains is often about helping suppliers run better businesses.

From clothes to cocoa, this is becoming the mantra of large corporates who understand sustainability/corporate responsibility improvements cannot exist in a vacuum.

But traditionally, factory managers have sometimes been resistant to suggested changes to operating procedure. There are of course myriad reasons for this, not least cost.

But the growing social unrest in China, masked as most of it is from us in the West, surely helps make the business case for supplier engagement. Here’s our report on it from 2006.

The numbers of serious incidents has doubled since then, according to the LA Times:

“A sociologist at Beijing’s Tsinghua University reported this year that China has had 180,000 “mass incidents” in 2010, double the number in 2006.”

If workers are rioting and bombs going off in Southern China, that ought to get sustainability and corporate responsibility a bit more attention from your supply chain heads.

Now, they may rightfully ask: “What can this fuzzy CSR stuff do to stop workers going on strike, or rioting and smashing up our contractor factories?”.

To which you might reply:

“Well, if we, and other brands, help factory owners run better businesses (rather than do philanthropy), we’re going to see a much better reputation on the ground, improve productivity, cut costs and, if it all kicks off, have a higher chance that our contractor factories will not be targeted”.

Clearly, this kind of capacity building with the local “institutions” (as much of the cause of unrest as private businesses) is not going to be easy in China. But then it’s not easy in Nigeria, Azerbaijan, Venezuela or most other places either. That doesn’t mean we shouldn’t think about it.

If business doesn’t get together and help, who else is going to? Government and NGO capacity building programmes only go so far. (i.e. not very)

Social unrest in China is likely to increase. Brand factories are increasingly vulnerable as a result.

Sourcing company engagement with the issues can be done, through partnership, programmes and lobbying.

Doing so may mean a good opportunity to stabilise the supply chain.

It’s not as if you can just stop sourcing from troublesome or increasingly more expensive places such as China. As Paul French points out, other sourcing nations come with their own challenges.

Here’s a briefing on what some of the leading brands are doing. We publish 20-30 of these per year. Sign up for all of them here.

(We’re holding conferences in London and New York in October/November on supplier engagement. For more info contact Cora.Ng@ethicalcorp.com)

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