Ethical Performance
inside intelligence for responsible business


‘fatigue’ in supply chains needs government tonic

April 2005

The World Bank has become so concerned at the slowing momentum of ethical supply chain monitoring that it is urging governments to become involved.

The bank feels many companies’ supply chain initiatives could run out of steam as buyers and suppliers wrestle with the complexities of improving their social and environmental performance. It believes both groups now need more support from governments, particularly in developing countries. In a report written by PricewaterhouseCoopers and Business for Social Responsibility for the CSR Practice in its Investment Climate Department, the World Bank says it has found widespread ‘fatigue’ among companies and suppliers, and ‘a sense progress ... has peaked’.

Existing approaches, especially those based on company codes, ‘cannot continue indefinitely without losing opportunities for improvement’. At the same time, progress is hampered by ‘continuing cynicism on the part of suppliers, who do not believe that investments in better social and environmental conditions will bring improved economic performance or greater access to markets’. The report’s authors say governments could help by providing a ‘supportive enabling environment’ along the lines of the Ethical Trading Initiative (ETI), which the UK government set up with companies, suppliers, trade unions and non-governmental organizations.

The bank feels that in developing countries in particular governments ‘should be involved more in setting up collaborative, industry-focused and multi-stakeholder initiatives’, such as those under way in the South African wine industry and the Kenyan horticulture sector.

In many developing nations where governance is poor, codes of conduct may be a ‘force for positive change’ but are unlikely to bring improvements unless implemented ‘within a comprehensive, public sector-governed framework’.

The bank, which originally commissioned the report for internal use, but subsequently decided to make the findings public, says that governments should explore ‘negative incentives’, such as fines for sectors or companies that fail to improve their social and environmental performance. At the same time they should cut red tape and offer tax incentives to companies or sectors trying to improve labour standards.

The ETI told EP: ‘Individual solutions to code implementation can only ever have limited impact. Collaboration between companies and their suppliers, governments, trade unions and NGOs is essential.’

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