It’s not easy, but some leading companies have found that the right incentives and collaborative efforts can help their suppliers achieve better environmental performance.
Multinational corporations are under growing pressure to make sure that their contractors and subcontractors in China meet environmental standards in their operations. Yet traditional approaches to ensuring environmental, health and safety compliance, such as checklist audits, have proved problematic. The authors conducted research over a one-and-a-half-year period with leading multinational buyers (mostly in the apparel and footwear industries) as well as with NGOs and industry groups active in China. Based on their research, the authors report that rather than simply monitoring Chinese suppliers’ compliance with local environmental, health and safety (EHS) standards, leading companies are giving suppliers tools and incentives to independently improve environmental performance. They are helping suppliers use energy, water and materials more efficiently and reaching deeper into their supply chains to where the greatest environmental damage occurs. At the same time, they are overcoming their traditional reluctance as competitors to cooperate in monitoring and fixing problems at common suppliers.
The authors describe innovative approaches that companies such as Nike are taking. More generally, the authors’ recommendations include: working closely with suppliers and providing incentives for identifying, disclosing and addressing problems; establishing collaborative relationships with NGOs and industry groups; and finding ways both to learn from suppliers’ best practices and to facilitate learning among suppliers.