On December 13, 2018, the Stanford Graduate School of Business hosted a conference on “Responsible Supply Chains: Building Positive Impact in a Changing World.” The event brought together practitioners and academics to explore how corporations could make their supply chains more ethical, thereby improving environmental and labor standards along with mitigating operational and logistics risk.

The agenda was packed with amazing insights, but my main takeaways came from the panel on labor issues in global supply chains. Greg Distelhorst, a professor at the University of Toronto and MIT’s Sloan School of Management, presented a fascinating paper on lean manufacturing co-authored with Jens Hainmueller of Stanford and Richard Locke of Brown. The researchers showed that lean manufacturing in the apparel industry had the side benefit of improving labor standards. Specifically, comparing lean firms to control firms showed that lean led to a 15 percentage point reduction in noncompliance. This is an enormous effect, particularly given past results that showed that compliance itself had limited effects on labor violations. The major result is that companies need to think more innovatively about their supply chain practices, and move beyond simple models of audits and policing.

The panel also featured practitioners from the organizations LaborVoices and EcoVadis. These companies are helping both buyers and suppliers to collect better data on the well-being of workers. Distelhorst’s paper had a limited number of outcome variables, and a promising avenue for future research is to examine other labor outcomes beyond noncompliance with labor standards. Indeed, Distelhorst highlighted the difference between compliance and well-being. Whereas compliance is solely about the material conditions of work, well-being takes into account additional variables such as financial security and social connectedness. This accords with the World Health Organization’s definition of health: “Health is a state of complete physical, mental, and social well-being, and not merely the absence of disease or infirmity.”

Indeed, much of our existing model of supply chain management attempt to avoid clear harms with respect to labor practices. However, going forward, corporations should explore ways to provide positive benefits to workers. It is possible that this shift away from compliance per se will improve productivity along with respecting worker rights.

Please see the full article here at Forbes: