From USA-ITA OFF THE CUFF for May 29, 2012

For USA-ITA members, the ethics of your supply chains are equally important as speed and price. On May 7th, the Center for Strategic & International Studies in Washington hosted an event titled, “Global Supply Chains: Development Opportunities & Ethical Responsibilities.” The event coincided with the launch of the Center for Responsible Enterprise & Trade (CREATe.org) white paper titled, “Trade Secret Theft: Managing the Growing Threat in Supply Chains.” Ben Heineman, a Senior Fellow at Harvard’s Belfer Center for Science & International Affairs, and Pamela Passman, President & CEO of CREATe.org, discussed the meaning of supply chain ethics and what companies can do.

According to Heineman, big companies have an obligation to do three things in their supply chains: develop and enforce labor standards (both global and local), ensure the safety and quality of products, and pay attention to programs like Trade Adjustment Assistance (TAA) to address U.S. labor issues. In short, companies should be working to make sure they are “doing the right thing by society,” even though it may be complicated to pinpoint exactly what the right thing may be. He also said that companies should not only follow the law, but should also “go beyond the law.” Companies should view themselves as regulators, because ultimately, a company is responsible the quality and ethics of its supply chain. In addition, companies should not simply rely on programs like TAA—which is good, but “has holes,” he said—but should also provide things like severance, training, and outplacement to displaced U.S. workers.

What’s a company to do? It might be helpful to look to organizations like Pamela Passman’s CREATe.org, which is working to instill responsible business practices in companies by driving innovation and job creation while addressing issues like IP issues and corruption. IP issues, including trade secret theft, are especially important because pirated goods account for $250 million/year, but it’s very difficult to enforce IP laws. The goal of CREATe.org’s white paper is to spark public discussion on the issue. In addition, said Passman, companies should have a baseline of expectations for suppliers, and should share information with other companies and stakeholders when possible. (Of note, Passman said that the Trans-Pacific Partnership should focus more on supply chain security and competitiveness and should be more specific about IP issues.)

Heineman concluded that IP and other supply-chain ethical issues are “a long way from being more enforceable.” He added that we’ve seen dramatic change, but there’s still more to do and companies should still be vigilant when it comes to their supply chains.

For more information on the topic, visit http://create.org/ or download the white paper here. The audio of the event is available on the CSIS website here.