Corporate social responsibility and the moral supply chain

I'd love to say that this is my work but it isn't. Its the work of Dr. Stephen LeMay, a professor at University of Western Florida who has a long history in both supply chain and CRM. The supply chain is not morally agnostic and, stretched as it is now, it still is accountable.

Note: I've known Steve LeMay since my first day as a freshman at Northwestern University.  If you want to hear the coolest stories about our days at the University, I'd advise signing up for a CRM Playaz Happy Hour (3:30pm - 4:30pm EDT on Wednesdays) when he's on one.

But he has gone on to a distinguished life as professor at University of Western Florida, a thought leader in Supply Chain and logistics and if that wasn't enough, a runner who is ridiculously fit for his age (same as mine).  He has written multiple books both text and trade and is loved by his students (see his ratings on RateMyProfessor). Plus, to top all this off, he's a really good human being.

He makes one of the most interesting and arguably significant cases for why the supply chain, stretched to the nth as it is now, still needs to be morally accountable. As hard as that might sound, given how many thousands and even millions of entities make up that supply chain, it won't seem anything but entirely sensible when you read his argument. Let us know what you think. 

Take it away, Steve.

The Short Chain

We get our eggs from a local farmer, known around the house as the Egg Lady. It's actually Dr. Egg Lady, if you want to know the details. She teaches at a local university. If we wanted her to, she would introduce us to her chickens -- by name. One of the chickens found a way to hide her eggs, so now they have five new chicks to name. The chickens belong to her parents and grandparents, but Dr. Egg Lady drops the eggs off on our porch and picks up the empty egg cartons to reuse.

The eggs vary in size and color. We can tell when she picked the eggs for our cartons because they are large and close to uniform. If her grandmother loaded the cartons, they get filled more or less in the order that they come out of the chickens. The chickens are free range and their feed is organic. They get a few drugs that keep them well. We like the eggs, and should we have a complaint, we know exactly who to call. This is a very short supply chain.

Of course, if 'her girls' aren't laying, we don't get those eggs. We have to rely on a longer supply chain and we know far less about what goes on in it. Our local Publix carries organic eggs, but not free range. And eggs that are none of the above. Whatever the label, we have to take their word for it. We will never be introduced to the chickens, but they will reliably have eggs. Our egg lady does her best, but her chickens . . .well, we might even see her in Publix buying eggs. It hasn't happened yet, but it could.

We get our cell phones from our service provider, Consumer Cellular. You can get the same cell phone from an online seller or from a store. No one is going to introduce us to the employee who put the final touches on the phone or put it in a box for shipping. The estimates vary, but its parts probably went through at least 10,000 suppliers before it became your cell phone -- or mine. We can know little about what goes on here. There's no single 'Dr. Egg Lady' to give us reliable information. This is a very long, complex supply chain.

As supply chains get longer, information about what goes on there becomes foggier and less reliable. It depends a little on what you expect and what you care about. Maybe it's not eggs. Maybe it's cell phones or healing crystals or one of a myriad of other things that we buy and use in the developed world. Most have long supply chains, and there's the problem. Those long supply chains don't have the Egg Lady. We can't know them the way we know her.

The Long Chain

The longer the supply chain, the more likely it is to host something you don't like. Child labor. Chemical leaks. Poisoned land. Labor abuses. Carbon and other emissions. Corruption, bribery, theft, money laundering. Name it, and a long supply chain likely has it. Each one of these violates some term that is common to our consumer conversations: fair trade, sustainable, organic, healthy, vegan, non-GMO, ethical trade, human rights, or fair wages. Even many laws. The list can go on.

There is no Dr. Egg Lady to tell exactly where or when something is going on. She will tell us she gives the chickens antibiotics. The long supply chains won't do that, or at least we can't know that they do.

The most common response to these violations is to point at the corporations involved in these supply chains and say that they should stop that, whatever 'that' is. And we should say 'Stop that' when corporations step over ethical and moral boundaries. Corporations need to take responsibility for their actions. This usually falls under corporate social responsibility, CSR.

But CSR both goes too far -- and doesn't go far enough. Corporations are held up for public scrutiny and scorn for things that they can't control or influence. That's the 'too far' part. The next part, the 'not far enough' is a well, duh: CSR focuses only on corporations. It leaves out everybody else -- consumers, national governments, city governments, the UN, and more. These other guys, including us as consumers, create the context in which corporations operate. Governments, for example, structure markets while consumers drive them.

Let's face this, too. Nike, Dell, and Apple will get far broader scrutiny than Dr. Egg Lady. If she did something we didn't like, we would stop buying her eggs and maybe tell a couple of neighbors. If something goes haywire in supply chains for these big brands, it may be in the New York Times and in a lead story on CNN. Or at least these media will focus on them.

So let's look at the moral supply chain.

THE MORAL SUPPLY CHAIN

The supply chain that lets us buy an iPhone or a Samsung Galaxy also hosts encounters between morals, values, and ethics. The thousands of parts and assembled goods flow through supply chains, but they carry with them morals and ethics that may differ or even conflict. When we deal with Dr. Egg Lady, we know or can know exactly what's going on at any time. We're mostly in agreement, so the short supply chain lets our values mesh with the values of the supplier. We agree with Dr. Egg Lady on how she treats her chickens and supplies our eggs.

But the title of one academic article starts like this: Sweatshop labor is wrong unless the shoes are cute. That puts the consumer's values in the picture. That is, even when consumers know what's going on, it may not change their decisions. Israeli historian Noah Yuvel Harari wrote, "A global world puts unprecedented pressure on our personal conduct and morality. Each of us is ensnared within numerous all-encompassing spiderwebs, which on one hand restrict our movements but on the other transmit our tiniest jiggle to faraway destinations." That drags everyone into the picture.

In the abstract, as modeled, the moral supply chain (TMSC) is amoral. There is no moral content in the squiggly lines and algorithms that we use to describe long supply chains. Pull the supply chain out of the 'atmosphere' or whatever, and plop it down in the real world, it suddenly stops being amoral. It becomes a multitude of paths along which morals and ethics flow, meet, interact, and sometimes clash. Where we could easily draw a picture of the Dr. Egg Lady supply chain, it's not so easy to picture or model the supply chain for cell phones or healing crystals.

Keep in mind that the Moral Supply Chain (TMSC) concept isn't intended to replace CSR. CSR is not only an important idea, it is also a more-than-cottage industry that generates conferences and consultancies around the world. They often teach good practices on sustainability and the treatment of workers, among other things. TMSC means to encompass CSR and broaden the view of social responsibility. Dr. Egg Lady doesn't need to attend the seminars.

Let's look at a detailed example of a long supply chain through the lens of TMSC. The usual warning applies: some things will be discussed that may not make you happy. Dr. Egg Lady will not be part of this story, but we will get back to her.

We'll start with an excerpt from an article that appeared in the Guardian.

YOUR HEALING CRYSTALS, THE COBALT IN YOUR SMARTPHONE, AND TMSC

"Mining has an environmental impact, whether it's for 'healing crystals', the copper in your phone, or the gold in your ring," explains Payal Sampat of nonprofit organization Earthworks. The quote marks are her own. "'Healing crystals' are mined in places like Myanmar and the Democratic Republic of Congo where mineral extraction is linked to severe human-rights violations and environmental harm." In the DRC, seven-year-old children work in the cobalt and copper mines, where covetable "healing" stones such as citrine and smoky quartz abound. International NGO Global Witness found that the Taliban earns up to $20m a year from Afghanistan's lapis mines, lapis lazuli being, as crystal websites explain, one of the best stones for activating psychic abilities. "As with most minerals," adds Sampat, "it is impossible to know for sure if your crystal was obtained via an environmental and human rights horror show." (Wiseman, 2019, p. 1).

Human rights horror show. Human rights horror show? Most of us don't like the sound of that, and, while most of us might be able to dismiss it because we don't buy or use healing crystals, we really cannot so easily dismiss the idea that it applies to our smartphones. As consumers, we are apt to put our hands over our ears and at least figuratively go "Lalalalalalala." We would rather not know. For one thing, what are we going to do about it?

Sixty percent of the world's cobalt comes from the Democratic Republic of the Congo. It comes from the mines discussed in this article. Those same mines are the focus of a collection of lawsuits against Dell, Google, Apple and other makers of electronic devices that use cobalt and other minerals. The class action lawsuit was filed by International Rights Advocates on behalf of 14 anonymous plaintiffs (Doe plaintiffs), all guardians of children who were killed or maimed in tunnel or wall collapses while working in the mines. The horrors involved and the facts of the case are difficult to deny.

I have no intention of trying to guess or second guess what a US Federal court will do in such a lawsuit. I have little doubt that the harm was done, but I will ask the question: What are Apple, Alphabet, or Dell supposed to do about these things? Invade the DRC? Threaten them with economic sanctions?

These are corporations, not sovereign governments. They deserve to be held responsible for the things they control and the things they can influence, but here we encounter a moral and ethical issue that fits with the point of our model, TMSC. Is a large company like Dell responsible because they may have known that this was going on?

Let's look at the options. These firms could buy cobalt from other sources. They could stop selling products that have cobalt in them. They could try to force the mining companies into better labor practices that treat adult laborers better and leave the children out entirely.

We'll stop at those three for the moment. First, the cobalt from other sources is already being bought. You may rest assured that these companies would like to find more cobalt or a substitute for cobalt that costs less and brings with it less controversy. Second, consumers want batteries that have longer lives and that hold a charge longer. That used to be nickel hydride batteries. Now it's lithium ion batteries, the major focus of battery research at this time. I have worn sports watches for years. The one I have now, a Garmin Fenix 5, will hold a charge for two weeks if I don't use GPS, and for three days if I do. Its predecessor, a Garmin, would barely make it through a round of golf. The newer lithium ion battery is much better.

But guess where the cobalt in my GPS watch can be found? In the lithium ion battery, of course. And those batteries are now found in nearly every smart and every stupid electronic device on the planet. Which addresses the second point: companies are not likely to stop selling devices with these batteries and consumers are not likely to stop buying them.

So to the third point. These companies aren't going to force anything on a company in the DRC. It's a sovereign nation with a police force, an army, and its own set of government officials. Even companies like Apple and Alphabet cannot control what happens inside that country. Does their money give them power? Of course, but that money won't overcome the idea that the market for cobalt goes beyond them, that the cobalt will sell to someone, and that the government of the DRC doesn't really care who buys the cobalt.

Even if those companies had armies, such invasions haven't worked out so well lately anyway. Look at Iraq and Afghanistan. So what should be done?

That's where TMSC comes in. It underscores the idea that corporations alone cannot solve the problems shown here in this one example, or in many other examples. Did you know about the organized crime involvement in the olive oil market? The 30% likelihood that the fish on your menu is not what it claims to be? That the collector's item in the catalog may have been stolen, extracted illegally from an historical site, or sold in countries where that is illegal?

TMSC is about making this point: corporations can't solve child labor issues without help from governments, NGOs, consumers, and others in the supply chain. Governments can't do it alone either, nor can any one of these make it work all by themselves. It takes all of them working together to solve these problems and to reconcile the differences in value systems that may conflict along the supply chain.

If you live in the developed world, then you probably think it's a good idea for your child to get some kind of part-time job when he or she turns sixteen. The experience will do them good. If you live in some parts of the developing world, you may look at your 13 year-old and think "Why don't you have a full time job yet?" These two views are likely to encounter one another along the supply chain, especially as supply chains become more transparent.

So who is right? The parent of the 16-year-old part-timer? The person who believes that child labor is a violation of human rights? Or the person who thinks the 13-year-old needs to start contributing to the family welfare? Context matters and values may conflict.

So in a sense we're trying to make the supply chains for smartphones and 'healing crystals' a little more like the supply chain for the eggs at our house. We need to find the equivalent of Dr. Egg Lady in the long supply chain, someone who knows what's going on and will tell us about it. We don't imagine that the supply chain that brings honest news about behavior will turn out as conflict free as our egg supply chain. Sometimes the values will conflict, sometimes adapt, and sometimes create a profound indifference.

TMSC is about helping to understand the encounters between differing values. It is also about taking a long view and working to bring about solutions to problems that corporations, governments, and consumers alone cannot solve. TMSC will host encounters between Eastern and Western values, between values in developing countries and values in developed countries. We are more likely to deal well with them if we make ourselves think through the complex processes and recognize all of the players in this serious, important, and sometimes deadly process. We hope it helps host conversations like the ones we have with Dr. Egg Lady.