Department of Business Administration Author:

Business and Social Sciences Troels Haun Albrechtsen

(Characters: 122748)
Supervisor:
Erik Kloppenborg Madsen

Supply Chain Sustainability

A Case Study on Apple, Nike, and Walmart

Aarhus University
September, 2012
Table of Contents
1. Introduction 1
2. Problem Statement 1
3. Methodology 2
4. Delimitation 2
5. Cases 3
5.1. Foxconn 3
5.2. Wintek 4
5.3. Hugger and Vision Tex 5
5.4. Nikomas Gemilang 6
5.5. PT Kizone 6
5.6. Elec-Tech 7
5.7. Walmart Seafood Supplier 8
5.8. New York City Pensions Fund 9
5.9. Ford's Carbon Footprints 9
5.10. United Parcel Service 10
6. Non Governmental Organisations and Groups 11
6.1. Fair Labor Association 11
6.2. Workers Rights Consortium 12
6.3. Carbon Disclosure Project 13
6.4. NGO and Company Interactions 14
6.4.1. The Initial Interaction 14
6.4.2. Implementing the Palm Oil Code 15
6.4.3. From Implementation to Institutionalisation 17
7. The Triple Bottom Line 19
7.1. The Triple Bottom Line and Supplier Selection 20
8. Stakeholder Management 27
8.1. Initial Stakeholder Approach 27
8.2. Stakeholder Identification 28
8.3. A Context Based Stakeholder Approach 29
8.3.1. Density and Centrality 30
8.3.2. Network Analysis and Stakeholder Management 31
8.4. The Extended Enterprise 34
9. Analysis 35
9.1. Apple's Sustainability Approach 35
9.1.1. Code of Conduct 36
9.1.1.1. Labour and Human Rights 36
9.1.1.2. Health and Safety 37
9.1.1.3. Environmental Impact 37
9.1.1.4. Ethics 38
9.1.1.5. Management Commitment 38
9.2. Nike and Walmart's Sustainability Approaches 38
9.2.1. Health, Safety, and Environment 39
9.2.2. Compliance with the Code 39
9.3. The Network Approach to Stakeholder Management 40
9.3.1. Apple 40
9.3.2. Nike 43
9.3.3. Walmart 45
10. Discussion 48
10.1. Company and NGO Cooperation 48
10.2. Apple, Nike, Walmart and Supplier Employees 50
10.3. Competitor Cooperation 52
11. Conclusion 53
Bibliography 56
Appendix
1. Introduction
Over time public attention to companies' business conduct have increased. That is, both
through media attention, but also consumers grow increasingly concerned with the
conditions under which the products they buy are produced. In that context, little
information is often available regarding working conditions at a company's suppliers
and subcontractors. How sustainable a product is, is therefore rarely decided upon by
considering such conditions, as that information is not readily available, but instead
solely on the contracting company's approach to such issues. An increased commitment
from companies, outsourcing their manufacturing process, to issues such as working
conditions and environmental issues, would provide a better basis for consumers to
choose which products to buy.
Apple have experienced such issues related to working conditions recently. Two of its
Taiwan based suppliers, with production facilities in China, have been caught in media
searchlights, as demonstrations and suicides among the workers have occurred. Nike
have also experienced issues related to employees at various of the company's
suppliers. Attention to these issues have led to demonstrations by student groups in
front of Nike retailers, as well as pressure from universities to remedy the situation. The
issues experienced by Nike, is mainly related to suppliers neglecting to compensate
their employees for their work. A third company that have experienced issues at its
suppliers, is Walmart. Investigations, conducted by NGOs, have revealed safety and
workers rights violations at some of Walmart's suppliers. The attention generated by the
NGOs have also led to pressure on Walmart, from one of the company's shareholders
requiring the company to find a long term solution to the issues.

2. Problem Statement
Based on the implicit request by the public to increase the transparency of business
conduct, as seen in the growing media attention to supplier issues, and Apple, Nike, and
Walmart's experiences with some of the companies' suppliers, the problem statement in
focus in this thesis will be:

How can companies increase sustainability in the supply chain?

To propose a solution to this problem, Four other questions will be considered; why
should a company take responsibility for the actions of its suppliers? That question in

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turn, raises another question. That is, if companies' responsibility should include its
suppliers, then what about sub-contractors, or a sub-contractor's suppliers?
Another relevant question would then be related to the actions of the suppliers; what are
a company's options when trying to find a solution to issues concerning its suppliers?
When considering that question a dilemma arise. How should companies approach
deciding on either terminating a contract or continue the cooperation with that supplier,
with the purpose of being able to influence issue areas such as working conditions.

3. Methodology
The starting point of this thesis, will be a review of various cases of companies
involved in supplier issues. The aim of that review is to firstly, illustrate some of the
problems companies can be faced with in their supply chain, and secondly to outline
some of the solutions, as well as reactions from those companies. The cases described
have been selected with the intent to include well known corporations that have a
leading role in their individual industries. This choice was made both because industry
leaders often set the standards of business processes and issue handling. As such, those
companies have the opportunity to influence the industry in which they operate.
As will be described in the cases reviewed, NGOs can be influential in both attention
generation to issues, as well as pressuring companies to remedy those issues. To
elaborate on the relationship between companies and NGOs, a case study of Rabobank's
interactions with Friends of the Earth Netherlands, will be included.
The analysis of the thesis will be based on the cases reviewed, involving Apple, Nike,
and Walmart, as well as those companies' approach to sustainability in general terms,
described by reviewing their codes of conduct. The framework of the analysis, will be a
network approach to stakeholder management. The analysis will act as a basis for a
discussion section, which, among other, will include considerations of application
opportunities of the Triple Bottom Line for Apple, Nike, and Walmart.

4. Delimitation
Sustainability as a term, is usually related to the preservation or account for the
environment, in various business processes undertaken by corporations. However, for
this thesis the term will also cover human rights issues, such as safe working conditions
and fair wages. This decision is based on the fact that corporations usually is engaged in
preserving the environment because of the consequences not doing so could have for

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human beings. Also, few would likely describe a corporation experiencing multiple
severe work related injuries every year, due to unsafe working conditions, as
sustainable, even if that same company monitors and manages its greenhouse gas
emissions. Therefore, it does not seem out of context to include social aspects in the
term.
As mentioned in the methodology, the framework of the analysis will be based on a
network approach to stakeholder management, as proposed by Timothy J. Rowley.
Rowley bases his stakeholder approach on network analysis and some key definitions
of such analysis will be described, however, an in depth review of network analysis is
beyond the scope of this thesis and will therefore not be included.

5. Cases
This section will review various cases, mainly concerned with workers rights violations
at suppliers affiliated with Apple, Nike, and Walmart. However, also environmental
concerns throughout the supply chain will be considered, in the two cases of United
Parcel Service and Ford.

5.1. Foxconn
Foxconn is a Taiwanese company, with assembly factories located in China. The
company is one of Apple's main suppliers, but also assemble products for Microsoft,
Dell and Hewlett-Packard. Foxconn employs around 1.2 million workers that work 6-7
days a week, in up to 14 hour shifts. (Guardian 1 (2012))
The company have been accused of running extremely fast assembly lines, as well as
demanding too much overtime, accusations that the company have denied. (Guardian 1
(2012))

In 2010, the Apple supplier experienced a series of suicides among its employees,
working at one of the company's plants located in Shenzhen, China. Further turmoil
arose in January 2012 when workers living in a Foxconn dormitory in Wuhan, China,
climbed to the roof of the dormitory and threatened to jump to their deaths. The source
of the issue was a matter of job transfers, however the situation was solved without any
casualties. (Guardian 1 (2012))
Previous issues at Foxconn have been covered by media as well. In 2006, a report by
Mail on Sunday into a Foxconn factory in Longhua, revealed instances of forced

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overtime, low wages, and overly crowded dormitories. At that time, the media coverage
led to an investigation into Foxconn's plants by Apple self. (MoS (2006))
Apple have responded to the recent incidents, taking place at Foxconn, by asking for
the help of the US Fair Labor Association (FLA), which have carried out inspections at
Foxconn's plants. (Guardian 1 (2012)) Additionally, Apple's CEO Tim Cook stated that
Apple takes working conditions very seriously and that workers have a right to a safe
and fair work environment. Also, Apple allowed ABC News' Nightline TV program
access to Foxconn's plants. (Guardian 1 (2012))
Other companies contracting with Foxconn have been reluctant to communicate about
the issues at the plants. Most companies have referred to general sustainability reports,
while other companies, like Samsung, have not responded to the issues. Some
companies cooperate with third party agencies to conduct audits, this is an approach
used by, as an example, Amazon, however the audits, done for Amazon, are not made
public. (Bits (2012))

Foxconn have responded to the increasing publicity and attention from Apple by
increasing wages a second time, first increase came after the 2010 incidents mentioned
above, resulting in a total of a 25% wage increase, compared to 2010. The supplier is
also taking steps to lower the work hours and the wage increase is given as a
compensation for this. In addition to the wage increase, Foxconn also plan to invest in
robots and similar technology, to be applied in the company's production. (Guardian 1
(2012))

5.2. Wintek
Another Apple supplier, that like Foxconn is based in Taiwan and have production
plants in China, is Wintek. And like Foxconn, Wintek caught media attention in 2010,
when 2000 employees demonstrated in Suzhou, in China, where one of Wintek's
factories is located. The demonstration turned violent and the employees destroyed
equipment and vehicles at the factory. (Apple Insider (2010))
The demonstration had started, because 137 workers had been poisoned by a chemical,
called n-hexane, used to clean iPhone touch screens as a part of the factory's
production. (Guardian 3 (2011)) The chemical can cause damage to the spinal cord,
which can lead to muscular weakness and in worst case paralysis. It was decided, by a
Wintek manager that n-hexane, instead of alcohol which had been used earlier, should
be used to clean the touch screens. The decision was made, as this could speed up
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production due to n-hexane cleaning the screens better and drying faster. (Guardian 2
(2010))

Apple ordered Wintek to terminate the use of n-hexane to clean the screens and to
improve safety measures and stated that the afflicted workers would be monitored by
Apple self. (NYT 3 (2011)) Wintek responded to the incident by firing the manager
who chose to use n-hexane instead of alcohol. New safety measures were introduced as
well, such as notifying workers about risks involved with their jobs, tightening
procedures for introducing new chemicals, and carrying out medical checks of the
employees. Additionally, Wintek agreed to cover the medical fees and provide
compensation to the affected employees. (Guardian 2 (2010))

The Wintek workers poisoned by the chemical, however, told the media that the
compensation given have not been sufficient and that the company pressured employees
who had taken the compensation, to leave their jobs. Also, no assurance that employees
experiencing new symptoms from the poisoning in the future, would have their medical
fees paid, have been provided by Wintek. (Reuters (2011)) The workers therefore
prompted Apple to take action in the matter, mainly through a letter addressed to, then,
CEO Steve Jobs. Apple did not comment on the letter though. (Reuters (2011))

5.3. Hugger and Vision Tex

In 2009, Hugger and Vision Tex, two of Nike's subcontractors, making sweatshirts and
T-shirts, closed their plants located in Honduras. After complaints by the laid off
workers, about the absence of severance pay, the US-based Workers Rights Consortium
(WRC) carried out an investigation and reported to more than 100 American
universities on the matter. (NYT 2 (2010))
The report by WRC led to protests, by a student group called United Students Against
Sweatshops (USAS), in front of Nike retail stores. The group demanded that Nike
should cover the severance pay. Additionally, one university decided to terminate its
contract, of college-logo apparel, with Nike and 1100 students at another university
petitioned for their university to do the same. (NYT 2 (2010))

Nike first reacted by claiming that the two subcontractors did not produce college-logo
products. Later a statement was issued that the company was disappointed that the two
manufacturers had failed to pay the owed severance. At the same time though, Nike
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retained the position that ... factories which directly employ workers are responsible
for ensuring that their employees receive their correct entitlements, and as such Nike
will not be paying severance to workers .... (NYT 2 (2010)) However, after additional
pressure, from universities and student groups, to settle the issue, an agreement was
reached between Nike and a Honduran labour federation. (NYT 2 (2010))

Nike agreed to pay 1.54 million dollars to set up what was called a workers relief fund,
Nike stated that the 1.54 million was not for severance pay though, also Nike would
finance health related costs, as well as provide the laid off workers with vocational
training. Additionally, Nike pledged that other factories the company contracted with in
Honduras, would prioritise employing workers that had been laid off by the two closed
subcontractors. (NYT 2 (2010))
After the agreement had been made, Nike stated that the company, in the future, would
still take the position that cases of neglecting to pay severance and similar issues, would
remain the suppliers or subcontractors' responsibility. (NYT 2 (2010))

5.4. Nikomas Gemilang

Nikomas Gemilang, a subsidiary of Taiwan-based Pou Chen Group, located in
Indonesia, agreed to reimburse its workers, for a total amount of unpaid overtime wages
of around 1 million dollars, the agreement was settled between the subsidiary and a
local union. (Watoday (2012)
Investigations into Nikomas Gemilang was carried out by a local union cooperating
with USA-based Educating for Justice (EfJ), which is a non-profit group campaigning
against Nike. The investigations showed that 4500 of the 24000 workers, assigned to
exclusively produce Nike shoes, had been working 2 hours of overtime daily six days a
week, which they had not been compensated for. (Watoday (2012)
Nikomas Gemilang employs around 57000 workers, excluding the 24000 that produces
Nike shoes, the workers makes shoes for Adidas, Puma and Asics. The local union
announced that if those companies wished it, an investigation into the work hours of the
remaining 33000 workers would be carried out as well. (Watoday (2012)

5.5. PT Kizone
As seen in the case of Nikomas Gemilang, sporting apparel suppliers often have
contracts with several of the large sports brands and not just a single company.
Therefore, it is not surprising that other sporting apparel companies, and not just Nike,
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have experienced similar issues of unpaid severance wages as well.
Investigations carried out by the WRC, revealed issues of unpaid severance wages at
PT Kizone, a manufacturer of both Nike and Adidas products. The owner of the
supplier, located in Indonesia, fled the country after his company had failed to pay
legally required severance pay since September 2010. (WRC (2012) p. 2)
The buying agent for Adidas and Nike, Green Textile, along with the direct buyer of the
Dallas Cowboys, an American-football team, assumed control of the factory. Eventually
the factory was closed, at which time the individual workers were owed what nearly
amounted to a years salary. (WRC (2012) p. 2)

Around half of the amount owed to the workers have been covered. Encouraged by
Nike, Green Textile have provided 2/3 and Nike have provided 1/3 of that amount.
However, Adidas have taken the position that the company have no financial obligation
to the workers involved. Adidas based this decision on two factors. Firstly that PT
Kizone was not one of Adidas' suppliers when the issues arose, which was found, by
WRC, to be untrue, and secondly that the company is not obligated to cover wages
when a supplier fails to pay its workers. (WRC (2012) pp. 2-3)
Instead Adidas have taken similar action, as Nike took in Honduras, and encourages its
other suppliers in Indonesia, to hire the workers from PT Kizone, as well as convening
meetings between the Indonesian and Korean government and industry officials to
reach a solution. (WRC (2012) p. 3)

5.6. Elec-Tech
Electronics producer Elec-Tech, supplying Wal-Mart with various home appliances,
have been accused of unsafe working conditions at its factories in China. The
accusations were put forth after the organisation Students and Scholars Against
Corporate Misbehaviour (Sacom), conducted an investigation, in August 2010, into
Elec-Tech's factories. (SCMP (2010))
The organisation found that over 60 workers had been disabled, in the period between
July 2009 and June 2010, at Elec-Tech's plants. The injuries were due to unsafe
machines, lack of protective equipment, insufficient training of the workers operating
the machines, and pressure on the workers to speed up the production. Additionally, the
organisation found that workers worked 10 hour shifts and were underpaid. (SCMP
(2010))
A migrant worker who had lost his forearm when working at an Elec-Tech plant, stated
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that the company, in addition to the personal damage, also fined workers who had been
injured in the work process, holding the worker responsible for mistakes of
production, thereby justifying the fines. (SCMP (2010))
Sacom found that the injuries could be avoided by updating the technology of the
machines used in the production, and encouraged Wal-Mart to investigate Elec-Tech's
plants. (SCMP (2010))
Walmart responded to Sacom's inquiry, and launched an investigation into Elec-Tech's
factory in Zhuhai, where two unannounced audits were made. The audits revealed 55
incidents of worker injuries. (Bloomberg (2010))
Based on Walmart's findings, Elec-Tech agreed to put the dangerous machines out of
use until safety measures, as requested by Sacom, had been installed. (Bloomberg
(2010))

5.7. Walmart Seafood Supplier

After investigations into one of Walmart's seafood suppliers was initiated by the
National Guestworker Alliance (NGA), an advocacy group for foreign workers, and
conducted by the Worker Rights Consortium (WRC), Walmart is now being pressed to
improve working conditions at several of its USA based seafood suppliers. (NYT 1
(2012))
The guest workers had complained to the NGA that they had been forced to work 16 to
24 hour shifts and had been locked into the plant. Additionally, the workers had been
threatened with physical violence to speed up production, and that harm would come to
their families if they tried to complain to government agencies. In their investigation of
the supplier, WRC also found cases of psychological abuse, as well as violations of
wage laws. (NYT 1 (2012))
The NGA wishes to investigate 18 other Wal-Mart suppliers, all of which also employs
guest workers at their plants. (NYT 1 (2012))

Wal-Mart initiated its own investigation into the supplier and found violations of its
supplier standards. Therefore, Wal-Mart chose to suspend the supplier until a full
investigation had been carried out. Additionally, the United States Labor Department
(USLD) and the Occupational Safety and Health Administration (OSHA) also began
examining the supplier. (NYT 1 (2012))
If Walmart's own investigation shows that the allegations of forced labour is true, Wal-
Mart stated that it will terminate the cooperation with the supplier. (NYT 1 (2012))
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5.8. New York City Pensions Fund
Cases such as those at the seafood supplier and Elec-Tech, concerning Walmart's
suppliers' employees' workers rights, prompted the New York City pensions fund
(NYCPF), to require that Walmart takes steps to better monitor and disclose the
company's suppliers' treatment of their employees. The NYCPF owns a small
percentage of shares in Walmart and as such planned to ask Walmart, at its 2011
shareholder meeting, to make it a requirement for doing business with the company,
that its suppliers report on and disclose treatment of workers at their facilities. (NYT 4
(2011)) The Fund's proposal states that such reports should be based on ...
internationally recognised standards, indicators and measurement protocols (NYT 4
(2011))
A spokesperson for the NYCPF said that the fund would ask Walmart to include such
requirements in its business conduct, as the capacity to monitor all the company's
suppliers is limited and having the suppliers conduct self assessments, would increase
the amount of information disclosed. The spokesperson also recognised that the fund's
proposal was unlikely to succeed, due to its low share percentage in Walmart, but that it
might create additional focus on such issues. Walmart argued that persuading its
suppliers to draft such reports, as described in the fund's proposal, would be very
difficult. Also, Walmart stated that succeeding in having its suppliers report on workers
rights, might result in a shortage of products, produced at those suppliers who would
not comply with the demands. To resist the proposal, Walmart notified the U.S
Securities and Exchange Commission (SEC), an investor protection agency, that it
would strike the proposal from its agenda and asked that SEC would not penalize it for
doing so, SEC declined the company's request however. (NYT 4 (2011))
To present its proposal, the fund contacted a Bangladeshi labour organiser, who stated
that many of Walmart's suppliers mistreated their employees, the majority of the
violations being neglecting to enforce the law on minimum wages. (NYT 4 (2011))

5.9. Ford's Carbon Footprints

As mentioned above, also cases of environmental issues would be reviewed. Ford's
supplier initiative, describes the car manufacturer's approach to decreasing the
environmental impact of its supply chain.
In 2010, Ford began a survey into its suppliers' environmental impact. The car
manufacturer began its survey by working with 35 of its suppliers, producing car tires,
seats, steering systems, and metal components. The 35 suppliers included in the
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company's survey, were specifically chosen since their production were deemed, by
Ford, to be heavy in energy consumption. (RPN (2011))
The survey confirmed Ford's hopes that the company's energy heavy suppliers were
monitoring their environmental impact. However, Ford remained uncertain that the
survey represent a general tendency, towards monitoring and managing greenhouse gas
emissions, in the motoring industry. (RPN (2011))

A year later, Ford expanded its survey to include companies supplying Ford with parts,
amounting to 60% of the company's annual purchasing budget. The expanded survey
will cover suppliers providing the car-maker with parts used in the production, but will
also cover suppliers of information technology as well as logistic services. (RPN
(2011))
The expansion of the survey was made to give Ford a greater overview of how well its
suppliers monitors and manages emissions that impacts the environment, and to help in
the creation of a broad carbon management system. (RPN (2011))

Additionally, Ford have been working with various industry groups to create guidelines
for estimating, collecting, and reporting on greenhouse gas emissions from production
facilities, and is a part of the independent Carbon Disclosure Project (CDP). (RPN
(2011)) CDP is a non-profit independent organisation working towards reducing
greenhouse gas emission, as well as secure sustainable water use by businesses and
cities. (CDP)

5.10. United Parcel Service

In line with the Ford case, the United Parcel Service (UPS) case have been included in
this section, to illustrate how a supplier, in this case of a logistics service, can take steps
to improve sustainability in the supply chain it is part of. As such, improving
sustainable performance does not have to be limited to upstream initiatives, such as
those described in the Ford case.
UPS have introduced a labelling scheme that provides its customers with a new way of
signalling that sustainability is important throughout the entire supply chain. The
scheme introduces a logo that UPS will allow its customers to put on its packages, if the
packaging reaches criteria in damage prevention, right-sizing of packs and choice of
packaging materials. (PN (2010)) Damage prevention is essential for sustainability, as
replacing damaged goods in principle doubles the carbon footprint of that item.
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Packaging such that parcels holds no excess room, thereby optimizing the use of
materials, also means that the use of space in transport vehicles is maximized.
(Greenbiz (2010)) The criteria to be assessed when judging the packaging materials
includes; end-of-life use, the amount of waste, and the materials' life-cycle. (PN (2010))
Issues such as biodegradability is considered, as well as how widely a material is
recycled, rather than only viewing whether or not it can be recycled. (Greenbiz (2010))

The group, Sustainable Packaging Coalition (SPC), views UPS's initiative, as taking
assessment of the environmental impact of transport packaging to a new level. Also, the
coalition believes that the new scheme will lead to heightened awareness of the
environmental impact of packaging, as well as lead to more sustainable design
solutions. (PN (2010))
Due to UPS's presence in more than 200 countries, the SPC views the day-to-day
evaluation of the packaging, as a critical step towards improving the stewardship and
preservation of natural resources in the future. (PN (2010))

6. Non Governmental Organisations and Groups

As seen in the cases, much of the attention generated to a company's actions is often
driven by groups and organisations. The first part of this section will shortly describe
the FLA and WRC, as both will be involved in the analysis and discussion below. The
intent of this, is to illustrate the areas the two organisations can be influential in, as well
as the work they conduct. Additionally, the Carbon Disclosure Project, as mentioned in
the Ford case, will be described as well, as the group focuses on reducing greenhouse
gas emissions, through participating companies disclosing and sharing information,
relevant to environmental issues.
The second part of this section will, through a review of a case study on Rabobank,
address how organisations and groups may impact corporate social responsibility (CSR)
and sustainability.

6.1. Fair Labor Association

The FLA was created in 1996 on the basis of a meeting called by, then, president Bill
Clinton. Multinational companies and NGOs gathered at the White House, where
Clinton challenged them to work together to improve the working conditions of the
clothing and footwear industry. (FLA 1)
Today, FLA have evolved into a collaborative effort of universities, civil society
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organisations, and companies concerned with social responsibility, working towards
improving working condition in any industry and geographic location. (FLA 1)

FLA carries out audits when issues arise at a workplace, however the organisation
recognises that, although audits may be useful to handle immediate problems, they do
not necessarily prevent recurring violations, nor do they drive sustainable
improvements in the working conditions. (FLA 2)
To try and create long term solutions at workplaces, the organisation works with what it
calls a sustainable compliance methodology, which can be compared to thorough
medical care. First step is a check up, data such as historical information, policies and
procedures, and results of self assessments are gathered about the workplace. Next is
diagnosis, here FLA assessors identifies current issues, as well as possible future issues.
Third is the remedy, immediate issues are solved and actions to prevent similar
problems in the future are recommended. Lastly is follow up and results which is
included to prevent the issues from recurring. (FLA 2)
The FLA counts such brands as Adidas, Nike, Puma, and Apple, but also several
suppliers, mainly located in Asia, are affiliated with the organisation. (FLA 3)

6.2. Workers Rights Consortium

Like the FLA, and as the name suggests, the WRC is also involved in improving
workplace conditions and solving workers rights issues. However, the WRC was
created, in April 2000, to assist universities with securing that the universities' labour
rights code of conduct, for producing clothing bearing university name and logo, was
respected. As such, the WRC was founded by university administrators, students, and
international labour rights experts. (WRC 1)

The WRC's work consists of conducting independent, in-depth, investigations at

factories, producing college apparel. Also, reports on factories, producing for major
brands, are published by the consortium. Additionally, the WRC helps the workers at
those factories to end labour abuse and defend their workers rights. Investigations are
initiated, both as a response to worker complaints, but are also conducted by initiative
of the WRC self. (WRC 2)
Investigations initiated by the organisation self, are often based on information from
local NGOs. Additionally, an investigation can be launched if a particular factory is
deemed to be an important source of college apparel, but little information is available
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about that factory. (WRC 3)

The investigations are conducted by the WRC in cooperation with representatives, with
knowledge of the local community, as well as representatives of local labour rights
NGOs and academic experts. The data collected by the organisation is based on
interviews, both with employees and managers. Relevant documents and records, as
well as journalistic material, if available, is reviewed. Additionally, inspections of
factories is carried out, if allowed by the management. (WRC 3)
When violations are found, the WRC makes its recommendations to a solution and
seeks to work with the factory and its buyers, to correct the violations before releasing a
report with the findings, thereby positive changes, if any, can be included in the report
as well. (WRC 3)

6.3. Carbon Disclosure Project

The Carbon Disclosure Project (CDP) is a non-profit organisation, working towards
reductions in greenhouse gas emissions and more sustainable water use by both
businesses and cities. (CDP 1) To achieve that goal, the organisation works to transform
the way business is done, aiming for business conduct focusing on long-term
sustainable solutions rather than short-term gains at the expense of the environment.
(CDP 2)
The organisation mainly works with measurement and information disclosure aimed at
making it easier for businesses and cities to manage environmental risk. Greenhouse
gas emission, climate change risk, and water strategies are measured and disclosed by
the companies that reports to the organisation. (CDP 2)

The CDP divides its work into three programs; climate change programs, a supply
chain program, and an investor program. The climate change programs operates by
requesting information such as greenhouse gas emission and energy use from
companies, which is then, through the CDP, made available for decision and policy
making by other businesses as well. The idea is that companies are better able to
manage environmental issue,s when measurement and transparency is increased. (CDP
3)
The aim of the CDP's supply chain program, is to extend the environmental
management to a company's suppliers as well. Companies are encouraged to disclose
information about suppliers' emission, as well as the company's own, thereby extending
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the impact of the program. In addition to being aimed at businesses, the supply chain
program also works with governments and their supply chains. (CDP 4)
The measurements and information disclosure collected by the CDP is done on behalf
of the organisation's signatory members. A signatory member is a company that have
answered a CDP questionnaire but are not an investor in the organisation. (CDP 5) A
group of investor members of the CDP are encouraging businesses to move beyond
only measuring environmental impact and show that they are managing it as well.
Companies are asked to reduce emission levels on an annual basis, make investments to
reduce emissions, set a goal for emission reduction and disclose that goal to the public,
and manage emissions in the supply chain. (CDP 6)

6.4. NGO and Company Interactions

Organisations and groups today are becoming increasingly influential in how
companies conducts business. As seen in the cases, and mentioned above, much of the
media attention of the issues represented, is generated by NGOs and groups. As such,
companies will to a higher degree than previously, have to respond to the claims of
those organisations, to avoid bad publicity.

To describe how NGOs can impact business, Van Huijstee and Glasbergen have
analysed the interactions between Rabobank and Friends of the Earth Netherlands
(FoEN), as well as other NGOs, on the issue of Rabobank's investments in palm oil
production in Southeast Asia and soy production in Latin America. The research period
stretches from 1999 to mid-2007, approximately eight years, and is based on interviews
with both Rabobank and FoEN. (Van Huijstee & Glasbergen (2010) p. 251)

6.4.1. The Initial Interaction

The authors define two types of interaction, confrontational and collaborative
interactions, however interactions may at times be a combination of the two. (Van
Huijstee & Glasbergen (2010) p. 250) As such, the initial interaction between Rabobank
and FoEN can be described as being mainly confrontational. (Van Huijstee &
Glasbergen (2010) p. 262)
In a written correspondence, FoEN asked Rabobank about the financing of a plantation
in Indonesia that might have been involved in deforestation of Indonesian rainforest,
which meant Rabobank would indirectly be involved in the deforestation as well. The
public affairs manager at Rabobank then contacted the banks relationship managers,
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tied to the corporate palm oil clients, who explained that environmental and social
aspects were reviewed before deciding whether or not to invest in new plantations. (Van
Huijstee & Glasbergen (2010) p. 259)
The public affairs manager passed on the information given by the relationship
managers to FoEN, which ended the correspondence. However, in 2000 Greenpeace
released a report on the environmental and social issues tied to palm oil production,
such as deforestation and land clearing. Greenpeace and FoEN then worked together to
put pressure on Rabobank, with the purpose of getting the bank to adopt or create an
investment policy for its business, in the palm oil industry. (Van Huijstee & Glasbergen
(2010) pp. 259-261)
FoEN and Greenpeace encouraged Rabobank to include four lending conditions in the
development of a policy on the issue. The banks clients had to abide by the laws of
Indonesia, as well as relevant international conventions, and should not be ... involved
in clearing of High Conservation Value Forest, (Van Huijstee & Glasbergen (2010) p.
261) should respect local communities, and not be ... involved in burning of
forestland. (Van Huijstee & Glasbergen (2010) p. 261)
To further increase the pressure on Rabobank to take action in the matter, the two
NGOs launched a campaign, demanding stricter investment policies. Also, a second
report supporting the report released by Greenpeace was released, thereby the NGOs
managed to put the issue on the political agenda, as a member of parliament was
motivated by the second report to seek clarification of the issues. Finally, the NGOs
managed to play the banks, involved in investing in palm oil, off against each other,
thereby creating a kind of race-to-the-top situation, meaning all banks wanted to be
the best. (Van Huijstee & Glasbergen (2010) p. 261)
To protect its reputation, Rabobank decided to adopt the four lending conditions and
developed the Palm Oil Code in cooperation with the FoEN and Greenpeace. (Van
Huijstee & Glasbergen (2010) p. 262)
The palm oil issue moved the scope of what was previously considered, by Rabobank,
as its corporate social responsibilities, from responsible behaviour towards employees
and clients, as well as minimizing the environmental impact of internal business
operations, towards also covering the bank's clients' operations. (Van Huijstee &
Glasbergen (2010) p. 262)

6.4.2. Implementing the Palm Oil Code

The next step for Rabobank, was to implement the new Palm Oil Code in its palm oil

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investments, which was done under surveillance by FoEN. At the time Rabobank's
headquarters began discussing implementation procedures for the Palm Oil Code, Asia
was in an economic crisis and Indonesia was politically unstable, investments in palm
oil had therefore been put on hold. (Van Huijstee & Glasbergen (2010) pp. 262-263)
Rabobank decided to resume its investments in palm oil, but to spread the bank's
financial risk, it would move its investments from the actual plantations, to the holding
companies controlling the plantations. However, an internal report in 2003 stated that
the implementation of the code had failed to provide the managers, of the bank's palm
oil clients, with guidelines on how to control if the clients were in compliance with the
code or not. (Van Huijstee & Glasbergen (2010) p. 264) Also, although the code had
been put into effect, it was disconnected from the actual business processes. In the
internal report, the reputation risk imposed, by failing to take the measures to ensure
that the clients would adhere to the code, was recognised. (Van Huijstee & Glasbergen
(2010) p. 264) As a step to remedy this problem, Rabobank wanted to integrate the
Palm Oil Code in the bank's credit approval process. Therefore, a survey on
productivity and sustainability, which was to be carried out by new clients seeking
loans, was developed, a review carried out by an independent consultant had to be done
of the client, and an obligatory review by a Rabobank review panel should be carried
out annually at the clients. (Van Huijstee & Glasbergen (2010) p. 264)

At the same time that Rabobank had started implementing the Palm Oil Code, the
World Wildlife Fund (WWF) had taken initiative to develop a Roundtable for
Sustainable Palm Oil (RSPO). The initiative was taken, since not only Rabobank had
been impacted by FoEN and Greenpeace's campaigns, other actors in the palm oil
supply chain had been affected as well. (Van Huijstee & Glasbergen (2010) p. 263)
The attention the issues related to producing palm oil had been given, resulted in a
demand for sustainably produced palm oil. To achieve this, palm oil had to be traceable
through the supply chain, making it a necessity to increase the transparency of the
chain. As such, the objective of the RSPO was to create sustainability criteria that the
supply chain actors would abide by. (Van Huijstee & Glasbergen (2010) p. 263)

Although Rabobank had made steps towards a better implementation of the Palm Oil
Code, and was engaged in the RSPO, FoEN brought the bank's attention to one of its
clients, a large holding company denoted Palmoil Ltd., which controlled plantations
believed to be involved in activities that were at odds with the bank's code. (Van

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Huijstee & Glasbergen (2010) p. 264)
FoEN claimed that the code would be inadequate, unless Rabobank took further action.
Firstly, the bank should only provide financial services to clients who themselves, and
their subsidiaries complied by the code. Rabobank should monitor its clients' adherence
to the code and create a complaint procedure for stakeholders which should include ...
victims of harmful palm oil companies. (Van Huijstee & Glasbergen (2010) p. 264)
As a response to FoEN's request for action, Rabobank developed what was denoted as
an engagement strategy. The strategy makes use of risk management to argue for
sustainable business practices, the idea being, that Rabobank can help its clients with
managing risks these are exposed to, rather than punish them for not complying with
the code. This was decided upon since the competition, at the time, was fierce in Asia
and terminating contracts, as a way of punishing clients for not adhering to the code,
would result in Rabobank losing a client and its influence on that client. (Van Huijstee
& Glasbergen (2010) p. 265) However, FoEN perceived Rabobank's influence over its
clients to be strong enough, to be more strict about compliance with its code, while
Rabobank argued that the holding companies often are financed by banking syndicates
and that its influence therefore was limited. (Van Huijstee & Glasbergen (2010) p. 265)
In spite of the differences between FoEN and Rabobank, the interaction resulted in
Palmoil Ltd. joining RSPO. Also, the holding company agreed to answer questions
from NGOs and to provide sustainability information on an annual basis. (Van Huijstee
& Glasbergen (2010) p. 266)

6.4.3. From Implementation to Institutionalisation

A new issue arose in the beginning of 2006. Rabobank had begun financing Soy
farmers in Latin America directly, similar to how the initial investments in palm oil was
done, this concerned the FoEN, as well as another Dutch NGO; Aseed. As a response,
the bank invited the two NGOs to a meeting, to discuss solutions to the perceived
dilemmas. The NGOs were asked to discuss a draft version of a social and
environmental policy, for the soy sector, within the forum of the Dutch Soy Coalition
(DSC), consisting of FoEN and nine other NGOs. (Van Huijstee & Glasbergen (2010)
p. 269)
The cooperation's result, was a policy that contained innovative new approaches.
Besides defining on what basis loan seekers would not be given credit, the policy also
presented a new practice, based on what was denoted as qualification criteria that is,
how clients could improve social and environmental performance. The idea was to tie

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the interest rate of credit to the qualification criteria, better qualified clients would as
such, receive a more favourable interest rate. (Van Huijstee & Glasbergen (2010) p.
269)

In spite of the successful cooperation between Rabobank and FoEN in the soy sector,
the parties could not come to terms on the issues of palm oil production. FoEN
demanded increased transparency and clear procedures for dealing with clients not in
compliance with the Palm Oil Code. Rabobank argued that it did not have the capacity
to monitor all its clients in the palm oil sector, due to the large size of the holding
companies. (Van Huijstee & Glasbergen (2010) p. 270)
In 2007, FoEN brought attention back to Palmoil Ltd. in a report, claiming that the
holding company was involved in illegal logging, forest burning, and land conflicts.
When encouraged to take action by FoEN, Rabobank took the position that the NGO
had to solve the issues with Palmoil Ltd. directly, since the holding company earlier had
agreed to cooperate with NGOs. (Van Huijstee & Glasbergen (2010) p. 271)
The dispute over Palmoil Ltd. led to a termination of the cooperation between
Rabobank and FoEN, on the issues of palm oil. The bank felt that FoEN did not give
due attention to the improvements achieved in the palm oil production, while FoEN felt
that Rabobank had been unwilling to pressure its clients to increase sustainability. (Van
Huijstee & Glasbergen (2010) p. 272)

Although the interaction ended as it did, FoEN did manage to influence Rabobank's
approach to social and environmental performance. As such, the policies developed for
palm oil and soy, gave way for integrating social and environmental policies into
Rabobank's international credit approval process. (Van Huijstee & Glasbergen (2010) p.
270)
Additionally, an internal discussion within Rabobank arose, as the bank's Asian branch
felt that the palm oil policy in force was in compliance with the sustainability criteria of
the RSPO, which should be sufficient, while the CSR department at Rabobank's
headquarters argued that an update of the policy was necessary, to make the RSPO
criteria relevant to the bank's practices. (Van Huijstee & Glasbergen (2010) p. 273)

The study of the interactions between Rabobank and FoEN, shows how the bank
changed its approach and practices to handle social and environmental issues. From
being mainly related to internal business processes, CSR in Rabobank developed to

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cover practices of its clients as well. Additionally, the approach to handling issues
brought to attention by NGOs, developed from reactive to proactive in the period of
interactions between Rabobank and FoEN.
The study also shows that, although the parties may not be able to reach an agreement
in one specific area of business, they may still be able to in another, such as was the
case of the palm oil and soy sectors. Also, in a multinational company such as
Rabobank, it may not always be possible to dictate branches actions from headquarters,
leading to internal discussions such as the one between Rabobank's CSR department at
its headquarters and its Asian branch.

7. The Triple Bottom Line

In the same lines that Rabobank recognised a need to somehow tie its CSR efforts
directly to its business processes, so was the Triple Bottom Line (TBL) developed to
move beyond measuring a company's performance solely on economic criteria, and
include social and environmental aspects in the performance measures as well.
The TBL was developed by John Elkington in the mid 1990's, to create a way to
measure performance among businesses in the USA. Elkington's approach distinguishes
itself from other accounting frameworks, by also measuring social and environmental
performance in addition to economic performance. (Slaper & Hall (2011) p. 4)
When the TBL is outlined as above, it seems fairly straightforward, at least in theory.
However, in practice how to measure social and environmental performance becomes
an issue, since the three dimensions does not share a unit measure. As such, different
approaches to a solution have been put forth, some argues that the three dimensions can
be monetised. Objections to this approach, have been the practical difficulty in pricing
environmental and social performance and impact. (Slaper & Hall (2011) p. 4)
Another approach is to create an index, if all involved in the TBL shared the same
accounting method, this would bypass the problem of how to measure the units and
make the accounts comparable between the users of the TBL. However, weighting of
the three different dimensions would be necessary, which is a challenge of its own.
Deciding on, as an example, if the dimensions, as well as the components within each
dimension, should be given the same weighting, also adds some subjectivity to an index
approach. (Slaper & Hall (2011) p. 4)

For a company, the TBL provides the opportunity to measure the long-term
profitability, potentially generated in its concern for environmental and social issues. As
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an example, waste reduction in packaging, can also reduce a company's costs, as less
waste then goes to landfills. (Slaper & Hall (2011) p. 6) Another example could be an
increased attractiveness to job seekers, meaning the company receives more applicants
for job openings and therefore is able to choose the best qualified person, from a greater
number of applicants.
However, also non-profit organisations and governments make use of the TBL. Some
organisations have partnered with businesses that they share stakeholders with, to come
up with mutual solutions to sustainability issues. Governments have applied the TBL as
a way of measuring performance, but also as a decision making tool to show the cause
and effect of various actions. (Slaper & Hall (2011) pp. 6-7)

Despite some of the problems, mentioned above, the TBL is used in practice. This may
be because the TBL does not have an universally dictated method for calculating the
bottom lines, nor is there a shared standard of what each of the three dimensions should
include, this makes the approach very adaptable, meaning that very diverse companies
or organisations can make use of the TBL, it also means that it can be applied to
measure performance of single standing projects. (Slaper & Hall (2011) p. 5)
No matter what or in which context performance is measured with the TBL, collecting
the right data is essential to the success of those measures. What to include when
measuring the three dimensions could be decided upon by including stakeholders in the
decision process. For a local project identifying who or what would be impacted by the
actions taken would to a certain extent determine what to measure, thereby measuring
the projects impact locally. (Slaper & Hall (2011) p. 5) As an example, a company may
plan to set up a new plant. The new plant will likely create new job openings for the
local community thereby lowering the unemployment rate, this could be one of the
social measures. The plant is likely to increase the waste going into local landfills,
which would be an environmental measure. Also the plant would have to be profitable,
over time, for the company, this could be one of the economic measures.
When using the TBL to measure performance of a company or organisation,
stakeholders could be given a voice as well, by including these in the selection and
weighting of the components that should make up the three dimensions. (Slaper & Hall
(2011) pp. 6)

7.1. The Triple Bottom Line and Supplier Selection

Godfrey and Manikas proposes a TBL approach corporations can take when selecting
Page 20 of 64
suppliers. The two authors recognises the issues, as mentioned above, of measuring the
three dimensions. However, Godfrey and Manikas suggests that managers can still
make value judgements and comparisons when deciding which objectives are more
important, even if those decisions are not made by comparing numbers. As a framework
for their decision making, Godfrey and Manikas uses Analytic Hierarchy Process
(AHP). (Godfrey & Manikas (2012) pp. 1-2)

AHP was developed by Thomas L. Saaty and, in short, allows for decisions to be made,
based on matrices composed of what is deemed to be important objectives in the three
dimension of the TBL. The objectives are then compared pairwise and calculated to
provide a numerical value.
To illustrate the application of AHP to a supplier selection decision, Godfrey and
Manikas uses finding a new supplier, to replace hazardous material used in
manufacturing a company's product, as an example. (Godfrey & Manikas (2012) p. 4)

Table 1:

(Godfrey & Manikas (2012) p. 5)

Table 1 shows four criteria that is relevant for the supplier selection. NPV is the Net
Present Value and describe cost increase or decrease in areas such as, among others,
purchase and transportation. Positive values of NPV indicate improved performance.
(Godfrey & Manikas (2012) p. 4) For the percentage increase/decrease in hazardous
waste criteria, negative values will indicate improved performance, as positive values
means that more hazardous waste is sent to the landfill. Positive values for the next
criteria, percentage reduction in lost workdays, means improved performance. The last
criteria, diversity of supply base, is, in Godfrey and Manikas' example, measured on a
scale from 1-100, 100 being the highest diversity possible. A measure of diversity at a
supplier, could be based on the number of female employees, as well as the number of
minority employees working at that supplier. (Godfrey & Manikas (2012) pp. 4-5)

The four criteria includes economic, environmental, and social objectives. However
none of the three suppliers are best on all four criteria. Therefore, to make a decision of
Page 21 of 64
what supplier to select, the next step is to illustrate the problem graphically.

Figure 1:

(Godfrey & Manikas (2012) p. 5)

Figure 1 shows the hierarchy of the supplier selection problem, that is; the overall goal
of selecting a new supplier, the criteria to base this decision on, and the alternatives to
choose from.

Next the selection criteria need to be prioritised. Godfrey and Manikas does this on a
scale from 1-9, 1 being Equally important and 9 being Extremely more important.
Then, a pairwise comparison of the criteria is carried out. (Godfrey & Manikas (2012)
p. 6)

Table 2:

(Godfrey & Manikas (2012) p. 6)

Table 2 shows the pairwise comparison of the criteria. The more important criteria of
each comparison is selected and described both verbally and numerical.
Next step is to create a comparison matrix for the criteria.

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Table 3:

(Godfrey & Manikas (2012) p. 7)

The initial values section of table 3 shows the numerical rating of the criteria from table
2. Each criteria does not need to be compared to itself and are given a 1, this creates the
diagonal of ones. In the final values section of the table, the blanks of the matrix is
filled out. Criterion 1 was given a 9 when compared to criterion 2, so to fill out the
blank in the row of criterion 2 and column of criterion 1, a value that depicts that
relationship needs to be entered. Therefore criterion 2 is given a value of 1/9 when
compared to criterion 1, the rest of the blanks are filled in, in the same manner.
(Godfrey & Manikas (2012) p. 6)
Next, a synthesization need to be completed to show the priority of the criteria based on
the average values of the pairwise comparison. Therefore, the columns of the final
values section are given three decimals and are then summed. Each criteria value in
each column are then divided by the sum of each column which leads to the normalized
ratings. (Godfrey & Manikas (2012) p. 6) As an example, 0.608 is derived by dividing
criterion 1 in column 1 (1.000) by the column sum of 1.644: 1.000 divided by 1.644
equals 0.608.
To get the priorities of each criterion the rows of the normalized ratings are then
averaged out.

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Table 4:

(Godfrey & Manikas (2012) p. 7)

Table 4 shows that criterion 1 is the most important of the four, second is criterion 4,
then criterion 3, and the least important is criterion 2. (Godfrey & Manikas (2012) p. 7)

Since the pairwise comparisons of the criteria to some extent is based on the view of
one or more decision makers, the consistency of the comparisons need to be considered.
To illustrate; if criterion A compared to criterion B is given a value of 3, and criterion B
compared to criterion C is given a value of 2, then for perfect consistency to exist,
criterion A compared to criterion C should have a value of 6 (3x2). If the decision
maker, or makers, have judged it to be anything but 6, inconsistency between the
comparisons exist. (Anderson et al. (2008) p. 676) It is very likely that inconsistency
will exist among the comparisons, therefore a degree of inconsistency can be accepted,
however, if that degree is not met the pairwise comparisons need to be reconsidered.
The acceptable degree of inconsistency can be described by an consistency ratio (CR).
CR values below or equal to 0.10 means the degree of inconsistency is acceptable.
(Anderson et al. (2008) p. 676)
The CR is defined as the consistency index (CI), which will be calculated below,
divided by a randomly generated consistency index (RI). The value of RI depends on
the number of items being compared which is denoted as n.

(Anderson et al. (2008) p. 678)

In Godfrey and Manikas' example inconsistency was found between criterion 4,

criterion 1, and criterion 2. Criterion 4 compared to criterion 2 was given a rating of 4,
and criterion 1 compared to criterion 4 was rated as 3, this means that criterion 1
compared to criterion 2 should be 12 (4x3), however the rating given was 9. (Godfrey
& Manikas (2012) p. 7)
To compute whether or not the inconsistency is acceptable, the four columns of the final
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values section of table 3 are multiplied with the average normalized ratings in table 4.
The calculations and result, look like this:

(Godfrey & Manikas (2012) p. 8)

The result is a weighted sum vector, which is then divided by the average normalized
ratings from table 4. For criterion 1 the calculation is 2.399 divided by 0.588 which
equals 4.080. The result for criterion 2 is 4.000, for criterion 3 it is 4.019, and for
criterion 4 it is 4.053. The average of these four figures equals 4.038, this average is
denoted as max and is used to calculate CI. (Godfrey & Manikas (2012) p. 8)
The formula, calculations, and result for CI looks like this, n is the number of items
compared:

(Godfrey & Manikas (2012) p. 8)

With the consistency index calculated, it is now possible to calculate the consistency
ratio. To get CR, 0.0127, which is the CI, is divided by 0.90, which is the RI when
comparing four items. The result is a CR of 0.0141, which is below 0.10 and the
inconsistency between the criteria is therefore at a degree which makes the priority of
the criteria acceptable. (Godfrey & Manikas (2012) p. 8)

The next step is to make pairwise comparisons of the three suppliers based on the
criteria. Again, Godfrey and Manikas uses a scale of 1-9, 9 being the most preferable, to
judge each of the three suppliers on each of the four criteria. As an example, judging the
suppliers based on criterion 1, supplier 2 is preferred as this is the only supplier that
actually increases performance based on that criterion. It is then for the decision maker,
or makers, to decide how much more supplier 2 is preferred to the other two suppliers.
A similar matrix is created as when comparing the criteria. (Godfrey & Manikas (2012)
p. 9)

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Table 5:

(Godfrey & Manikas (2012) p. 9)

Next would be to synthesize the suppliers as done for the criteria, the only difference is
that it would have to be done four times, once for each criteria. Also the CR would have
to be calculated for each of the synthesization calculations. To abbreviate, Godfrey and
Manikas assumes that the degree of inconsistency is acceptable. (Godfrey & Manikas
(2012) p. 9)

Table 6:

(Godfrey & Manikas (2012) p. 9)

Table 6 shows the result of the synthesization for each supplier based on each criterion.
Supplier 2 is preferred based on criterion 1 and 2, and supplier 1 is preferred based on
criterion 3 and 4. Since none of the suppliers makes for an obvious choice, an overall
priority ranking of the three suppliers need to be made. (Godfrey & Manikas (2012) p.
9)
This is done by multiplying the criterion priority, the last column in table 4, with the
supplier priority, the rows of table 6. The calculation for supplier 1 looks like this:
0.588(0.066) + 0.060(0.320) + 0.106(0.648) + 0.247(0.623) = 0.281
For supplier 2:
0.588(0.615) + 0.060(0.557) + 0.106(0.122) + 0.247(0.137) = 0.442

Page 26 of 64
And for supplier 3:
0.588(0.319) + 0.060(0.123) + 0.106(0.230) + 0.247(0.239) = 0.278
Based on these priority rankings it can be concluded that supplier 2 is the preferred
choice, followed by supplier 1 and then finally supplier 3. (Godfrey & Manikas (2012)
p. 10)

8. Stakeholder Management
The TBL is a practical tool, as illustrated above in the supplier selection example, as
much as it is a decision making tool, in the sense that what is measured is usually also
managed, outlining the directions of future actions. However, the TBL requires
identifications of what is to be measured, a company's stakeholders can be a valuable
resource in such decision making.

8.1. Initial Stakeholder Approach

R. Edward Freeman is by most, considered as the father of stakeholder management.
Freeman's initial work concerning stakeholders, was published in 1984 in his Strategic
Management A Stakeholder Approach and was based on the view that the existing
theories at the time, were inconsistent with the changes taking place in the business
environment. Therefore, a new conceptual framework was required. (Freeman (1984) p.
5)
Freeman viewed one of the basic problems managers was faced with, as the inability to
distinguish between the impacts, changes in the business environment would bring.
What changes would greatly impact daily business and which would not be significant.
(Freeman (1984) p. 22) Faced with this problem of external impact on business,
Freeman proposed the stakeholder concept as a possible solution. The idea of Freeman's
stakeholder approach, was to move from a managerial view of business, centred around
a corporation's management of owners, suppliers, customers, and employees, to also
recognise governments, media, organisations, etcetera as possible actors in the business
processes. (Freeman (1984) pp. 24-25) As such, Freeman defines a stakeholder as: Any
group or individual who can affect or is affected by the achievement of the firm's
objectives. (Freeman (1984) p. 25) With the definition of what a stakeholder is, a basis
for taking a stakeholder approach must follow. As such, the core idea in stakeholder
management is that a company is required to concern itself with the expectations of
each stakeholder, meaning that managerial decisions will be influenced by a company's
stakeholders. (Rowley (1997) p. 889)
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Freeman describes two issues arising with a stakeholder approach. Firstly, the need to
understand each individual stakeholder of a corporation, is a necessity to be able to
shape the agenda of those stakeholders and understand their key issues. As such,
strategy must be assessed for each of the stakeholders, which is likely to require that a
company develop new expertise areas. (Freeman (1984) p. 26) Secondly, a business can
not be managed in isolation. New processes for managing multiple stakeholders on
multiple issues need to be integrated into business conduct, such as assigning
employees to manage each stakeholder relationship. (Freeman (1984) p. 26)

8.2. Stakeholder Identification

Wheeler and Sillanp proposes an approach to identifying a company's stakeholders
by categorising these into primary and secondary, as well as social and non-social,
stakeholders. Using this definition, primary stakeholders have a direct interest in the
corporation, while secondary stakeholders often represents the interests of society. A
primary social stakeholder could be a supplier, depending on the type of business a
corporation is involved in, and a non-social secondary stakeholder could be a NGO
involved in human rights issues, such as Amnesty International. (Carroll & Buchholtz
(2006) pp. 70-71)

Figure 2: Stakeholder Typologi: One, Two, or Three Attributes Present

Adapted from (Carroll & Buchholtz (2006) p. 72)

Figure 2 shows three attributes a stakeholder can be defined to have present; power,

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legitimacy, and urgency. Further identification of a stakeholder can thereby be done, by
assessing how many of the three attributes it possesses.
Stakeholders in area 1, have the power to influence the company in one way or another.
Area 2 represents stakeholders that are able to make legal demands or claims against
the company, such as employees or customers, while stakeholders in area 3 requires the
company's immediate attention, an example could be the initiation of a boycott of its
products. The areas 4, 5, 6, and 7 represents stakeholders that are more influential in a
company's practices than stakeholders in possession of one attribute, as such they will
also, usually, require more attention from the company. The purpose of a definition
done in this way is, to identify a company's most influential stakeholders, as such
stakeholders in area 7 will require the full attention of the company. (Carroll &
Buchholtz (2006) pp. 71-72)

8.3. A Context Based Stakeholder Approach

Over time stakeholder theory have been given increasingly attention. Several
modifications of the theory and, not least, the definitions of what a stake is, in a
business context, as well as what stakeholders can and can not be, have been suggested.
The initial stakeholder theory, as described by Freeman in 1984, is based on dyadic ties
between the company and its stakeholders. That is, the examined interactions are
limited to those taking place between a company and each of the individual
stakeholders and not, as an example, interactions between those stakeholders.
As a response to this, some approaches to stakeholder management suggests that it is
necessary to view a company's stakeholders, in the entire context in which they act and
not just in its interactions with the company. The interactions a stakeholder is involved
in, are unlikely to be solely between it and the company. As such, a stakeholder may
also be involved in interactions with a companys other stakeholders, as well as entities
that does not necessarily have a direct impact on the company. As a simplified
illustration, figure 3 shows a possible context in which a stakeholder might act.

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Figure 3: Simplified Network

Adapted from (Rowley (1997) p. 891)

Rowley uses network theory to describe such stakeholder contexts. Galaskiewicz and
Wasserman defines social network analysis as; rather than analysing individuals'
behaviours, attitudes, and beliefs, focus is instead on analysing the framework or
structure stemming from the interactions between those individuals. As such, to
understand an individual's behaviour, it is necessary to understand the relational context
the individual is part of. (Rowley (1997) p. 893) Therefore, network theory provides an
opportunity, when combined with stakeholder management, to examine how an
organisation is influenced by the relationships and interactions its stakeholders are part
of. (Rowley (1997) p. 893)

8.3.1. Density and Centrality

To describe the network in which a company acts, two attributes are defined. One of the
two is the density of the network. The density is characterised by the number of ties
between the actors in the network and can be calculated, by comparing the actual ties in
the network, with the maximum possible number of ties. (Rowley (1997) p. 896) As an
example, the network illustrated in figure 3, would be characterised as less dense
compared to if the company in the figure also had direct ties to each of the two entities.
As such, a higher density means that more ties between actors exist in the network.
Rowley discusses three types of centrality: Degree -, closeness -, and betweenness
centrality. (Rowley (1997) p. 898) Degree centrality is defined by assessing the number
of ties an actor, in a network, has to other actors. As such, it is assumed that more ties
equals more relationships, which in turn results in access to information from more
sources, as well as access to a greater amount of resources. (Rowley (1997) p. 899)
Closeness centrality, however, assess centrality by the ability an actor independently
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has to reach other actors. The more actors that can be reached, the more central an actor
is. (Rowley (1997) p. 899) Using figure 3 as an example again, the stakeholder has a
more central place in the network than the company, since it has direct ties to the two
entities, as well as the company. However, if ties were made from the company to each
of the entities, the company and stakeholder would hold an equally central position in
the network.
Betweenness centrality, is similar to closeness centrality, in the sense that both
approaches assess centrality through an actors access to other actors in the network.
However, betweenness centrality focus on how frequent an actor, acts as an
intermediary between other actors. (Rowley (1997) p. 899) In figure 3, the stakeholder
has the most central position in the network, according to the betweenness measure, as
it acts as an intermediary between the company and the two entities. If direct ties
between the company and the two entities were established, this would reduce the
centrality of the stakeholder.

8.3.2. Network Analysis and Stakeholder Management

Rowley's approach to applying network analysis in stakeholder management is based
on the idea that, as density and centrality varies, it will impact a company in different
ways. (Rowley (1997) p. 898 & p. 900)
The density of a network will have impact on the information flows in the network.
Information will flow more easily in a dense network, since communication between
actors become more efficient. Through increased interacting and sharing of
information, the actors will begin to imitate each others behaviour and start to develop
shared behavioural expectations, which in turn shapes the norms of the network.
(Rowley (1997) p. 897)
Rowley proposes that when norms align among a company's stakeholders, this will
create strong constraints on that company's actions. The constraints is the result of the
company's reduced ability to find sympathetic actors among its stakeholders, since the
norms are aligned. Also, a dense network increases the opportunity among the
stakeholders to monitor the company and, due to efficient communication, spread the
information to other actors. Additionally, as interactions in the network have already
been established among the stakeholders, coalitions are more likely to form, as the
actors does not have to suffer the costs of creating entirely new relationships. (Rowley
(1997) pp. 897-898)
Rowley suggests that the opposite is also true. That is, in a network with low density a

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company's stakeholders will be less likely to form coalitions, as information flow and
ability to monitor the company is limited, this means that the company will be less
limited in its actions. However, low density also means that norms will not align, to the
same degree as in a dense network. Therefore, conflicts among the actors is likely to
exist, meaning that a company will likely compromise the expectations of one
stakeholder, when trying to comply with anothers. (Rowley (1997) p. 898)
Rowley focuses on the betweenness approach, as a measure of a company's centrality in
a network. This is the case, since this approach describes the company's influence, or
power in the network, through being in control of information or resource flows. As
such, an actor with a central position can act as a broker or gatekeeper in the network.
Acting as an intermediary in this way, also provides the company with the opportunity
to shape behavioural expectations by controlling what information is shared in the
network. (Rowley (1997) p. 900)

Density and centrality both impacts the limitations experienced by the actors in a
network. To illustrate the power balance present in the different combinations of density
and centrality, Rowley identifies four approaches a company can adopt as a response to
stakeholder pressures.

Table 7: Responses to Stakeholder Pressures

(Rowley (1997) p. 901)

Table 7 shows the four responses; compromiser, commander, subordinate, and

solitarian, within the four possible types of network characteristics of density and
centrality.
Rowley describes the network environment in which the compromiser role is
undertaken, high density and high centrality, as one where a company's stakeholders are
able to constraint its actions, but the company is at the same time able to resist
stakeholder pressures, as such both the stakeholders and the company can influence the

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other party. To create some stability in the network, the company is likely to initiate
negotiations to reach satisfactory solutions for as many actors as possible, aiming to
create a business environment where all the stakeholders will not oppose the company
in joined forces. (Rowley (1997) pp. 901-902)
In a network characterised by low density and high centrality, a company's stakeholders
will be limited in their ability to induce collective pressure on the company, due to
inefficient communication. Combined with the company's central position in the
network, creating the possibility to control the limited information flows, shifts the
power base of the network in the company's favour, allowing it to take on a commander
role. (Rowley (1997) pp. 902-903)
Rowley describes the subordinate role as a vulnerable position for a company. The
network is characterised by high density, allowing stakeholders to exert collective
pressure on the company, and low centrality, so the company is at the same time limited
in its ability to resist pressure from its stakeholders. In such a position, the company
will have to abide by the established norms of the network and abide by its stakeholders
expectations. Suppliers that produces a single component, used in the assembly by a
single large company, will usually be in a subordinate role. (Rowley (1997) pp. 903-
904)
The solitarian role is rarely a position a company can remain in over time, as it is
characterised by low centrality but also low density. As such the company can not
influence the norms in the network, but at the same time it is met with few constraints
from its stakeholders. To a certain extent the company's actions will therefore go
unnoticed. However, the solitarian role is likely to change over time, as resources and
information usually is obtained through interactions with other actors in the network.
(Rowley (1997) pp. 904-905)

Rowley's approach to stakeholder management is descriptive rather than prescriptive,

meaning that it is not the aim to provide companies with strategies to improve
performance but to describe the role of a company in a network, characterised by one of
the four combinations of density and centrality. (Rowley (1997) p. 905)
However, the four roles may have become too rigid as globalization have increased and
information flows have increased with it. It is difficult to imagine that a company's
actions will not somehow, be shared within a limited time period, either through media
or brought to attention by interest groups or organisations, at least if those actions are in
any way at odds with what society finds acceptable. An example could be a company

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establishing a complaint system at a supplier, allowing that supplier's employees to
issue complaints directly to the company or NGOs monitoring a facility which have
experienced issues earlier. As such the density of networks may in general have
increased.
Rowley recognise another issue of the network approach to stakeholder management,
being the inability to always identify all the actors that make up the network and, in
relation to this, the difficulty in defining the network's boundaries. (Rowley (1997) p.
905)
In spite of the issues mentioned, Rowley's network approach to stakeholder
management deals with the initial stakeholder theory's dyadic interactions approach,
and proposes the idea that stakeholders are influenced by the network in which they act
and a company will be influenced by that network as well. As such, it is necessary to
identify the network to manage the stakeholders.

8.4. The Extended Enterprise

The authors James E. Post, Lee E. Preston, and Sybille Sachs, takes a similar approach
to stakeholder management as Rowley, in what they define as the extended enterprise.
The term, extended enterprise, originated at Chrysler Corporation where it helped shape
information exchange and cost reduction, in the company's supply chain. The three
authors builds upon the idea of the extended enterprise, and lets the term include a
company's interactions with its stakeholders, as well as with other businesses. (Post et
al. (2002) p. 7)
As such, a company is viewed as being part of a network, consisting of its stakeholders,
in the same lines as what Rowley proposes. The stakeholders influence the company
through creating, sustaining and enhancing its value creation capacity. Therefore, the
company must rely on its ability to create new, and sustain existing relationships within
a network, made up of all the company's stakeholders. What is important for a
company's long-term survival is therefore, relationships rather than transactions, as
relationships implies ongoing interactions, both collaborative and confrontational,
between a company and its stakeholders, while transactions imply a one-time
interaction. (Post et al. (2002) p. 7)
The authors identify three areas in which a company's stakeholders can be categorised;
the resource base, the industry structure, and the social political arena. The resource
base includes stakeholders such as, employees, investors and customers, meaning actors
included in a company's resource base, provide capital to the company in one way or
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another, such as the workforce of employees or capital of investors. The industry
structure includes stakeholders, such as unions, regulatory authorities, supply chain
associates, and a company's business partners. While the resource base category is
concerned with downstream supply chain activities, at least, in terms of managing
customers, the industry level category includes stakeholders that are affected by
upstream activities, such as suppliers and business partners. The third category of
stakeholders is related to the environment a company operates in, meaning it includes
stakeholders such as governments, NGOs and communities. These stakeholders both
offer opportunities of cooperation, as well as the ability to pressure and constraint a
company through various claims. (Post et al. (2002) pp. 10-11) As an example, like
FoEN required that Rabobank established a set of lending conditions its clients should
comply with.

Like Rowley, the extended enterprise approach to stakeholder management, emphasises

the importance of managing stakeholders, based on the interactions and relationships
between the company and its stakeholders, as well as between the various stakeholders,
and not on the dyadic ties between two actors, without consideration of the context of
the interactions. Also, the three authors emphasise that stakeholder management implies
developing and implementing policies and practices that are concerned with the values
and goals of the company's stakeholders, as such management does not imply
mobilization and exploitation of those stakeholders. (Post et al. (2002) pp. 8-9)

9. Analysis
This section will focus on Apple, Nike, and Walmart's approaches to sustainability. As
such, the companies' standards, that they expect their suppliers to comply with, will be
reviewed and the network approach to stakeholder management will be considered for
each of the three companies.
Nike, Walmart, and Apple have been chosen as the focus organisations as all three have
recently experienced issues at their respective suppliers. Also, they hold substantial
positions in their industries, meaning they are influential in shaping business conduct in
those.

9.1. Apple's Sustainability Approach

Apple is committed to driving the highest standards for social responsibility
throughout our supply base. (Progress Report (2012) p. 3) As the quote states, Apple
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recognises the need to take responsibility for the company's actions throughout the
supply chain. This creates a challenge, as Apple's rapidly growing customer base
creates a need to also expand the company's supplier base over time. As well as
procuring new suppliers, reviews of existing contracts with suppliers are carried out
periodically. Suppliers working with Apple must meet requirements to both quality and
standards of sustainability. (Apple 1) Apple expects safe working conditions to be
provided by its suppliers and that a supplier's workers are treated with dignity and
respect, also, the manufacturing processes must be characterized by concerns for the
environment. (Progress Report (2012) p. 3) Principles such as these are combined in
Apple's supplier code of conduct.

9.1.1. Code of Conduct

The code goes beyond legal commitments existing in each supplier's country of
operations, which Apple expect all of its suppliers to abide by. Five conduct areas are
identified; labour and human rights, health and safety, environmental impact, ethics,
and management commitment. (ASCC (2012) pp. 1-6) Some of the most important
aspects of the code, will be considered next.

9.1.1.1. Labour and Human Rights

The area of labour and human rights includes various issues. To oppose discrimination,
suppliers must be concerned with the equal treatment of all workers, both concerning
workers already employed and when hiring. (ASCC (2012) p. 1)
The code includes countering inhumane treatment of workers, such as sexual
harassment, corporal punishment, or restrictions on when workers are allowed to enter
or leave the workplace. (ASCC (2012) p. 2) In line with the humane treatment of
workers, prevention of involuntary labour and human trafficking is included to prevent
that suppliers are involved in any kind of forced labour practices. As such, workers
must have the opportunity to resign with reasonable notice. Also, when provided with
workers from third party agencies, it is the suppliers' responsibility that such agencies
act within the boundaries of Apple's code of conduct. (ASCC (2012) p. 2)
To prevent child labour, no supplier is allowed to employ workers under the age of 15.
If the minimum age of employment is above 15 years of age, in the country where the
supplier operates, the supplier must abide by that law. Additionally, if the age for
completing compulsory education is above 15, no one under that age may be employed.
Suppliers are allowed to employ workers under the age of 18, as long as the employee

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is above the minimum age of employment. However, the supplier must ensure that
those employees are not involved in work that is unsafe in any way. (ASCC (2012) p. 2)
The Labour and human rights area also states that suppliers must abide by a work week
of no more than 60 hours, including overtime. Additionally, workers must be given at
least one day off per week. Suppliers must pay their employees at least minimum wage,
as required by law in the country where it operates, and deduction in wages may not be
used as a disciplinary measure. Suppliers must also respect employee memberships in
unions and may not discriminate between union members, and applicants not in a
union, when hiring. (ASCC (2012) pp. 2-3)

9.1.1.2. Health and Safety

Apple suppliers is required to provide safe working conditions for their employees. As
such, suppliers must provide protective equipment and a safe work environment, such
as ventilation in areas where the work includes the use of chemicals, to eliminate
hazards associated with the work. Also, safe work procedures for the workers must be
established to prevent work related accidents, this includes providing workers with
health and safety information, training, and safety drills. Additionally, workers that
raise safety concerns or refuse to work due to such concerns may not be disciplined for
doing so. (ASCC (2012) p. 3-4)
Suppliers are required to track and report injuries and illnesses associated with the work
procedures, and must manage such cases by investigating them and correct the issues.
Additionally, Apple encourages suppliers to establish committees to both improve
safety education and to receive worker input on health and safety issues. (ASCC
(2012) p. 4)

9.1.1.3. Environmental Impact

The suppliers must focus on reducing or, when possible, eliminating pollution such as
solid waste, waste water and air emissions. This also includes, reducing indirect air
emissions stemming from energy providers and as such the energy consumption must
be minimized. (ASCC (2012) p. 5) Disposing of waste must be done in compliance
with the laws and regulations of the country in which the supplier operates. Also, the
supplier must obtain and maintain environmental permits and act accordingly, as well
as meet any reporting requirements, included in these (ASCC (2012) p. 4-5)

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9.1.1.4. Ethics
The ethics area of Apple's code of conduct deals with the standards that must be upheld
when suppliers interact with workers, suppliers, and customers. As such, suppliers must
oppose corruption, extortion, and embezzlement. This also includes, preventing getting
involved in bribery. Additionally, suppliers must work to uphold fair standards in sales
and advertising as well as competition. (ASCC (2012) p. 5)
It is regarded as a supplier's responsibility that workers are protected and are given a
voice. Therefore, suppliers must establish anonymous complaint mechanisms, so
workers have the opportunity to bring attention to workplace issues. (ASCC (2012) p.
5)
In addition to the responsibilities related to its business conduct, Apple also encourages
its suppliers to promote social and economic development and sustainability in the
communities, in which they operate. (ASCC (2012) p. 6)

9.1.1.5. Management Commitment

To ensure that suppliers are in compliance with the code of conduct, Apple requires that
a statement is drafted which describes the supplier's commitment to abide by the code
and continually strive to improve shortcomings. The statement must be posted at all the
supplier's work sites. (ASCC (2012) p. 6) Additionally, the supplier must identify risks
associated with its operations and carry out evaluations both on its own conduct but
also to verify if its suppliers and subcontractors are in compliance with Apple's code of
conduct. It is therefore, the suppliers responsibility that managers and workers receive
the necessary training, to enable them to carry out such work tasks. (ASCC (2012) p. 6-
7)

9.2. Nike and Walmart's Sustainability Approaches

Both Nike and Walmart have drafted documents concerned with the same issues, as
Apple's supplier code of conduct. Nike gathers its expectations to suppliers in a code of
conduct, as well as what is denoted as code leadership standards. Walmart sets forth
standards for its suppliers to abide by. As such, both Nike and Walmart, in the same line
as Apple, expects their suppliers to abide by local laws. Both companies also
emphasises that all employment is voluntary so no forced labour is used. (NCC (2010))
(WSS (2012)) While Walmart's standards for suppliers does not define a specific age
employees must be above, it does, naturally, prohibit child labour. (WSS (2012)) Nike
specifies that workers must at least have reached the age of 16 and includes the same
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standards, of local laws of minimum age of employment, as well as the age of finishing
compulsory education, as Apple. (NCC (2010)) Both Nike and Walmart require that the
wages, at least, meets the local minimum wages and both companies also focus on the
freedom of association, allowing employees to form or join unions as they choose.
(NCC (2010))(WSS (2012))

9.2.1. Health, Safety, and Environment

The health and safety and environmental protection issues are also dealt with, similarly
to Apple, by both Nike and Walmart. Both companies require their suppliers to provide
safe working conditions and that ongoing steps are taken to prevent work related
accidents. (NCC (2010))(WSS (2012)) To reduce the suppliers' environmental impact,
the companies require that suppliers' manufacturing facilities, complies with
environmental standards and laws and that continual steps are taken to reduce the
environmental impact. (NCC (2010))(WSS (2012))

9.2.2. Compliance with the Code

Nike and Walmart specify the terms of business in the same lines as Apple, that is that
suppliers that wish to do business with either of the companies must adopt and comply
with respectively Nike's code of conduct and Walmart's standards for suppliers. Also,
suppliers are required to ensure that their suppliers and subcontractors are in
compliance with the standards set forth by Nike and Walmart. (NCC (2010))(WSS
(2012))
To ensure that Apple, Nike, and Walmart's suppliers comply with the business standards
defined, the three companies each carry out scheduled audits. Nike and Apple's audits
are carried out by auditors directly associated with the companies, but also cooperate
with auditing agencies to carry out audits. (Apple 2)(Nike 1) In addition to the
scheduled audits, Apple also conduct surprise audits. As implied by surprise, this type
of audit is unannounced and must be carried out within one hour of when the auditing
team arrives, at the facility to be audited. (Apple 2) Walmart's audits are mainly carried
out by auditing agencies, but validation audits are carried out by Walmart self as well,
to ensure the integrity of the audits done by the agencies. (Walmart 1) Apple, Nike, and
Walmart all emphasise that audits help define areas where they can help suppliers
improve performance and correct issues. However, they are also an essential part in the
decision making on whether to terminate a supplier contract or not. (Apple 2)(Nike 1)

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(Walmart 1)

9.3. The Network Approach to Stakeholder Management

To emphasise the advantages of a network approach to stakeholder management, this
section will, based on the Apple cases, compare the initial stakeholder approach,
building on dyadic ties between a company and its stakeholders, with the network
approach. Focusing on ... the fact that any stakeholder relationship may be the most
critical one at a particular time or on a particular issue (Post et al. (2002) p. 7) and to
limit the extent of this analysis, the stakeholder identification will be based on the
Apple, Nike, and Walmart cases as described in the section; Cases. As the networks
analysed will be based on the cases, identifications of Apple, Nike, and Walmart's role,
as defined by Rowley, will be omitted as the networks will be incomplete or partial.
Although, the centrality is difficult to define, the density will be considered, which will
allow focus to be on the interactions in the network and the importance of the
stakeholders in the specific cases.

9.3.1. Apple
Figure 4 illustrates the initial approach to stakeholder management based on the actors
involved in the Wintek and Foxconn cases.

Figure 4: Dyadic Stakeholder Approach: Apple

Adapted from (Rowley (1997) p. 891)

As described in the cases, the issues at both Wintek and Foxconn was given attention
through the media. Using the attributes definition as described by Carroll and
Buchholtz, in the cases of Wintek and Foxconn, the media both require urgent attention

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from Apple and have the power to create bad publicity for the company. Additionally, it
can be argued that because the cases are concerned with workers rights and safety
issues, media may on behalf of the employees at Foxconn and Wintek, put forth legal
claims against Apple. As media then have, at least, two of the three attributes present,
extra attention must be given to that stakeholder. However, the attention generated by
the media may result in new claims against Apple made by other of the company's
stakeholders. Such stakeholder interactions are illustrated in figure 5.

Figure 5: Network Approach: Apple

Adapted from (Rowley (1997) p. 891)

The network approach to stakeholder management includes the interactions between the
stakeholders. Although, not specifically mentioned in the Foxconn and Wintek cases,
shareholders, consumers, and apple employees are included in figure 5, based on the
assumption that the three stakeholders will in some way be impacted by the media
attention. Shareholders may require Apple to remedy the situation, consumers might
avoid Apple products while a solution is under way, and Apple employees may be
tasked with finding a solution to the issues. This is represented by the connecting lines
between media and each of the three stakeholders. The interactions between the media
and Foxconn, is mainly based on ABC news being granted access to Foxconn's
facilities, as a part of Apple's issue handling. However, earlier media interaction have
taken place as well when Mail on Sunday did a report on Foxconn in 2006. The media
is also connected to the employees at Foxconn, as some of these generated attention

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when they threatened to commit suicide, by jumping from the supplier's roof.
In addition to allowing media access to Foxconn, another part of Apple's solution was
to request the help of the FLA that are tied to Foxconn through audits performed, at the
Apple supplier's facilities.
Similarly to Foxconn, the attention to the issues at Wintek was initiated by employees
and then media driven. As such, an employee demonstration at a Wintek factory
generated the media attention. As described in the case, the interaction is focused on the
media and the employees at Wintek and consists of interviews with the workers
poisoned by n-hexane. However, an interaction between Apple and the employees are
initiated as well, as Apple decides to monitor the afflicted Wintek employees.

When considering the density of the network illustrated in figure 5, by comparing the
existing number of ties with the maximum possible number of ties, the density can be
defined as fairly low. Rowley proposes that this means few cases of coalitions, against
Apple, will form. However, as previously discussed, sharing of information have
become more efficient over time which might also impair a network's actors' ability to
act as gatekeepers of information. As seen in the Wintek case, the media conducts
interviews with the supplier's employees, without restrictions from Wintek. This
information can then be shared with Apple's other stakeholders. This makes media a
very important stakeholder for Apple in the Foxconn and Wintek cases, as it may be
able to influence Apple's other stakeholders' expectations to the company, based on the
media's point of view. This is in line with what the illustration of Apple's stakeholders
based on the dyadic ties approach showed. However, based on figure 4, Apple would
only have to concentrate on managing one stakeholder, media, and might omit
considering the impact media can have on Apple's other stakeholders.
As such, it may not be surprising that Apple chooses to cooperate with the media in the
Foxconn case, by granting it access to the supplier's facilities, thereby stating that Apple
does not have anything to hide at Foxconn. Also, notable in the Foxconn case is that
Apple have no direct ties to the employees at Foxconn. This means that information
concerning the supplier's employees will be shared either through the media or from
Apple, but only consisting of the information the supplier provides the company with.
This means that Apple have limited control of such information, as well as how it is
shared. Additionally, no ties exist between Apple and its competitors either, leaving
Apple in the focus of media attention as the competitors are reluctant to comment on
the issues. This also means that no common measures, to solve the issues, are

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considered by neither Apple nor its competitors.

9.3.2. Nike
Figure 6 shows Nike's stakeholder network based on the PT Kizone, Nikomas
Gemilang, and Hugger and Vision Tex cases. All three cases are similar in the sense that
they involve suppliers, neglecting to compensate their employees for the work they
have performed.

Figure 6: Network Approach: Nike

Adapted from (Rowley (1997) p. 891)

Based on the same assumption as made in the Foxconn and Wintek cases, media have
been given ties to Nike's employees, shareholders and consumers. Also, media is tied to
both the student group USAS and the WRC through interviews with spokespersons and
statements made by the two groups on the issues at Hugger and Vision Tex.
The WRC is also tied to both of the Honduran contractors and their employees, as the
organisation's investigations into the the two contractors, was initiated by employee
complaints. The results of the WRC's investigations was communicated to the
American universities. As such, the WRC is not involved in any direct interactions with

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Nike in the Hugger and Vision Tex case, but the organisation's findings resulted in
demonstrations by USAS, as well as pressure from the universities, including the
termination of one university's contract with Nike. The issue was settled when Nike and
the Honduran labour federation cooperated on a solution. As such, Nike is indirectly
tied to Hugger and Vision Tex's employees, through the labour federation.
As the network, the Pou Chen Group is part of, shows and similar to the PT Kizone
case, Nike is not always directly tied to the manufacturers of its products. As such, the
issue of unpaid overtime wages was settled between Nikomas Gemilang and the local
union, illustrated by the ties between these two actors. The issue at the manufacturer
was brought to attention by investigations carried out by EfJ and the union in
cooperation, tying EfJ, the union, and Nikomas Gemilang together, through interactions
related to the investigations. Nike competitors is tied to the manufacturer as well, since
other brands were being manufactured at that supplier too.
As mentioned above, the networks based on the Nikomas Gemilang and PT Kizone
cases are similar, in that Nike is not directly tied to the manufacturer where the issues
arise. As in the Hugger and Vision Tex case, investigations into PT Kizone by the
WRC, brought attention to the issues. Therefore, the WRC are tied to the manufacturer
in the network. As described in the case, Green Textile and the buying agent of the
Dallas Cowboys, took control of the manufacturer after the owner fled from Indonesia.
At the time, the WRC reported on the steps taken to solve the issues at PT Kizone, the
Dallas Cowboys had not yet provided financial coverage of the owed severance pay, but
had pledged to do so. Therefore, only Green Textile and Nike are tied to the former PT
Kizone employees, since Adidas did not recognise a financial responsibility in the case.

Comparing the density of Nike's entire network with Apple's, it can be described as
lower. When considering the network described in the Hugger and Vision Tex case
though, it is fairly dense. This might explain the coalition of the WRC, the USAS, and
the universities, applying conjoined pressure on Nike.
However, although the information flow is slow in the entire network, and in spite of
the two suppliers' holding central positions, in the long term neither Green Textile, nor
the Pou Chen Group, could sustain an information broker role between Nike and the
manufacturers. It can however, be argued that had Nike had direct contact with
Nikomas Gemilang or PT Kizone, the issues might have been discovered before they
evolved into publicly exposed problems.
The issues described in the three Nike cases also differ from the ones experienced by

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Apple, in the way that attention to the issues are brought by organisations, such as EfJ
and the WRC, and pressure to resolve the issues comes from those same organisations,
in cooperation with student groups and universities. As such, media disperses
information, while the organisations acts as brokers of the information provided to the
media. The claims Nike will have to concern itself with, is therefore the ones put forth
by the organisations. Considering the organisations in terms of Carroll and Buchholtz'
three attributes, the stakeholders have urgency present, as an example since USAS
conducts demonstrations in front of Nike retailers. As seen by the WRC's report's
impact on the universities, leading to one terminating its contract with Nike, power is
also a present attribute. Thirdly, the organisations represent the suppliers' employees'
legal claim to be compensated for their work.
However, Nike have no direct ties with neither the EfJ nor the WRC, although these are
the organisations conducting the investigations into the manufacturers. Also, except
from the PT Kizone case, no direct interaction with the workers is made in the issue
solving, as the workers are represented by the labour federation in the Hugger and
Vision Tex case, and by a local union in the Nikomas Gemilang case. However, in the
Nikomas Gemilang case the issue is settled by EfJ and the union in cooperation,
without the involvement of Nike. Also, although the manufacturer produces apparel for
Nike's competitors, Nikomas Gemilang is still mainly described as a Nike
manufacturer. This underlines the importance of identifying the stakeholder network,
since even if Nike places its orders at the Pou Chen Group, issues arising at
subcontractors, such as Nikomas Gemilang, will be tied to Nike when disclosed by
media or organisations.
Similar to Apple's network, no interactions between Nike and its competitors, using the
same manufacturers as Nike, exists in the cases. As such, no common guidelines for
solving the issues, described in the cases, exist in Nike's network either. This becomes
evident in the differing approaches to the arising issues. Nike's competitors remains
reluctant to take responsibility for the problems, as seen in Adidas' approach in the PT
Kizone case, whereas Nike does take steps to solve the issues.

9.3.3. Walmart
Based on the Elec-Tech, Seafood Supplier, and NYCPF cases, Walmart's stakeholder
network is illustrated in figure 7.

Page 45 of 64
Figure 7: Network Approach: Walmart

Adapted from (Rowley (1997) p. 891)

The interactions, illustrated in figure 7, Between Elec-Tech, Sacom, and Walmart, was
initiated by Sacom's investigations into the Walmart supplier's factory. As such,
Sacom's tie with Elec-Tech is based on the interactions connected to the investigations.
The tie between Sacom and Walmart is established when the organisation, based on its
findings, encouraged Walmart to do an investigation of its own, to which the company
responded, by conducting two surprise audits at the supplier.
Similarly to the Elec-Tech case, investigations into one of Walmart's seafood suppliers
was conducted by an NGO, the WRC. As such, the tie between NGA and the WRC
exists as the consortium did the investigations into the supplier, when requested to do so
by the NGA. The NGA is therefore not directly tied to the supplier, but represents the
employees working there. Along with Walmart's own investigations into the seafood
supplier, OSHA and USLD are also tied to the supplier through investigations of
worker rights violations.
Unlike the previous cases, the claims against Walmart in the NYCPF case, is put forth
by one of the company's shareholders. The tie between the media and the fund is based
partly on the same assumption made in the Apple and Nike cases, as well as on the the
NYCPF's statement that it is the fund's hope that focus on worker rights issues is
increased. By having a labour organiser present the fund's proposal to Walmart, ties are
created between the NYCPF and the organiser, as well as between the organiser and

Page 46 of 64
Walmart. Also, the SEC is tied to Walmart through the company's request to strike the
fund's proposal from the agenda.

Similarly to the Nike cases, the issue attention is generated by organisations, in both the
Elec-Tech case and the seafood supplier case. Also, in both cases, the pressure to solve
the issues comes from organisations, Sacom in the Elec-Tech case and the NGA in
cooperation with the WRC in the seafood supplier case. And, as seen in the Elec-Tech
case, Sacom was influential enough, to persuade Walmart to conduct investigations into
the supplier itself.
However, in the NYCPF case, the issue attention is generated by one of Walmart's
shareholders. The fund is a stakeholder with a clear legal claim against Walmart; to
ensure that the company's suppliers does not violate workers rights. Due to the
relatively low share percentage owned by the fund though, its power to influence
Walmart will be limited, at least if it acts on its own. However, the SEC rejecting
Walmart's request to strike the fund's proposal, may increase the perceived importance
of the issue by other shareholders as well. In combination with the fund's cooperation
with a labour organiser, this may create support to the proposal from other of Walmart's
shareholders. If the NYCPF's support increases among the shareholders, this will also
increase the density of the network existing between, the fund, Walmart's other
shareholders, the SEC, and the labour organiser. Increasing density also increases the
chance, or risk from Walmart's point of view, that coalitions will form and joint
pressure might be applied on Walmart.
The NGA have taken an information broker role between Walmart, the employees at the
seafood supplier, and the WRC. If Walmart did not initiate an investigation into the
supplier of its own, the issues discovered in WRC's investigation would be disclosed
from the organisations' point of view, since Walmart have no direct tie to the
investigating organisation, and have suspended the supplier. As a result, the NGA and
WRC would have had greater influence on Walmart's future actions in the case. Also,
the two organisations could secure greater influence on Walmart by cooperating with
OSHA and USLD. If such a cooperation was undertaken, the expectations to Walmart's
actions could be coordinated, creating a situation where Walmart had to resist pressure
from four organisations, with the same expectations to the issue solving. Had Walmart
had direct ties to the employees at both Elec-Tech and the seafood supplier, a solution
to the issues might have been reached between Walmart, the suppliers, and the
employees, and the organisations' involvement in the cases might have been avoided,

Page 47 of 64
additionally the issues might have been prevented entirely, if caught early in their
evolving process.

It is evident, when viewing all three companies' networks, that little interaction between
any of the three companies and the source where the issues arise, the suppliers'
employees, exists. Where they do occur, as in Apple's Wintek case and Nike's PT
Kizone case, the measures are reactive and only deals with solutions to the current
problem, such as Nike compensating laid off workers their owed severance pay and
Apple monitoring the Wintek employees poisoned with n-hexane.
Additionally, the networks show that no direct ties exist between the companies and
their competitors in the cases. As such, no solutions to the issues are developed at
industry level, which is also evident in the differing approaches to the issues, such as
Apple and Nike's competitors' anonymity in the Wintek, Foxconn, and Nikomas
Gemilang cases, as well as Adidas' reluctance to recognise any financial obligation to
PT Kizone's laid off workers.

10. Discussion
This section will consider various approaches to Apple, Nike, and Walmart's
experienced issues, as described through the cases and the analysis section. The section
will also include considerations of applications of the TBL, based on the three
companies' issues. Additionally, a comparison between some of the proposed solutions
and the findings described in the case study of Rabobank and FoEN will be considered.

10.1. Company and NGO Cooperation

As seen in the Rabobank study, long term interactions between a company and a NGO
can occur, when the two parties are involved with the same stakeholders, in this case
environmental preservation. However, differing perceptions of what is required from
each party involved in the interaction, is likely to exist. As such, in Rabobank's case, the
bank emphasised the problem of monitoring all of the plantations controlled by the
holding companies it had invested in, due to limited resources. Meanwhile, FoEN felt
that Rabobank could have put more pressure on its clients, to comply with the bank's
demands to increase sustainability. Rabobank, however, argued that because of the
financing structure, the bank had limited influence, since it was not the only bank
providing funds to the holding companies. In the same lines, in the NYCPF case,
Walmart argued that it would have difficulty in pressuring its suppliers to report on
Page 48 of 64
workers rights issues, as the fund's proposal required.
As seen in the Rabobank study, the differences between the bank and FoEN resulted in
a termination of the cooperation in the palm oil area. As described, Rowley proposes
that interactions will result in norms aligning. This may be true, to a certain degree, as
Rabobank did change its approach to what its corporate responsibility should involve,
thereby moving closer to the expectations FoEN had to the bank. The norms had not
aligned between the bank and the NGO to such a degree, however, that a termination of
the cooperation could be avoided. The differences in expectations stems from the
differing approaches to the parties' common stakeholders. As an example, Rabobank
decided to invest in the holding companies controlling the palm oil plantations, rather
than investing directly in the plantations. This would spread the bank's risk and as such,
made good sense from a business point of view. However, it also meant that Rabobank
no longer could meet the expectations of FoEN, as its influence on the clients
diminished and its monitoring capacity was limited to a few of the many plantations
controlled by the holding companies.

Is cooperation between companies and NGOs bound to fail eventually then? One way
to help reach common ground may be through the TBL. Companies may be able to
cooperate with NGOs, as well as other stakeholders, in defining what to include when
measuring the three dimensions; economic, environmental, and social performance. As
such, a company may be able to utilize organisations' expertise areas, leading to more
detailed definitions of what is relevant to measure in the social and environmental
areas. Additionally, stakeholders, in general, might also be given a voice in the supplier
selection process through the use of the TBL as a decision making tool. As described,
supplier selection based on the TBL, involves defining relevant criteria to make the
decision on, as well as prioritising those criteria. Also, the judgements of the supplier
alternatives, based on the defined criteria, could be done in cooperation with
stakeholders. By cooperating with stakeholders in this way, a company may be able to
take on a proactive approach to issue solving, since what a company measures it is also
likely to manage, rather than reacting when a issue arises. As an example, if Walmart
had been cooperating with, Sacom or WRC in its supplier selection, the seafood
supplier and Elec-Tech might not have been chosen as suppliers in the first place.
Additionally, involving the two NGOs in supplier selection, could create the basis for
future cooperation as well. As such, some media attention might have been avoided, or
turned into positive attention, by being able to solve the issues faster, or entirely prevent

Page 49 of 64
them from occurring, in joint force with the NGOs.

10.2. Apple, Nike, Walmart and Supplier Employees

Having established interactions, Rowley propose, also means that the involved parties
are more likely to cooperate again or form coalitions. As such, since the network
analysis showed that one of the things the three companies had in common, was very
few direct interactions with supplier employees, although the cases had focus on
workers rights issues, Apple, Nike, and Walmart is likely to be met with joint pressure
from multiple actors. An example of this is the Hugger and Vision Tex case, had Nike
had established interactions either between the employees, through representatives or a
local union, or with the WRC, the issues might have been handled differently.
Although, there is little Nike could have done about the closing of the two
manufacturers, however, a similar solution, as the the one described in the case, might
have been found without the involvement of the WRC. Alternatively, a solution might
have been made in cooperation with the organisation. In both situations, Nike might
have been able to avoid a purely negative report done by the WRC, leading to
demonstrations by the USAS and the termination of one of the company's contracts
with the universities. As such, if Nike had been a more central part of the network
existing between Nike, the universities, the USAS, and the WRC, through more
established interactions with the actors, the WRC, USAS, university coalition against
Nike, might have been avoided.
Similarly, Walmart might be able to avoid a coalition being established between the
WRC, NGA, OSHA, and USLD by cooperating with those organisations, in the
investigation into the seafood supplier. Additionally, Walmart could attempt to create
ties with both the NGA as well as the WRC, by meeting the guest worker agency's wish
to start investigations into other Walmart suppliers employing migrant workers.
Establishing a tie to the NGA might also help Walmart in identifying future workers
rights issues, as it may be difficult to establish direct ties with workers that are only
employed at Walmart suppliers for a very limited period of time.

As mentioned above, and as seen in the Rabobank study and NYCPF case, arguments
against monitoring suppliers to ensure compliance with a company's expectations to
business conduct, are based on limited resources to do so in practice. Also, a company's
influence may not be as strong as expected by third parties. However, the claims against
companies are resilient enough not to be counter argued by such limitations, as is
Page 50 of 64
evident throughout the cases, Apple, Nike, and Walmart are involved in. As is seen in
the three companies' codes of conduct, one of the common points is the requirement
that the supplier adopts the code and ensures that its own suppliers are also in
compliance with that code. This may in some situations spread like rings in the water,
which is also likely the hope, however, NGOs and other stakeholders will trace the
money streams back to the established well known brands when issues arise at
suppliers, creating media attention such as in the Apple, Nike, and Walmart cases.
When faced with this problem, Rabobank changed the scope of its defined
responsibility areas to include the actions of its clients, also including actions of the
holding companies' clients, as the bank deemed the potential damage its reputation
would have to endure, if not doing so, too great. Although Apple, Nike and Walmart
have been unwilling to take a similar step, it have been necessary for all three
companies to find solutions to issues arising at their suppliers. As such, it may be
necessary for the three companies to view their corporate responsibility efforts as risk
management, in the same lines as Rabobank did, since claims against companies
concerning their suppliers, only seems to gain more attention. Since both Apple and
Nike often use the same suppliers as their competitors, and Walmart argues that it has
limited influence over its suppliers, the three companies could adopt a similar approach
as Rabobank. That is, to rather help its suppliers managing risks, than punish them if
they are not in compliance with the codes of conduct. Rabobank, recognised that if the
bank were to punish a client by terminating the relationship that client could easily find
another lender, due to fierce competition. As such, the bank decided that it would be
more beneficial for both, in Rabobank's case, the environment and the bank itself, to
have some influence over the client rather than none at all.
Apple, Nike, and Walmart will be faced with the same dilemma, terminate the contract
with the result that no changes occur or keep the supplier and try to improve conditions,
bearing the risk that more issues arise in the future. One way to approach a solution to
this dilemma is through stakeholder identification. If the three companies recognised
employees at suppliers as stakeholders, on equal terms with employees employed
directly by the company, the solution would be, to have as much influence on the
working conditions for those employees, as possible. Such an approach would also
encourage more direct interactions with the supplier employees, which as discussed
above might have been able to limit the extend of the issues, or prevent them entirely.
Such an approach, however, is resource heavy, as some monitoring of the working
conditions is necessary. Reducing such costs might be done through cooperation with

Page 51 of 64
NGOs, to take on some of the monitoring tasks, NGOs such as WRC and FLA is
already involved in auditing suppliers, or by establishing direct measures allowing
workers to report and complain about issues, directly to the company.

10.3. Competitor Cooperation

As mentioned above Apple, Nike, and Walmart often use the same suppliers as their
competitors. Some of the implications of this, has been discussed above as well, such as
the limitations it imposes on a single company's influence on a supplier.
From the companies' point of view, having no mutual industry agreements, on how to
deal with issues arising at suppliers, might leave one company alone in the media
searchlights. This has been the case for both Apple and Nike, whose competitors
managed to remain fairly anonymous in the cases described, however, the roles might
as easily have been reversed. As such, it would seem to be in all parties interest, to
establish guidelines for handling supplier issues. Previous attempts include the
establishment of the FLA. As described, the organisation was established with the
purpose of improving working conditions in the clothing and footwear industry, but
evolved to act within any industry, as such both Apple and Nike are part of the
organisation. The FLA would be an obvious platform for establishing, or renewing, a
mutual approach to deal with supplier issues. As the PT Kizone case showed, Nike and
Adidas took different measures to solve the issue of unpaid severance wages, although
Adidas did not recognise a financial responsibility towards the supplier's employees, the
company did take similar action, as Nike had taken in the Hugger and Vision Tex case.
Nonetheless, the case was not beneficial for Adidas, as Nike was depicted, by media, as
showing a greater sense of responsibility.
Mutual guidelines might help avoid such a scenario for any company willing to
participate. Also, being part of such an organisation may help prevent NGOs playing
competitors off against each other, such as described in the Rabobank study, which is
positive from a company point of view. To avoid such an organisation evolving into
something similar to a cartel, though, and to utilize various expertise areas, the
involved companies' stakeholders could be included in defining common sustainability
criteria for one or several industries.
As such, mutual guidelines between competitors, would also benefit supplier employees
as companies could, to a higher degree, influence a supplier, based on the knowledge
that the company's competitors would take action accordingly, were they in a similar
situation. Thereby, through aligning expectations and norms to what corporate
Page 52 of 64
responsibility should include, it might be possible to increase sustainable performance
in the long term, as well as approach supplier issues with proactive rather than reactive
measures.

11. Conclusion
The problem statement of the thesis was defined as following:

How can companies increase sustainability in the supply chain?

Four questions to be considered, to address the problem statement, was defined as well:

Why should a company take responsibility for the actions of its suppliers?
One answer to this question is based on Apple's statement that the company is
committed to ensuring sustainability throughout its entire supply base. As such, Apple
might have to actually take responsibility for the actions of its suppliers, as in the
Wintek case, because the company itself recognises a responsibility to do so, or because
it is pressured to do so.
In the same lines, Rabobank felt that the risk of damaging the bank's reputation, by not
taking steps to improve the sustainability of its clients, would be too great to omit doing
so.
Thirdly, a company involved in stakeholder management must concern itself with the
expectations of its stakeholders. Therefore, if a stakeholder, with sufficient influence or
through coalitions, require the company to take responsibility for a suppliers actions,
the company will have to find a solution to the issues at hand.

If companies' responsibility should include its suppliers, then what about sub-
contractors, or a sub-contractor's suppliers?
Continuing in the same lines of stakeholder management, as above. The extent of a
company's responsibility through the supply chain, will depend on the requirements
imposed on the company by its stakeholders, as well as how influential those
stakeholders are.
However, Apple, Nike, and Walmart, all express, in their supplier codes of conduct,
that, besides being responsible for its own actions, it is the companies' suppliers'
responsibility that sub-contractors, or third party agencies affiliated with the supplier, is
in compliance with the code of conduct of the three companies. However, as seen in the
Page 53 of 64
Hugger and Vision Tex case, such limitations of the extents of companies'
responsibility, may be overruled by the requirements of the stakeholders.

What are a company's options when trying to find a solution to issues concerning its
suppliers?
As described in the Rabobank study, requirements imposed by stakeholders can result
in new business processes. The pressure from FoEN on the bank to establish lending
conditions, led to a redefinition of its CSR efforts. As such, issues at suppliers might be
solved through cooperation with NGOs or other stakeholders. Rabobank viewed its new
CSR efforts as risk management and established interactions with both FoEN and its
clients, to find mutually beneficial solutions to the various issues. If a cooperation
between a company and a NGO is to succeed, it is, however, necessary that the
limitations of the cooperating parties are defined. Such as companies' limited resources
or influence over suppliers.
Also, establishing industry wide sustainability criteria, to create common ground for the
actors in a supply chain, may be a possible solution to various issues. This includes
competitors cooperating, to increase sustainability of the supply chain, or chains, in
which they operate.
Additionally, as included by Apple, Nike, and Walmart in their codes of conduct,
companies have the opportunity to terminate a supplier contract, if the code of conduct
is violated.

How should companies approach deciding to, either terminate a contract or continue
the cooperation with that supplier, with the purpose of being able to influence issue
areas such as working conditions?
Terminating a supplier contract can, of course, be necessary, when a suppliers violations
of a code of conduct is too extensive, or when no attempts to remedy previous
violations have been made. However, it does create a dilemma for companies, like
Apple, Nike, and Walmart, expressing a commitment to ensure supply chain
sustainability. The choice of action will, naturally, be dependent on the situation.
Defining a supplier's employees as a company's stakeholder, is likely to result in a
reluctance to terminate a supplier contract, as that would mean losing influence over the
working conditions and potentially a worsening for the employees. Although, a
situation where violations are extensive enough to leave a company with no other
choice, than to terminate the cooperation with a supplier, is certainly still imaginable.

Page 54 of 64
When considering the answers to the four questions above, it is evident that a company
have various opportunities to increase the sustainability in the supply chain, it is part of.
One approach to improve, at least, working conditions, is to define supplier employees,
as a stakeholder directly tied to the company. However, even companies with
substantial market positions are imposed with limitations of resources as well as
influence. As such, cooperation between companies, NGOs, and other stakeholders,
may be a necessity to create beneficial solutions for all parties involved, or impacted by,
business conduct.

Page 55 of 64
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Web Pages
U.S Securities and Exchange Commission
http://www.sec.gov/about/whatwedo.shtml
Visited: 26/6-2012

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