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The Dow Chemical Company
Respecting Human Rights in the Dow Supply Chain Thomas
McMennaminJesse NishinagaHaas School of BusinessMonday, May 4, 2009
“Red in the Face” Company Events
Unsafe toys, 2007Estimated cost to company: Over $12 Million
Symbol of sweatshop labor, late 1990sEstimated cost to company: Millions of dollars; sales dropped, share price dropped
Sweatshop in Saipan, 1999Estimated cost to company: Millions of dollars in settlement costs plus severe impact to financial performance and brand image
Violations in the Supply
Chain!
Violation
Child Labor
Unlivable wages
Poor Working Conditions
Sweatshops
Anti-workers’ rights
Discrimination
InhumaneMistreatment
Project Scope
To ensure that Dow is supporting and living its values throughout the
supply chain in an ever-changing world of CSR principles
Combining the Power of Science and Technology with the “Human Element”
MissionConstantly improve what is essential to human progress
VisionBe the largest, most profitable, most respected chemical company
Values Actions are driven by values of integrity and respect for people
Sustainability at DowHuman Rights and Labor Standards fits neatly into Dow’s Sustainability Goals
Strategic Theme: “Set the Standard for Sustainability”
Dow’s 2015 Sustainabilit
yGoals
Dow’s Growth StrategyGrowth strategy makes Dow more vulnerable to supply chain violations
Additionally, there IS increased scrutiny on human rights all the way through the supply chain
• Operating in countries with less transparency and poor human rights records
• Harder for Dow to enforce or extend its business standards and codes of conduct
• Greater exposure to consumer scrutiny
Human Rights & Labor StandardsThe business case to embrace labor and human rights practices is strong
Operationalize Measure
Quantify Interpret
Project Deliverables
Develop a Multi-Generational Plan (MGP) that outlines the integration of a supply chain CSR management
program
Create a supply chain CSR management framework that addresses supplier’s performance on human
rights and labor standards
Identify best practices for addressing human rights in the supply chain management process
Best Practices
To provide Dow with best practices on how to evaluate and improve supplier’s performance on expectations related to human rights and
labor standards
CSR Practices BenchmarkedCompany CSR practices were reviewed and best practices benchmarked
CSR Practices Benchmarked Non-profit and intergovernmental organizations were reviewed and best practices benchmarked
Best Practices CompiledFour distinct buckets of best practices formed the outline of the recommended Dow model
Supplier Responsibility Management
Program (SRMP)
To enable Dow to systematically evaluate and improve
supplier’s performance on expectations related to human rights and labor
standards
Supplier CategoriesSuppliers divided into various categories are treated differently in the Supplier Responsibility Management Program
Supplier Responsibility Management ProgramCompliance Life Cycle
Supplier Responsibility Management Program Existing Suppliers
Step 1:ENGAGEABC Chemical
Supplier Responsibility Management Program Existing Suppliers
Step 2:PRIORITIZEABC Chemical
Supplier Responsibility Management Program Risk-Priority Matrix determines the tier in which the supplier falls
Tier 1: Immediate
action required
Tier 1: Immediate
action required
Tier 2: Reassess
relationship immediately
Tier 1: Immediate
action required
Tier 3:Action
required within 4-6 months
Tier 4:Regular annual review process
Tier 3:Action
required within 4-6 months
Tier 4:Regular annual review process
Tier 4:Regular annual review process
CSRRISK
Supplier Segmentation
Strategic
TacticalImportant/
Value
Supplier Responsibility Management Program Existing Suppliers (Tier 1)
Step 3:IMPLEMENTABC Chemical
Supplier Responsibility Management Program Existing Suppliers (Tier 1)
Step 4:VALIDATEABC Chemical
Supplier Responsibility Management ProgramA process has been developed for all tiers of suppliers for a defined timeframeTime
(month)0 1 2 3 4 5 6 7 8 9 10 11 12
Existing
Supplier
Tier 1
Tier 3
Tier 4
Conduct Auditand Develop
Plan Review/
Approve Plan
Review
Develop and Implement Plan (if
applicable)
Annu
al
Asse
ssment
Implement Plan
No Action
NoActio
n
Validate Planand Prepare for Annual Review
Tier 2
Discontinue
Validate Plan (Monthly Updates)
Multi-Generational Plan (MGP)
To provide specific guidelines for Dow to operationalize the SRMP
Set Expectations; Build
Infrastructure; Pilot New Process
Empower Suppliers; Recognize Suppliers;
Develop Multi-Stakeholder Initiatives
Require Mandatory
Compliance; Execute Audits;
Obtain Independent Third-Party Verification
Multi-Generational Plan (MGP)
Phase I Phase II Phase III
Operationalizing the Supplier Responsibility Management Program
Phase I: Outreach and Integration
Establish Establish ManagemeManagement Structure nt Structure
and/or and/or Executive Executive ChampionChampion
Establish Establish ManagemeManagement Structure nt Structure
and/or and/or Executive Executive ChampionChampion
AdoptAdoptCSR Data CSR Data
ManagemeManagement Systemnt System
AdoptAdoptCSR Data CSR Data
ManagemeManagement Systemnt System
CommunicaCommunicate Policies, te Policies,
Criteria, Criteria, and MGPand MGP
CommunicaCommunicate Policies, te Policies,
Criteria, Criteria, and MGPand MGP
Expectations are Clear
Phase I: Outreach and Integration
BuildBuildAuditing Auditing
CapabilitiesCapabilities
BuildBuildAuditing Auditing
CapabilitiesCapabilities
Establish Establish External External
RelationshiRelationshipsps
Establish Establish External External
RelationshiRelationshipsps
Pilot New Pilot New ProcessProcess
Pilot New Pilot New ProcessProcess
Infrastructure is Built
Phase II: Ownership and Accountability
Launch Launch SRMPSRMP
Launch Launch SRMPSRMP
Mandate Mandate Data Data
ManagemeManagement System nt System AdoptionAdoption
Mandate Mandate Data Data
ManagemeManagement System nt System AdoptionAdoption
Add CSR Add CSR Metrics to Metrics to
Performance Performance ReviewReview
Add CSR Add CSR Metrics to Metrics to
Performance Performance ReviewReview
Accountability is
Realized
Phase III: Beyond Monitoring
Empower Empower Suppliers Suppliers Empower Empower Suppliers Suppliers
Recognize Recognize Good Good
PerformancPerformancee
Recognize Recognize Good Good
PerformancPerformancee
Establish Establish LeadershipLeadershipEstablish Establish
LeadershipLeadership
Leadership is Achieved
Multi-Generational Plan (MGP)
Phase I Phase II Phase III
Operationalizing the Supplier Responsibility Management Program
Year 2
Year 4
Year 5+
A 5-year Program Integration Plan
Start
Expectations are Clear
Infrastructure is Built
Accountability is Realized
Leadership is Achieved
Multi-Generational Plan (MGP)
DOW
Actions are driven by values of integrity and respect for people
Violation
Child Labor
Unlivable wages
Poor Working Conditions
Sweatshops
Anti-workers’ rights
Discrimination
InhumaneIntegrity
Human RightsDignity
Fairness
Living Wages
Respect
Industry Leadership
Partnership
MistreatmentFreedom to Associate
Thank YouFor more details, please contact:thomas_mcmennamin@mba.berkeley.edu jesse_nishinaga@mba.berkeley.edu