Earn trust with the company you keep

For any company, practicing business ethically should be a key priority. However, it can be just as important to ensure partners are adhering to the same high values.

For any company, practicing business ethically should be a key priority. However, it can be just as important to ensure partners are adhering to the same high values.

No company is immune to accusations of unethical business practices - even those that set their store by taking seriously the notion of corporate responsibility. Take, for example, LA-based clothing manufacturer and retailer American Apparel, lauded by many independent watchdog groups for its treatment of workers in an industry generally associated with sweatshops.

Bloggers on the www.consumerist.com Web site recently called the company to task for selling flip-flops made in Thailand by another manufacturer, rather than at the downtown LA facilities where the company promises its products are produced. In this instance, says Cynthia Semon, American Apparel's global media relations director, it was simply a test to see if it made sense to invest in the equipment and production changes required to begin making flip-flops - not a quiet attempt to begin outsourcing from an overseas partner.

But the flip-flop contretemps shows that any and all companies are now being held accountable for their behavior, as well as the behavior of any partner, that may contradict their stated values. Today, information about companies is readily available because of government regulations and consumer or investor concerns that force greater disclosure about business practices. Any information then made public is easily spread and accessed over the Internet.

"With success comes critics," says Semon, who manages the company's PR in-house. "But on the business side, no one can dispute the facts of what we do as a company and what we provide to our work force."

Can a company be entirely sure that its partners share its values? American Apparel manufactures nearly all the products it sells in its 130-plus stores, but doesn't make the yarn used in its clothing. VP of operations Marty Bailey says he can't promise his company's yarn suppliers never engage in bad business practices. "But that's not to say we're not working to understand the practices of where we're getting our product, and imposing our will," Bailey says.

One common way to understand partners' practices is to audit them. Kate King, corporate communications manager at Stratham, NH-based footwear manufacturer Timberland, which Porter Novelli works with, says her company uses external and independent organizations, as well as company staff, to regularly assess factories where its products are made to ensure partners are meeting Timberland's code of conduct, which stipulates no abuse of employees, prohibits child labor, and requires partners to meet government standards.

In fact, rating companies and their supply chains on corporate responsibility is an emerging industry in itself, says Eric Fernald, research director at Boston-based KLD Research & Analytics. "There's a whole ratings network where you can get your supply chain rated for how well it treats its employees," Fernald says. "Some factories will have been rated three different times in two months."

As businesses seek to gain access to social responsibility stock indexes like the FTSE 4 Good, they begin to compete at being more and more responsible, creating a kind of virtuous circle, Fernald says. Moreover, companies that care about social responsibility make a point of dealing with other companies that share their values and have formed groups like Businesses for Social Responsibility.

Corporate responsibility also is increasingly valued by employees, who are considered by many businesses to be partners just as much as any other part of the supply chain. "Our employees are stakeholders and are keen to make sure that their impact and their actions are beneficial to the world, so they want to join us in this path to sustainability," says T.J. Whalen, marketing VP at Waterbury, VT-based Green Mountain Coffee Roasters, which does its PR in-house.

Whether businesses are competing to outdo rivals in energy efficiency or treatment of workers, or employees at individual companies are questioning their employers' practices and making suggestions for improvement, everyone in the chain of development can influence one another to do better, helping foster that virtuous circle.

"There are lots of peer companies that we talk about these things with," Whalen says. "When we do T-shirts, for example, we buy them from American Apparel. It used to be that these were alternative brands for the small group of consumers who cared about these issues, but these are becoming major consumer interests."

PR experts say companies in general are increasingly addressing the question of whether both they and their partners pass muster by government regulators, activists groups, and other watchdogs. Virtually all corporate Web sites now have some type of corporate responsibility statement, notes Bill Trumpfheller, president of San Diego-based firm Nuffer Smith Tucker, who adds that companies that proclaim certain values, but don't fully practice them, are setting themselves up for disaster.

"It's guilt by association. What we've found is the whole idea of trust and transparency is becoming so important that brands that aren't really living their values are struggling," Trumpfheller says. "If your manufacturer is violating child labor laws, you're ruined."

Responsible behavior toward and by business partners is not just a nice thing to do. It can lead to higher profits. Tim Doke, corporate communications VP at Austin, TX-based Freescale Semiconductor, which works with PR shops Godfrey Q & Partners and Weber Shandwick, says when it or its partners are energy efficient, the company not only is environmentally friendly, but saves money, too.

In the coffee world, high-grade coffee sold in cafŽs provides the best margins, and suppliers of such coffee are limited, so it benefits Green Mountain Roasters to treat these suppliers with respect.

"We could slash costs and deliver outrageous profits for a short while," Whalen says, "but that wouldn't be sustainable because our partners couldn't stand in that position very long."

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