Social
Employee relations and diversity
Working conditions
Local communities
Health and safety
Conflict
Exporter Misfeasance, Nonfeasance, and Malfeasance
1) "Cycle-time" fraud (i.e. short cuts that create safety hazards).
2) "Cost of doing business" quality and safety fade.
3) "Diving" when problems occur.
4) Subcontract to low cost source. (i.e. forced-labor.)
Cost Factor Impacts:
ESG Metrics are elective options to promote investments. Data is available to present as a marketing claim.
CSR and Labor Code of Conduct Audits results are "deal breakers". Audits yield empirical data with measurable corrective actions and timelines.
Example:
- QA/QC staff prepare documents and workshop for pre-audit review.
- First audit results fail (i.e. RED code).
- Factory gets second chance to implement corrective actions.
- Second audit results improve. (i.e. Yellow).
- Orders can be placed with factory with corrective action plan for continual improvement.
- Factory who pass audit (i.e. Green) might be considered too expensive or potentially bribed auditor.
- Net result can yield tangible improvements for workers and factory owners.
- Success is based on trust.
- The factory owner spend time and money on improvements with promise of future orders.
- Win-win as follows: Factory Owner gets: Training/Education & Steady Orders Buyer gets: Competitive Price & Acceptable Quality
Meaningful, Measurable ESG Metrics: Simplified for Comparability Across Industries
Benchmark to 3 Measurable ESG Metrics
Employment: Lifetime employment with career roadmap for growth, training and trusted environmental stewardship.
Safety: Prioritize safety and security for community with a robust proven employee whistleblower protection program.
Growth: Growth measured from interns to C-suite to prove fair and transparent governance to benefit communities and families.
Quality: Established industry standards for Consumer products and services and labor. ISO9000 ISO14000 ASTM ISO ASQ EMS
Compliance: Enforce Regulatory and Community Health and Safety Standard as First Party Participates to eliminate risk with Third Party Oversight.
Employment records can verify:
-Employee retention: Percentage of employees with lifelong employment.
-Career paths. Percentage of internal promotions.
-Environmental Stewardship Results from employee participation with environmental causes.
Safety records can verify:
-Internal Whistleblower Reports.
-Corrective Action Planning with Action Items Timelines.
-OSHA Whistleblower Protection Program
Growth records can verify:
-Investments in employee training.
-Investments in communities.
-Pay fair share of corporate income tax.
-Employee growth metrics. Intern to C-Suite (i.e. Cradle to Grave) with reasonable salary advancements.
-Cradle to Grave sustainability for product/services (i.e. waste management) and employees (i.e. employment, education, health care).
Quality records can verify:
-Product Safety and Performance Testing. CPSC Testing Certification
-Factory workplace safety audits
-Environmental Management Systems (EMS)
Compliance records can verify:
-Internal compliance.
-External compliance.
-Labor code of conduct audits.
Example:
Firm with Highest ESG score might measure as follows:
-70% of employees have been with the firm for at least 80% or more of their working career.
-Internal Whistleblower Program has acted upon 100% of Intakes and made corrective actions on 80% or more of those intakes.
-80% of C-Suite employees began career at the firm and the current salaries is less than 10X the lowest paid employees.
-Employees have a sense of job security in this firm and are likely to be more secure to start a family, buy a home and plan a sustainable future.
Firm with Lowest ESG score might measure as follows:
-2% or less of employees have been with the firm for 3% or less of their working career
-No Internal Whistleblower Program. Firm has been reported to OSHA WPP multiple times with Zero corrective actions.
-100% of C-Suite employees have been with firm less than 5 yrs and the current salaries are more than 50X the lowest paid employees.
-Employees in this firm are encourage to take big risk, hazardous short-cuts, with a "fake it to you make it" Grifter Governance mentality.
Why ESG metrics appear convoluted and purpose driven obfuscation?
- Third party service fraud risk:
“You Pay-They Say” (i.e. transfer risk to third party services for Demo/Show Factories and Golden Test Samples).
“Look Here-Not There” (i.e. third party aspirational targets for headquarters while subcontracting.)
- Transnational Organized Crime:
- Fraud Upon Courts:
- Globalization has made "Grifter Governance" the rule versus the exception:
Opaque supply chains potential end with compromised sources (i.e.Transnational Organized Crime Networks).
Captured regulators who are political appointees and have a revolving door for lobbyists and special interest groups.
Enforcement Jurisdications blur when the supply chain stretches across the global.
Evidence Based Solutions
- Imported Product "Passports": detailed tracking labels to raw materials.
- Fine and jail corporate bad actors, not company shareholders.
- Whistleblower Programs with awards and guaranteed jobs.
- Jobs training programs for needy (i.e. homeless, Jail to jobs) in Consumer Product Quality and Safety Enforcement with overseas assignments based in foreign countries who manufacture consumer products for US markets.
Business Model Factors
- Added Value: Manufacturer who converts raw materials into finished products. Makers, Docters, Farmers add value.
- Rent Seeking: Example: Building Inspector who refuses to enforce building codes which then creates community health and safety hazards.
- Value Capture: Example: A teacher publishes of a book on making money and those who read it make a lot of money.
- Negative Value: Example: Team of leafblowers who make noise and create toxic PM2.5 tail pipe exhaust that kills pollinators.
Related Resources:
-Labor Code of Conduct. (standard used with toy factories located in China during 1990's)
-Corporate Social Responsibility (CSR). (standard introduced to toy factories located in China during early 2000's)
-Social Accountability 8000 (SA8000)
-ISO 9001 Quality Management Systems (standard used with toy factories located in China during 1990's)
-ISO 14000 Environmental Management Systems (standard used with overseas factories during the early 2000's)
-Lean manufacturing: production techniques to reduce cycle times within production process.
-Lean enterprise: minimize waste with robust processes that create value for end customer
-Lean Six Sigma: combines lean manufacturing and lean enterprise to eliminate eight kinds of waste.
- Defects
- Over-production
- Waiting
- Non-Used Talent
- Transportation
- Inventory
- Motion
- Extra-processing
-ASTM Standards:
-Excellence Through Quality ASQ:
Environment, Social, Governance (ESG) Disclosure and Reporting Framework links:
SEC.gov | SEC Response to Climate and ESG Risks and Opportunities
SEC.gov | Public Input Welcomed on Climate Change Disclosures
Investor Alerts and Bulletins | Investor.gov
SEC.gov | Office of the Whistleblower
ESG Disclosure:
Reporting Framework
-GRI
-PRI
-SASB Standards
ESG Rating
Passive
-MSCI ESG Ratings
-ISS
Active
-CDP Carbon Disclosure Project
-S & P Global
"Truth, Justice, Liberty and Humanity will Ultimately Prevail." Fredrick Douglas
Governance
Tax Strategy
Executive remuneration
Donations and political lobbying
Corruption and bribery
Board diversity and structure
Example of supply chain Grifter Governances:
- A North American Firm imports houseware products with designer image begins expansion but lacks trust in their supply chain.
- Firm hires college graduates from legacy design schools who rapidly scale their ideation output without internal technical support for proofing the concepts.
- They rely on their oversea manufacturer's technical support to proof design concepts and when designs are dropped, the overseas vendors use the concept.
- This creates a lack of trust between the North American "Design House" and their legacy overseas manufacturers.
- Human Resources hire a westerner to monitor their suppliers and establish a final assemble workshop in an Export Processing Zone (EPZ).
- Legacy sources are expected to ship "component" parts to the EPZ workshop instead of finished goods.
- This new arrangement attempts to prevent legacy sources from selling exceed production or rejected defects in the open market.
- The hired westerner is mandated to work without a working visa in a foreign country under hazardous and legally compromising conditions.
- The finished goods are sold at major publicly listed retail companies.
Thomas Doyle MSc.
Global Supply Chain Misfeasance, Nonfeasance, and Malfeasance
ESG Metrics are aspirational Marketing Claims used in the investment community.
- Environment aspirations become Green Washing.
- Social aspirations become Blue Washing.
- Governance aspirations become Regulatory Capture.
Corporate Social Responsibility (CSR) and Labor Code of Conduct Metrics are aspirational audit standards used to protect brands from reputational risk. (i.e. forced labor, hazardous working conditions etc.).
Environmental, Social and Corporate Governance (ESG)
E > Enforcement S > Safety + Security G > Globally
Importer Misfeasance, Nonfeasance, and Malfeasance
1) Prioritizing low price and speed to market.
2) "Cost of doing business" quality and safety fade.
3) Avoiding detail product quality and safety specification to prevent price increase and allow short cuts.
4) "Cycle-time" fraud (i.e. short cuts that create safety hazards).
Environmental
Waste and pollution
Resource depletion
Greenhouse gas emissions
Deforestation
Climate change