global shipping routesBruce Klafter is a respected leader in environmental, health and safety (EH&S) and sustainability circles. In 2013 he joined Flex, a socially-responsible, global leader in design, manufacturing, distribution and aftermarket services, to provide strategic direction to the Company’s social and environmental responsibility initiatives. His role includes regular consultation with senior management on sustainability and EH&S matters, including participation in the Compliance Council and facilitation of the Corporate Sustainability Leadership Committee (CLSC). Flex was a founding member of the Electronics Industry Citizen Coalition (EICC) and Bruce recently served as an EICC Board member and as Vice-Chair for the organization.

Christopher P. Skroupa: What are the most pressing corporate responsibility (CR) issues faced by global companies today?

Bruce Klafter: An emerging challenge stems from the multiplicity of regulation around the world. Most companies would like to operate in a one-size-fits-all model, however, this has become increasingly impossible. The European Union has produced a myriad of regulations regarding corporate responsibility. Other countries–in a somewhat defensive manner–are creating their own versions to mirror these schemes. These laws cover a broad range of topics such as: handling hazardous material, product registration, conflict minerals and other effective operational criteria. Companies must track these developments in each of these regions and fashion a scheme that enables them to comply with the multitude of regulations. Keeping up with this development is an extraordinarily demanding task. Another layer of traceability is required due to the increasing demand for transparency of the supply chain. These are among the questions that need answers: where does each piece/component/ingredient in a product come from, how was it sourced, how was it processed, if the product comes from a factory, how was it assembled, was that assembly done in a responsible manner? In particular, the electronics sector has been contending with these questions for a while since our industry has been largely outsourced. In addition to the criteria procurement typically focused upon, understanding the human rights of the workforce involved has also come under scrutiny. Forced labor occurring today is being labeled as “modern slavery” and the U.S. and U.K. have already responded with new rules. The final issue I would point to is the effect of climate change and extended drought in various parts of the world; this has placed an immense amount of stress on resources. A company that is operating in several geographies will inevitably run into an array of natural resource issues. A global company must mitigate water stress, energy prices spiking and in some cases the alignment of several critical circumstances. For example, Brazil’s dependence on hydropower electricity generation has become problematic during the extended drought, causing the price of energy to skyrocket.

Skroupa: What are some of the most encouraging trends or opportunities in the corporate responsibility space today?

Klafter: A lot of work has been accomplished across sectors in regard to standardizing product certifications, codes of conduct, reporting schemes, and so on. The pre-competitive incentive for this responsibility is the realization that it is preferable to certify products in a similar fashion and then compete on features, price, quality, etc.. Each new scheme, however, requires a unique build up of infrastructure around it: auditors and certifiers need to be trained, companies must comply and meet the specifications and so on. Other sectors of industry are being held to a standardized code of conduct resulting in a renewed collaboration amongst companies. These types of proactive measures have been taken pre-competitively within our industry. We have collaborated on a number of initiatives within the human rights frontier in regard to dealing with forced labor in South Asia. We have also worked toward reducing the carbon footprint in the supply/value chain for the entire electronics industry. This collaborative, responsible trend is one that all industries are eager to expand. Companies are also starting to take advantage of the remarkable advancements in technology. The price for solar photovoltaics has plummeted, allowing for the expansion of solar energy at the utility and commercial levels. The affordability and scalability of solar power, has facilitated the process for companies to make renewable pledges. We are going to see similar trends in the near future, one that we are all keeping an eye on would be effective commercial scale battery storage, the necessary compliment to wind and to solar energy production.

Skroupa: What role does multi-company and multi-industry collaboration play in resolving some of these issues?

Klafter: I think it’s very heartening to see how effective some of these multi-company and multi-industry collaborations have been. One initiative I’d like to highlight as exemplary would be the Conflict Free Smelter Initiative (CFSI), launched by the Electronic Industry Citizenship program began with the information and communications technology sector, however, additional participation from other industries such as the automotive industry, basic metal industry, and the jewelry sector have all contributed greatly. Interaction between corporate energy buyers and utilities as well as project finance developers have also been advancing. In the past, developers might simply resort to whatever offerings your utility had–some with green energy programs–but now you see companies entering directly into power purchase agreements (PPAs) for renewable energy. Utilities are no longer strictly in the space of solely being a provider or vendor; companies are now looking to partner, and strategically develop their energy programs.

Skroupa: How effective are codes of conduct and audits in terms of enforcing corporate responsibility expectations in a company’s value chain?

Klafter: It’s a pretty broad consensus that they are not entirely effective. The one thing about an audit is that it will always be a snapshot in time. A sporadic visit to the facility to gather some information from that particular occasion is not a fully comprehensive diagnostic. Conditions are changeable–even several days after inspection–so many companies are aiming to foster a deeper engagement with their key suppliers. Engagement on a regular basis can help to build trust, to establish greater transparency and ultimately it can lead to some relaxation of this whole audit paradigm. The old archetype, where the auditors correct, enforce and in the worst case, suspend or terminate the relationship, is not effective. Companies would much rather have a commercial type of relationship where they are working with the suppliers on a regular basis, as we typically do for cost, delivery, specifications and so on. The future of sustainability is definitely deeper engagement with suppliers in a different, more productive fashion. We are looking at software tools with capabilities to gather more real time information, and as a result suppliers can eventually view this data to create actionable changes. This software could potentially become the standard of comparing suppliers, which will be much more productive in the long run.