NY Factory Explosion - Procurement Must Step Up!

On November 20, 2017, New Windsor authorities say two explosions and a fire at a contract manufacturer in the Hudson Valley about an hour north of New York City left multiple people injured, including firefighters caught in the second blast. As of November 21, the tally was one man dead and 125 hurt after the deadly explosions.

Working in the sustainable procurement field, I try not to focus too heavily on sharing these horror stories. In fact, one of my favourite supplier sustainability stories revolves around another New York state contract manufacturer in the consumer goods space that avoided any such catastrophe, going from "Zero to Hero" in terms of their Environmental Health and Safety in a few short years. As I write this post from my company's New York office, however, the avoidability of this tragedy and needless loss of life strikes frustratingly close to home and I feel compelled to share my views on this horrific disaster. When I first heard of this event, the questions that sprung to mind were:

1) Were any of the Supplier's B2B customers aware of the level of risk to the factory workers?

2) If not, why not?

3) If so, why didn't they act?

This event was brought to my attention because the company I work for, EcoVadis, provides corporate social responsibility ratings and monitoring of legal entities (most often 'Suppliers') on their environmental, social, ethics and supply-chain performance. In other words, EcoVadis could have picked up some of this particular plant's gaps in management systems, or at bare minimum, the supplier's 19 OSHA violations, had a client requested it.

"This tragedy could have been avoided, if only one of their B2B customers had used EcoVadis..."

Upon learning of the explosion and resulting fire, my first instinct was to share a quick one sentence post or tweet, with a link to the article, saying something like, "This tragedy could have been avoided, if only one of their B2B customers had used EcoVadis...", but an opportunistic plug for my employer would have been missing the point entirely... Assessments don't save lives, action does... While an EcoVadis assessment could have told the Supplier (and their B2B customer) what the problems were and what the Supplier could have done to improve, in the case of this particular Supplier, they were already well aware of what the problems were (19 OSHA violations and fines of totalling $60,421 are a testament to this). Ultimately the risk/reward was such that, for whatever reason, the Supplier chose not to act. Saving lives requires action, and if there was anyone who could have saved lives in this scenario, it was their B2B customers. $60k in fines may not have moved the needle with this Supplier, but I bet millions of dollars in potential lost revenue could have.

So where is Procurement in this tragedy? Did they have the resources at their disposal to drive tangible improvement in working conditions and yet choose not to use them? What would have been Procurement's motivation to look into this supplier in the first place? We may never know. By now their customers have likely already hit the 'panic button', scrambled to find an alternate/interim supplier, cut their losses and moved on. Perhaps the Supplier's B2B customers had the resources to drive improvements, but chose instead to focus their attention on other suppliers perceived to be of higher risk...

companies take responsible sourcing seriously - but only in developing countries

As more and more production is moved offshore to countries like China, the focus of supplier vetting and due diligence tends to be offshored as well. Scandals involving product quality, environmental impacts, and modern slavery ensure companies take responsible sourcing seriously - but only in developing countries. In North America, it seems, the law of the land is seen as ample protection from supply-chain disruption, and as such, North American suppliers are being treated as 'low-risk', which ultimately leaves them off the hook in global responsible sourcing programs.

"There are good suppliers in 'risky' countries and risky suppliers in 'good' countries"

As cases like this highlight, however, assuming North American suppliers are "safe" and Chinese suppliers are 'risky' is not a sustainable long-term approach. As a Responsible Sourcing professional once told me, "There are good suppliers in 'risky' countries and risky suppliers in 'good' countries". In other words, a supplier's factory's geographic location is not a proxy for risk. Due diligence must be undertaken by procurement with all suppliers on an ongoing basis - regardless of geographic location - and those suppliers need to know that buyers truly care about the safety of factory workers and want to see their continuous improvement!

Care (and duty thereof) is the key here, because to mitigate the likelihood of avoidable disasters and tangibly improve the environmental health and safety of workers, it's going to require that CPOs genuinely care about their Suppliers' CSR & Sustainability on the front-end (not after-the-fact), and stop treating it like a 'check the box' exercise for geographically 'at-risk' suppliers.

In Summary

• This tragedy was avoidable.
• CPOs need to take 'responsible sourcing' and 'sustainable supply-chain' initiatives seriously and globally (and 'globally' includes North America).
• Category Managers must put non-financial performance as the first KPI on the list (above Cost, Quality, and On-Time Delivery).
• Sourcing Directors must include Corporate Social Responsibility in RFPs and ensure suppliers are incentivized to improve on an ongoing basis.

As US Federal regulations drop like Fall leaves, it's up to Procurement to fill the due diligence void left behind by motivating suppliers to maintain the highest of standards, benchmarking their suppliers against global best practice, and rewarding those suppliers that go 'beyond-compliance'. Corporate-led multi-stakeholder industry initiatives may also help (such as the Responsible Beauty Initiative that launched in November 14, 2017). While due diligence with suppliers in emerging markets will always be a necessity, it should never be at the expense of the wellbeing of workers and their families in the buyer's backyard.

About the Author:

Daniel Perry is a sustainable procurement advocate, professional speaker, and occasional Tweeter, who is driving exponential change in the environmental, social and ethical practices within global supply chains, through his work at EcoVadis. Check out previous posts or say "hi" on Twitter.

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