Tag Archives: World Economic Forum

SPOILER ALERT: Amnesty International and World Economic Forum Kind of Agree on Supply Chain Responsibility

The World Economic Forum (WEF) just wrapped their annual meeting in Davos, Switzerland. The WEF headline garnering the most media attention was that of climate change, but a relevant and very useful report on supply chain responsibilities and accountabilities was also presented.  While the emphasis is not on conflict minerals, it is mentioned.

The report covered a number of topics in the context of a globalized economy and increased public pressures/expectations, concisely summing up the state of affairs as follows:

Despite significant investment from companies and episodic improvements, these efforts have been limited in the face of deeply entrenched human rights challenges.

Building off this fundamental insight, the WEF report continued to elaborate on the theme of “shared responsibilities”. In our view, the most compelling statements from the 24-page report include:

… a distinction needs to be drawn between visibility [into a company’s supply chain] and responsibility.

… consumers and the media assume that global brands have the capacity to know where their products are being produced or obtained.

…visibility does not equal responsibility; companies cannot and should not be held solely responsible for addressing challenges in their supply chains.

These challenges will never be addressed in a meaningful way if we put the burden solely on companies or governments to act alone… governments and other stake-holders should also identify the extent to which human rights issues are primarily related to significant governance gaps, caused by weak or inefficient regulation or corruption… This does not mean that companies should assume governments’ responsibilities to their citizens. Instead, it requires governments, companies and other stakeholders to work together to close governance gaps that are being driven, in part, by globalization and private sector demands.

At the same time, Amnesty International released a report highlighting environmental degradation, child labor and worker safety failures in the DRC related to artisanal mining of cobalt. In alignment with WEF, Amnesty pointed out that government plays a key role in improving conditions in a global supply chain, and in remedying specific failures in governments:

The research in this report exposes a clear gap in relation to the role of home states, such as China, as well as many others, in requiring transparency around cobalt supply chain practices.

Regulation is required to ensure transparency in relation to the points of extraction, the conditions of extraction and trading, and the chain of custody (actors involved) for cobalt. This will help to achieve the greater objective of ensuring that those responsible for the human rights abuses (including the companies who have on-going abuses such as child labour in their supply chains) become part of the solution.

Near the end of the report, Amnesty included three pages of recommendations to governmental entities to improve multiple areas of governance.

Yet the overall tone of the report focuses more on its accusations of corporate failures, which has unfortunately been reflected in the major media outlets. With the exception of The Verge, that coverage has omitted viewpoints on the current reality of supply chain visibility for cobalt.

We think both reports are worth reading.

World Economic Forum Releases Global Risks 2012

As it has done each January for the past 7 years in conjunction with its annual meeting in Davos-Klosters, Switzerland, the World Economic Forum (WEF) has released its annual review of Global Risks.

We have enjoyed the previous years’ report and find them incredibly interesting, primarily due to the insights provided about linkages and correlations of risk areas.  This year’s report – as did the 2011 report – contains a “microsite” that allows a meaningful interactive user experience in exploring the risk topics/geographies and related linkages.  Click on the Data Explorer tab to the right of the Report Viewer window – the controls are highly intuitive.

The Report goes well beyond HSE and sustainability matters to be sure, but well worth mentioning here and the time spent reviewing the report.

The World Economic Forum in Davos Releases Global Risk Report 2010

The Global Risk Network (GRN), an initiative under the World Economic Forum (WEF), released its Global Risk Report 2010 today.  The report is produced annually in conjunction with the WEF Conference in Davos and 2010 is the fifth year of the report.

This year, the report emphasizes the “interconnectivity” of global matters and the long-term view needed to identify and reduce major risks.  The report sets the stage by noting that

the increase in interconnections among risks means a higher level of systemic risk than ever before. Thus, there is a greater need for an integrated and more systemic approach to risk management and response by the public and private sectors alike.

In a contrast to previous years, today’s report underscored that a long-term view is critical to predicting major exposures.  Previous Global Risk Reports have not been as careful to clarify the timeline of the discussed exposures.  The report comments that:

the biggest risks facing the world today may be from slow failures or creeping risks. Because these failures and risks emerge over a long period of time, their potentially enormous impact and long-term implications can be vastly underestimated.

Further, the 2010 document seeks to provide more pragmatic guidance for companies to try to address the risks reviewed in the report.  A few points brought forward by GRN/WEC include:

Typically, risk is considered in terms of “impact and likelihood” based on internal consensus, often involving very little external or expert input [emphasis added].  Corporate risk assessments rarely consider a time frame beyond two to three years, or explicitly examine the long-term volatility introduced by risks to strategies with a five to 10 year execution horizon. Decision-making is further skewed by necessary focus on the reporting of short-term results and known or recent risks affecting the current period.

Further, research shows that relatively few companies effectively apply tools, such as scenario analysis, or effectively integrate risk data into long-term strategic planning.

…. institutions and governments collaborate to:

  • Take a long-term approach to global risk identification, analysis, tracking and mitigation
  • Use frameworks that reflect risk interconnections rather than silo approaches
  • Address the need for more robust data on key risks and trends to be collected and shared in a coordinated manner
  • Conduct cost-benefit analysis on risk solutions to improve fund allocation and better understand the long-term benefits of investment choices
  • Track emerging risks and educate leaders and the public about real, rather than perceived threats
  • Communicate clearly and consistently about the nature of threats and about strategies to manage and mitigate them
  • Understand the influence of behavioural aspects of risk perception

Our experience with various client HSE risk frameworks mirrors a number of GRN’s points.  Among our common observations:

  • HSE risk assessments frequently rely solely on internal senior management views.  Unfortunately, these views are not always consistent with operational reality in the field or trends outside the company.  To generate truly valuable information,  a risk assessment process should include senior management perspectives that are benchmarked against middle management directions, operations in the field and external emerging pressures.
  • Traditional financial and cost/benefit analyses do not adequately evaluate risk reduction benefits.  We find there are two primary reasons for this.  First, the complete array of relevant costs and benefits are not typically captured.   Second, the traditional view of short-term financial benefits tends to conspire with the internal “behavioural aspects of risk perception” to drive investment away from HSE risk assessment/management needs.  These findings lead to Elm’s development of our HSE risk reduction financial metric Return on Investment of Loss Avoidance (ROIa©).  Read more here.

The Global Risks report is produced by WEF’s Global Risk Network – a partnership of Citigroup, Marsh & McLennan Companies (MMC), Swiss Re, the Wharton School Risk Center and Zurich Financial Services.