Keep it clean

How the licensing industry is promoting social and environmental compliance throughout the supply chain.
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Over the past several years, more attention has been paid to manufacturing workplace conditions and the environmental impact of the manufacturing process. A growing number of brand owners who licence their marks, and major retailers who sell products to consumers, have chosen to take decisive action to protect their brands and companies by inserting strict clauses into their agreements about workplace conditions and environmental impact-related issues.

Compliance is a major concern, not only because of the ethical responsibility to make safe products, but also because the brand reputations of trademark holders and the retailers can be badly damaged if things go wrong.

In theory, it should be simple for licensees and their suppliers to determine if all the contractual obligations are being met and enforce those parameters. But, as anyone in the business knows, there isn’t a simple, seamless answer to the question of how companies can most effectively balance their core business interests with the imperative to have products manufactured in the most socially responsible way.

The time and cost of effectively monitoring of working conditions and environmental impact have been ongoing issues for a long time. The phrase 'audit fatigue' characterises ongoing complaints from manufacturers and subcontractors about the number of site visits they must endure and the amount of paperwork that must be completed to comply. In addition, of course, the financial burden of repeated audits and inspections may have considerable impact on a company’s bottom line or the consumer’s pocket.

That’s because virtually all brand owners and major retailers have slightly different standards that have to be met. All of them have full rosters of attorneys with their own perspectives on how best to guard the interests of their employers or clients. Licensing was once described to me as the 'Lawyers’ Full Employment Act, and in this area, among others, it’s hard to disagree with that assessment. Not that there can’t be honest disagreement among multiple brand owners and retailers about standards, but the number of variations on the theme is striking.

LIMA, I should mention, has its own voluntary Code of Business Practices, which can be viewed at http://www.licensing.org/about/lima-code-of-business-practices/

The LIMA Code is modeled after the ICTI Code, which is used fairly universally in the toy industry. Adherence to the ICTI Code is a condition of membership in the Toy Industry Association. It also compares favorably – though not precisely - with codes used by other associations, including the Fair Labor Association and Worldwide Responsible Apparel Production, and with those of major licensors and retailers. Factories making a good faith effort to comply with widely recognised international labor standards will, in most cases, be in compliance with the LIMA code.

But challenges – both external and internal - abound, and LIMA is working to address some of the most pressing issues, first through a pair of webinars. The first, held in October, offered some best practices on what licensees can do to more effectively deal with their suppliers. According to a survey conducted by Business for Social Responsibility (BSR) – the consulting group that has spearheaded the development of the webinars with a Licensing Working Group whose members include Disney Consumer Products, Hasbro, Mattel and NBC Universal -- licensees often are unable to obtain accurate information from their suppliers about such issues as greenhouse gas emissions, material toxicity, occupational safety, wages and labor practices, despite conducting frequent and costly factory audits.

But that only addresses part of the issue. A second webinar that will be held on Wednesday, January 19th, from noon-1:30pm, US Eastern Time, is designed to offer brand owners guidance on aligning their own internal policies, priorities, metrics and communications. An effective compliance strategy requires the coordination and cooperation of many competing interests within your own company. Departments such as Production, Design, Marketing, Sales, Logistics and Sourcing need to be aligned to promote compliance. If they’re not aligned, despite all best intentions, compliance becomes difficult at best.

This is a challenge facing everyone in the licensing business, and one that won’t go away by itself.

For more information about the webinar, go to www.licensing.org.

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