An Amazon Wishlist for the World

Imagine searching for a product on Amazon, and as well as the price, you could also view its supply chain: the materials and labor used to build the product, the environmental and social cost of manufacture, and delivery. Imagine being able to sort by highest sustainability or lowest human rights violations; exclude manufacturers whose supply chain included slavery or child labor, or problematic materials, such as palm oil, or cobalt, or unsustainable goose-down; prioritize manufacturers whose corporate policies and practices mirrored your own ethics; in other words to be able to understand the true cost of a product.

Ethical Sourcing goes Mainstream

You might think that the vision above is fantasy, a pipe-dream of some idealist. But here are some indicators that ethical sourcing is going mainstream:

• Amazon now has a social responsibility team. For a company that has been notably sluggish in this area, this is a sign that times are changing. The team sits within the sustainability group (an organizational structure that should arguably be the other way around). Amazon have hired Dara O’Rourke, a supply chain expert from U.C. Berkeley, and co-founder of GoodGuide, to be a senior principle scientist in this group, and as of June 2016, it has 17 other open positions;
• Mainstream media outlets are questioning the real cost of cheap products, such as cheap back-to-school uniforms;
• Low-end and high-end bricks and mortar retail stores such as H&M and David Jones are committing to strong ethical sourcing policies;
• Supermarket chains, such as Trader Joe’s are adopting ethical sourcing policies for items such as cage free eggs.

What is driving this change?

Trader Joe’s cage-free eggs announcement explains that their change came about in response to customer feedback, and they will accelerate their timeline, if their customers want it.

Consumers are more aware than ever of cruel farming practices, and the dangerous conditions to which global garment workers are exposed; that materials used in the products they buy could be harmful to the world’s oceans.

Once seen, images of environmental and social disasters, such as the Rana factory collapse in Bangladesh, the Deepwater Horizon oil spill in the Mexican Gulf, and the exploitative employment conditions at Foxconn are not easily forgotten.

Armed with intent and this information, consumers are demanding better of the brands that they buy from.

Companies want to protect their brands and keep their customers. Of course in this area, like much corporate messaging, there is plenty of hot air. It is important to sort the fluff from the genuine policy initiatives. Words (and even some actions) are cheap. It is not about making a mission statement here, and a charity donation there. It requires investment, and the belief that this investment will pay off in terms of brand reputation, customer loyalty, and compliance costs.

And if companies are not going to come to social responsibility voluntarily, then there is a swathe of (albeit fractured) regulatory requirements they increasingly need to meet, such as:

• Transparency in Supply Chains Act in California
• The UK’s Modern Slavery Act
• Dodd Frank Minerals Provision

Dismantling the Barriers

There are already many tiny retailers who differentiate themselves on the basis of their ethical sourcing, such as Good Cloth, Bydfault, Good & Fair, and Where Does It Come From.

On a larger scale, companies like Starbucks, Patagonia, The North Face, and WholeFoods are leading the way with their sustainable materials initiatives, and the certification of their supply chains.

Many people will and do choose these retailers on the basis of their reputation, whether it be for social, environmental or ethical considerations.

However, there remain significant barriers for this purchasing behavior to become widespread:

• Lack of information required to make a decision
• Lack of an ethical choice, even if sufficient information is available
• Ethically sourced products are too expensive
• The human tendency to blinker oneself from this sort of information, if it does damage to one’s self-perception

Visibility & Traceability

A customer should be able to ask, “Where does this come from?”, “Are its materials biodegradable?”, “Does the company made the product treat its employees well?”, “Are any of its materials harmful?”

Currently, there are various ad-hoc efforts to supply this visibility, mostly provided by consumers looking in, rather than companies looking out. For example:

• Good Guide: ethical, social and health guide to consumer products, (founded by the new Amazon Chief Sustainability Scientist)
• the Quartz database for building materials
• Various single-issue efforts, such as Say No To Palm Oil

There is only so much information that a consumer can find out about a product, if the manufacturer or supply does not provide any visibility of its supply chain. Even Joe Bennett, who attempted to glean this information first hand in China, as documented in his book Where Underpants Come From? could only partially fill in the missing information in his search for the provenance of his undies.

But before a consumer can know about a vendor’s supply chain, or corporate practices, the company has to have this data themselves. This is relatively simple for the first tier of suppliers and the internal practices of the company, but becomes more complex, the further into the supply network a company attempts to delve.

For supply chain traceability, several products are coming onto the market to assist:

• Segura Systems offers cloud based supply chain auditing, and integrates with current business systems
• Sedex offers consultancy services to audit supply chains
• Provenance markets an immutable digital record of the supply chain using blockchain technology initialized used to implement digital currencies such as bitcoin
• SKUChain is also using blockchain to manage contracts and payments through the supply chain
• Sourcemap geographically maps lifecycle information of a product
• Know the Chain provides resources for companies to address forced labor in their supply chain
• RFID technology can be used to tag and track materials and conditions through the supply chain

Creating ethical choices

With more information, the ethical options, and those that are not, stand in stark contrast. If there are no ethical options, then opportunities arise to manufacture them. We have already seen this in the area of renewable energy, free-range food produce, sustainable clothing materials, electric cars, and synthetic meat.

Market opportunities go hand-in-hand with laws and regulations, that are enacted to prevent environmental and social damage. Assuming there is sufficient demand for a product, and its manufacture is possible, new legal versions can be produced, while old ones are phased out.

Cost

While ethically produced products remain niche, their cost stays high. This price problem is reduced by economies of scale. Solar power is an example of this. We should see further price reductions as more efficient technologies are developed, and as coal-based power is phased out. Electric cars are following the same trajectory.

In addition, once the true cost is known, governments can introduce subsidies and taxes to engineer price changes on ethical and non-ethical products. This is probably less common in the US, where government intervention is seen as highly undesirable (although occurs readily within the farming sector without too much resistance). In other countries, cigarettes and sugary drinks are highly taxed to discourage their use. Many countries are considering or have implemented carbon taxes to drive change there.

Blinkering

While ethical purchasers are in the minority, the mainstream can blinker themselves and create (unflattering) stories about those who participate in the practice. As it becomes more common, this blinkering becomes harder to maintain.

It is like confirmation bias: the more it is questioned, the less it prevails.

It also becomes less necessary to maintain, because the information required to make a good decision is available, and there is no conflict between one’s self-perception and one’s choices. People feel empowered to make a choice, rather than cornered and powerless.

The Missing Piece

Amazon was dealt a rather hefty blow when the now infamous New York Times article was published in 2015. Despite denying most of the claims in the article, Amazon has been since putting various progressive policies in place (such as paid maternity and paternity leave, a renewable energy target for AWS, donation to the Mary’s Place shelter).

Perhaps these changes are a result of the excoriating article, or perhaps the company is moving with the times.

Hiring Dara O’Rourke into the sustainability group is an exciting and intriguing development. Consistent with the company’s overall modus operandi, this team seems to be working in stealth mode. Information from its key players (Kara Hurst, Christina Page, Christine Bader, Dara O’Rourke) is minimal, and when it appears, is mostly about hiring within the team, or small initiatives, such as discounted energy efficient light-bulbs).

Nonetheless, there are high hopes for Amazon’s sustainability team. Amazon has brought major expertise and credibility into this team.

Here is one way these hopes could be realized in a big way:

Through AWS (Amazon Web Services), Amazon provides a supply chain visibility and traceability software service, into which sellers and suppliers integrate. This is a first class cloud service that allows authentication and certification of the supply chain.

This information is exposed on the consumer website at various levels. At the highest level, products receive a rating for environmental, social and health impact. At a deeper level, consumers can search for specific impact, as outlined in the introduction of this piece.

Where better to implement this than at a major market place of buyers and sellers?

The value proposition to consumers is obvious — they have the information they need to make an informed decision. Even the absence of information about a particular product can inform a decision. Consumers are free to ignore this information if they wish to remain blinkered.

For sellers, suppliers, and manufacturers, the barrier to providing supply chain visibility and traceability is reduced by cost (like all AWS frameworks, the cost is proportional to the use of the service), by scale (sellers who share suppliers can amortize their efforts and the supplier information only needs to be provided once) and by operational effort (the service is managed and maintained on the cloud, thus allowing even small suppliers to integrate, without having to invest in bespoke and manual solutions to this problem, which would otherwise be prohibitive). Of course, security and privacy are paramount in this service: the interfaces between the pieces of shared data require the most stringent of authentication and authorization protocols.

For Amazon, the benefits are manifold: a revolutionary framework that makes good on their corporate social responsibility mission, a new service for which they receive revenue, more insight into what consumers are searching for.

It is a win for the world.

(Full disclosure: I work for Impinj, a supplier of RFID products and platforms. The views expressed in this article are entirely my own)