Microsoft Tests Out Mandatory Supplier Sustainability Reporting

Corporate supply chains are steadily coming under more scrutiny, and in almost no area is that more true than in the high-tech sector. In addition to recent dust-ups in China around pollution and workers' rights, the U.S. government is about to require companies that certify that the materials that are central to tech products are not sourced from the war-torn Democratic Republic of Congo.

For Microsoft, the topic has taken on a special level of urgency in the wake of a shareholder proxy action from New York City, one that has spurred the company to start a pilot project that will require sustainability reporting from a select group of its suppliers.

Beginning in 2013, the company will ask a dozen of its suppliers to file Global Reporting Initiative-compliant sustainability reports -- far from an earthshaking move, but one that could signal the leading edge of a looming trend.

"I'm proud of what we're doing," Steve Lippman, Microsoft's Director of Environmental Sustainability, explained in an interview late last week, "but by the same token, it's an evolution rather than revolution of what we're doing."

The move came about as a result of a shareholder resolution from the city of New York that asked Microsoft to require all of their suppliers to do sustainability reports.

After that resolution was introduced, Microsoft and its stakeholders discussed the various options -- requiring GRI-compliant reports from all of the companies tens of thousands of suppliers would be a massive and likely doomed-to-fail project -- and came up with what Lippmann described as a pilot project.

"We'll apply this to about a dozen suppliers at first, a cross-section of our sourcing organizations, contract hardware manufacturers, outsourced hardware manufacturers, and a handful of others that make sense," Lippmann said.

That process will give everyone involved a chance to take stock, and to find out if it was a meaningful project for Microsoft, for its stakeholders, and for its suppliers.

"Do we feel that [this project] improved supplier performance? Did it improve our own reporting? And based on that, who's the next group of people to roll this out to?" Lippman asked, rhetorically. Later, he added: "There's absolutely the commitment to learn from it and think about what's next, but there's no clear idea about what's next."

Microsoft is no stranger to sustainability reporting; just last week the company published its latest CSR report, which includes a GRI-compliant index as well as an extensive discussion of how it's working on its supply chain impacts, from conflict minerals to supplier accountability.

Microsoft's history with GRI was another motivating factor in pushing for the supplier pilot project.

"We think that there's a business value in GRI reporting," Lippman said, "and to that extent, we're happy to evangelize this to suppliers, to say we think this makes sense [and tell them they can] look to us to help."

Although Lippman was of course unable to predict what the next steps for the pilot project would be, given the increasing demand for supply chain transparency from customers, investors, regulators and stakeholders, it seems like Microsoft is starting to give its suppliers a nudge to get out ahead of what will likely be a requirement in the not-too-distant future.

Reports photo via Shutterstock.