When we think of abuses in factories overseas or the debate about "sweatshops," we tend to picture apparel, footwear, or maybe toy companies. The image of the technology sector as a "clean," forward-looking industry has meant that investors have not generally engaged these companies on labor conditions in the supply chain. However, there is increasing attention to global labor and environmental standards by companies like Hewlett-Packard and Intel, that are looking at the comprehensiveness of their Codes, their interaction with vendors, and the role of independent monitoring.

In short, technology companies are now stepping up and engaging their suppliers on issues like health and safety, environmental impact, and labor rights. The ripple effect of this attention can be profound as companies’ "purchasing power persuasion" establishes new expectations.

Hewlett Packard is a case in point. Its Global Citizenship Report not only outlines Hewlett Packard’s commitment to the environment, increasing recycling, and reducing hazardous waste, it also describes in some detail its Supply Chain Social and Environmental Policy and work with its 150 top suppliers. Twenty-five audits have been completed and problems with management systems and processes identified. Hewlett Packard also monitors for human rights violations, although to date neither the company nor others in the industry have addressed the adequacy of wage levels for employees in these factories.

A January 2004 study by the British investment firm ISIS Asset Management entitled "Waste and Workers in the Tech Sector" looked at "Race Leaders" compared to "Starters" on both labor standards and the environment. While Hewlett Packard and Nokia were identified as leaders in both areas, along with Dell for its environmental practices, IBM and Sharp were categorized as "Starters" on labor. IBM appears to have taken the analysis seriously and upgraded its practices. ISIS noted technology companies are "facing dual pressures to cut costs and improve standards of governance and corporate responsibility." Clearly there are intense market pressures to reduce costs. But a role of socially responsive investors is to ensure that our voice is heard urging companies to be responsible in their relationships with suppliers. Moreover, we think healthy supply chain relationships will ultimately enhance shareholder value.

Walden working in partnership with investors at the Interfaith Center on Corporate Responsibility has begun to engage companies in the technology sector on global labor and environmental responsibility – and we expect this will be yet another example of investors and companies making a difference by working together.

—T.Smith