President and CEO of Center for Responsible Enterprise and Trade (CREATe.org)
E. Can you talk a bit about the inspiration for CREATe.org and how you came to be involved with the organization?
PP: The Center for Responsible Enterprise and Trade (CREATe.org) is a nonprofit organization working with multinational corporations (MNCs) to foster innovation and economic prosperity by protecting intellectual property rights, fighting corruption and driving responsible business practices in global supply chains and business networks.
The inspiration for CREATe.org came from my work with Microsoft, where for the past nine years I was the Corporate Vice President and Deputy General Counsel, Global Corporate and Regulatory Affairs and also led the company’s corporate citizenship efforts. My first six years at Microsoft were based in Tokyo and I led Microsoft’s legal and corporate affairs team in Asia, with a focus on Japan, Korea and China.
In these roles, my work increasingly was impacted by the fact that in significant and growing markets around the world, local enforcement and the rules-based trading system were not working. As a result, global corporations increasingly face unfair competition, the misappropriation of valuable trade secrets and an estimated $250 billion annual impact due to counterfeit and pirated products.
During the past year, I began to incubate some ideas to address some of the intractable problems Microsoft and many others in the industry face in emerging markets related to the lack of respect for intellectual property rights, corruption and bribery and a fundamental lack of the rule of law and a culture of compliance.
We became intrigued with the idea of leveraging global supply chains across key affected industries – IT, pharmaceuticals, automotive, consumer products goods and defense – as one way to address the challenge. This builds on the work that global brands have done on fair labor and environmental sustainability, and increasingly on zero tolerance for corruption and bribery.
With a start-up grant from Microsoft, we launched CREATe.org in October 2011.
E. Create.org is working to tackle a number of important issues (IP theft, Bribery, Fair Competition, etc.), and this must be a daunting mandate. Will you begin your efforts in particular regions/countries or take a completely global approach?
PP: Multinational companies and their global supply chains comprise almost 60 percent of global trade in goods and represent tremendous opportunity for strengthening compliance and promoting transparency.
As a result, CREATe.org is focusing on working with a cross-section of multinational companies that represent sectors from across the economy and are predominately headquartered in the U.S., Europe and Japan.
While each multinational corporation has different individual priorities, we believe all have a shared interest and benefit in creating a culture of genuine compliance in global supply chains by ensuring respect for intellectual property rights and putting in place strong anti-corruption measures.
E. How are you working with companies to achieve your shared goals?
PP: CREATe.org is collaborating with companies to develop and share practical tools and best practices, provide education, and advocate for the use of supply chains to strengthen a rules-based global system of commerce.
In January, CREATe.org hosted three CREATe Corporate Roundtables to provide an opportunity for companies to come together to brainstorm to better understand how collective efforts can address stronger compliance by global suppliers and vendors with respect to protection of intellectual property and zero tolerance for corruption. During March, CREATe.org hosted Corporate Roundtables in Tokyo, Paris and Berlin.
CREATe.org has programs initiated with the Conference Board, the MIT Just Supply Chains Initiative and the Stanford Global Supply Chain Management Forum. These partnerships will provide companies, academics and other stakeholders with opportunities to discuss ways to collaborate on protection of intellectual property and prevention of corruption in global supply chains. CREATe.org also developed plans with the State Department for an event this past spring to bring more attention to the role of industry-led initiatives to address these challenges.
CREATe.org also builds on the legacy and learnings of the fair labor movement and more recent environmental sustainability efforts.
E. What can companies learn from the past few decades of working with their global supply chains on fair labor practices to most effectively address protecting IPR and preventing corruption?
PP: About 15 years ago, we saw the emergence of voluntary labor standards and Supplier Codes of Conduct. This was largely in response to media stories in the U.S. and Europe that showed poor working conditions in emerging market factories.
The first response by the companies was pure risk mitigation; and with the code came auditing. The credibility of the audits varies widely. It has also become clear that auditing is not systematically driving improvement in the suppliers.
Now, the focus is on “building capacity” in the suppliers so they can take more “ownership” of the compliance. One of the keys to improvement is to develop and implement management systems that involve workers. Sophisticated companies are now starting to supplement their focus on code and auditing with thinking about processes and training.
At CREATe our goal is to learn from the evolution in labor and environment and to explore programs that incorporate aspects of verification and capacity building from the start. The key will be to create something that is credible, pragmatic and cost-effective.
E. How can companies incorporate the focus on protecting IPR and preventing corruption in their global supply chains in their existing management systems?
PP: Companies have existing management systems that typically follow the same basic cycle. At CREATe, we want to help MNCs build on the management systems already in place to extend them to better protect IP and prevent corruption in the global supply chain.
Most MNCs have adopted a set of principles and policies. In short, the rules. Typically this leads to a Code of Conduct that goes into more detail on the expectations for the company’s employees.
Operating procedures clearly communicate to employees and workers at the company “HOW” to follow the rules. An effective management system then trains employees on how to follow clearly defined procedures. Next are controls to check to see if people are following the policies and procedures. The last part of the cycle is review and reporting.
Ultimately, we aim to help companies protect IP and fight corruption by developing and implementing effective management systems that build on existing internal systems and extend to their suppliers. We will do this through our discussions with MNCs, research and working with experts in management systems.
E. How will you define and measure success with this initiative?
PP: We believe there is an opportunity for a new approach – it is long-term and aspirational, but it can have an impact over time – by changing the behavior of individual companies over time. The objective is to address these problems and to foster an environment where a broader culture of compliance can take root.
The first step is to get companies to commit to working with their supply chains and business networks. We will do this by assisting them in developing, enhancing and implementing business policies and procedures that demonstrate respect for and protect intellectual property and that define measures to prevent corruption in their company and with their supply chain.
We are leading a collaborative process to build the systems and tools to help suppliers implement such policies and procedures. The adoption of such policies and procedures is an important measure of progress.
That said, ultimately we need to see a reversal in the growth in counterfeiting, piracy and misappropriation of trade secrets, which costs companies hundreds of billions of dollars a year. Equally, we aim to see a widespread reduction in corruption, which costs the U.S. economy an estimated $1.5 trillion dollars annually, more than five percent of global GDP.
