Supply chain transparency is a business necessity
July 15, 2019 / 111217
By Tim Mohin, GRI Chief Executive
Considerations about sustainability in the supply chain are no longer optional. In all regions of the world, these issues are front and center of both the business and political agenda.
When it comes to the supply chain, transparency is not the first instinct of business. A company’s sourcing practices can be one of the ways to stay ahead of the competition. But, when it comes to sustainability, it’s essential to track the origin of products and services for their environmental and human rights implications.
If you take the case of Nike in the 1990s, poor labor conditions in suppliers’ factories came into sharp and public focus. This created a crisis for the brand and the very survival of the company. The changes that were eventually implemented showed that Nike’s initial reaction — to say these are not our factories and therefore not our problem — were financially and morally untenable. Now, managing issues in the supply chain is common practice for many industries.
History has shown that dealing with supply chain risks can help minimize disruption from environmental and social impacts while protecting the company brand. Also, ensuring suppliers have effective compliance programs and robust management systems can enhance the reliability and efficiency of the supply chain, which adds value to the business.
Politically, mandates for supply chain transparency are increasing. For example, both the UK and Australia now require companies to report on how they are confronting modern slavery. I would anticipate these types of policy interventions to increase in the coming years.
This week in Bogota I am helping launch the Alliance for Competitive Supply, which focuses on supporting Colombian firms to responsibly manage their supply chains. Initiatives around the world such as this can be a driver for improving supply chain management and deliver mutual benefits for both the buyer and supplier.
Transparency based on good data is the foundation of good supply chain management. Companies manage what they measure, which is why monitoring the key impacts is essential for efficient and sustainable supply chains.
The GRI Standards, the world’s most widely used sustainability reporting framework, can help. Our Procurement Practices Standard specifically focuses on how an organization supports local suppliers, by building a complete picture of their impacts throughout the supply chain.
From my own experience of more than 20 years working in the private sector, I can tell you that transparency works. By carefully selecting the key metrics and making these measures public, there is a natural incentive to improve. But it can be a tough job as the boundaries of the supply chain continue to expand.
Recently, the case of ‘conflict minerals’ — sourcing of raw materials that may contribute to war and other human right abuses — stretched corporate responsibility to the very beginnings of the supply chain. Now, the companies that make sophisticated electronics have taken steps to establish due diligence systems and publicly report on practices, which play a part in mitigating conflict in the deadly African mining fields.
With this expanding scope, the demand for greater transparency of supply chain impacts has also grown. And this trend has put a strain on the small and medium-sized enterprises (SMEs) in the supply chain. So, it is particularly important to support SMEs as they add the capacity to manage and disclose sustainability information. They also need to understand the business value for this work, which can secure their competitive place and attract new investment.
GRI’s Competitive Business Program (supported by the Swiss government) is helping SMEs to build their capabilities and harness the benefits of sustainability reporting. It’s clear that SMEs with strong sustainability programs have an advantage in attracting new business and new customers from global buyers.
The social, environmental and economic benefits of transparency — for businesses, their suppliers, employees and the communities where they operate — cannot be overstated. The trend is clear: well managed businesses have strong supplier responsibility programs. And these are the businesses that win in the global economy. Ultimately, this is about business value today and securing a more sustainable future for all of us.