When it comes to the creation of goods and services, we are living in an increasingly interconnected world. However, this remains a challenging concept to get our heads around when a lot of these interconnections remain unseen. The components hidden inside the phone we purchase, or the ingredients in the frozen fish fingers from the local supermarket are likely to have crisscrossed the world as part of global supply chains before being assembled and delivered to market. It is human nature to feel uncertain about what we cannot easily see, and that can lead to mistrust – so how can businesses reassure consumers and retailers that what is out of sight is not out of mind?
The outsourcing of responsibility is clearly not good business
A couple of trends are driving businesses to improve their supply chain transparency and issue management. As consumers and business partners become more discerning about issues like labour practices, human rights and the environmental pollution associated with agriculture and manufacturing; new technologies are simultaneously enabling more and more visibility into supply chain practices, reaching further up the chain than ever before. In this context, the outsourcing of responsibility is clearly not good business.
Consumers, investors and other stakeholders now expect businesses to understand and talk openly about what is going on in their supply chains. This typically includes any environmental and social impacts extending right back to raw material sourcing, and what the business is doing to improve them. Simply hoping your supplier will deal with an issue on their own, or refusing to engage on issues that seem too big or tough for your business to address is not going to meet these expectations.
Stakeholder expectations of disclosure and actions present both risks and opportunities for business. By addressing expectations around transparency you can build stronger relationships, and focused actions will help you to reduce your risk exposure as well as differentiate in the market. Reporting based on a robust assessment of material issues which includes your supply chain helps reassure stakeholders that your business is aware of the priority issues and is taking the right actions to manage them. And on the positive side, when you do this most stakeholders will give you credit. Supply chain issues are complex, and no one expects you to solve them on your own.
Engaging with suppliers is key
To position your business with credibility on supply chain reporting, consider adopting a 'warts and all' approach which doesn’t gloss over your challenges, and which explains your work through industry collaborations and supplier partnerships. It’s well worth transparently demonstrating your engagement with suppliers to build their capability on sustainability issues (and their ability to engage with others). After all, you are going to need their help if you want to address sustainability challenges like carbon emissions, modern slavery, water pollution, and animal welfare (to name a few) which have hot-spots in the supply chain and are beyond your direct control.
So how good a handle does your business have on the social and environmental impacts linked to supply chain activities? Are you confident that you've got all the risks covered, and if so how do you keep on top of it? And just as important: what is your plan for collaborating with your suppliers to achieve positive impact?
Whether your business has just started to engage with the supply chain on sustainability or you are already well underway, i'm keen to hear your perspectives and thoughts.
The original version of this article first appeared in 'Towards Transparency', a guide produced by sustainability consultancy Proxima.