While BSR has been working with companies on supply chain sustainability for more than 20 years, this year we decided to hone our definition of “sustainable supply chains” by describing the impact we hope to achieve with our members.
We believe sustainable supply chains are inclusive, resilient, and transparent.
- Inclusive: They create value for the people who work in them through fair and safe employment, greater access to essential products and services, and thoughtful engagement and investment in workers’ communities. Sustainable supply chains empower workers, and respect and promote human rights.
- Resilient: They are climate-resilient and environmentally restorative through emissions reductions and climate-smart procurement.
- Transparent: They are readily verifiable and fully traceable and transparent, allowing companies and stakeholders to report their practices and impacts confidently.
To achieve inclusive, resilient, and transparent supply chains, we advise companies to take an integrated approach to supply chain sustainability by focusing on key impacts, incorporating supply chain sustainability tenets throughout the organization, deepening engagement with suppliers, and promoting greater transparency and traceability.
Focus on Key Impacts
Companies that want to increase the impact of their programs should adopt a targeted approach to supply chain sustainability by focusing on a particular category, commodity, or “root-cause” issue.
IKEA’s focus on sustainable cotton and timber and McDonald’s journey to verified sustainable beef are two examples of companies developing sustainable supply chain strategies for their most material commodities.
Others focus on root causes and move beyond broad-based social and environmental audits. At the tier 1 (assembly and manufacturing) level we are seeing companies focus on issues unique to factory environments, such as overtime, health and safety, women workers, building safety, and waste-water treatment. H&M, for instance, supports factories in developing effective internal management systems to prevent noncompliance with codes of conduct. Nike provides training to raise awareness among factory managers of human resources management issues. Other companies, such as ANN Inc. and Walmart, focus on issues in the factory labor force. BSR helped ANN Inc. develop a multiyear commitment to provide 100,000 women in its global supply chain with health and financial literacy training. In 2011, Walmart launched its Women in Factories program to teach critical life skills to 60,000 women factory workers.
Integrate Supply Chain Sustainability Throughout the Organization
Companies are also integrating sustainability into existing business processes and activities such as procurement. According to the HEC/Ecovadis “Sustainable Procurement Barometer,” the case for sustainable procurement is growing: 93 percent of procurement organizations recognize it as a critical or important objective, up from just 40 percent about 10 years ago. It now ranks fourth in terms of overall importance to procurement.
BSR’s Center for Sustainable Procurement (CSP)—which conducts research and works with companies to develop resources, tools, and methods to integrate sustainability into the procurement process—emphasizes “opportunity creation” over “risk mitigation.” We identify these opportunities by working collaboratively with supply chain partners and peers so that companies can increase the positive impacts of their procurement decisions. Specifically, we identify ways to incorporate sustainability elements into existing category and sourcing strategies, as well as conduct analysis to determine the sustainability benefits of alternative procurement options.
Deepen Supplier Engagement
Despite advances, most companies still rely on the “code of conduct, risk assessment, audit, and follow-up” approach to supply chain management. So how can companies achieve greater impact by augmenting their existing programs?
Examples from leading companies include offering trainings and remediation programs for suppliers, sharing best practices among suppliers, implementing targeted programs to strengthen supplier relationships, and using technology and database tools to engage with suppliers and share assessment results. Companies are also developing the skills of a targeted workforce, such as women workers, through leadership training. For example, BSR’s HERfinance builds the financial capabilities of low-income workers in global supply chains by delivering workplace-based financial education programs and connecting factory employees to appropriate financial services.
Other companies are partnering with organizations like LaborVoices and Good World Solutions’ Labor Link, which allow factory employees to anonymously report on working conditions. Labor Link has collected 1,023,110 data points from more than 250,000 workers in 16 countries. This kind of worker empowerment helps companies build a closer relationship with factory employees and obtain safety and working standards information firsthand.
Improve Transparency and Traceability
Consumers, stakeholders, and regulators are demanding more information about where products come from and the conditions in which they were made. This has made transparency and traceability for multitier supply chains a critical and challenging issue for companies. Nonetheless, only about one third of companies today are seeking transparency below their tier 1 suppliers.
There are two routes for improving this: better use of technology and high-performing collaborative initiatives.
With advanced technologies such as barcodes that consumers can scan with a smartphone, it is possible that consumers may someday have access to full product and supply chain information. However, many of these efforts are small and require support from large companies to help them grow.
Collaborative initiatives are leading other efforts to improve transparency through measuring, reporting, and certification practices. Fourteen countries are involved with Better Cotton, and the Better Cotton Initiative’s retailers and brand members represent about 10 percent of global cotton consumption. A newer initiative, Bonsucro, certifies nearly 4 percent of the global sugarcane surface, according to the “Supply Chain Traceability Guide,” which was published by BSR and the UN Global Compact in 2014.
Overall, trends are pointing toward more focus on key impact areas, deeper integration, innovative supplier engagement, and greater transparency. And while there is still much to do to achieve inclusive, resilient, and transparent supply chains, we believe many leading companies are on the right path—and more will soon follow.
BSR is hosting an event in New York today on inclusive, resilient supply chains.