A Sustainable Supply Chain Conundrum: Companies Care About Appearance, Not Outcomes

Within procurement, corporate social responsibility may be one of the biggest -- if not superficial and relatively short-lived -- trend in the market right now (besides supply risk, in the wake of recent events), and companies seem to be moving toward being open and transparent about audits, shortfalls, and successes within their global supply chains. As an example, Apple released their Supplier Responsibility 2011 Progress Report earlier this year (see Spend Matters coverage here and here) -- but a recent study from the UK's Warwick Business School and University of Bath School of Management suggests that far from having the good intentions of CSR, that "Most companies' efforts to improve their supply chain sustainability is focused on managing risk and public relations, not on actual improvements to the environment or worker safety, according to a new study."

It seems that the difference between "developing 'sustainable' supply chains" and "managing risk and preventing public relations crises" has become blurred, as most companies are using the latter to define the former, according to Dr. Stephen Brammer, a professor at Warwick. The study found that "instead of instituting preventative policies, companies use expensive and ineffective actions against suppliers after disruptions have already occurred" and that "the result of their after-the-fact approach, [Brammer] said, is that, 'In the end, nobody wins.'"

Brammer cites Apple and Mattel, specifically. "In 2007, Mattel was forced to recall $100 million worth of product when one supplier used lead-contaminated paint on the company's toys, the researchers said. The recall involved the removal of over 18 million toys." And "Apple had previously admitted that in 2008 half of its suppliers' factories for key products including iPhones and iPads weren't paying valid overtime, one quarter weren't paying workers minimum wage, and one quarter failed to meet environmental standards," though Apple seems to be attempting to take strides to improve, as they've obviously been auditing suppliers and releasing public reports on their findings, acknowledging where they need improvement.

So rather than putting out fires, what should companies be doing to take real, sustainable action? We need to be seeing our supply chains as "opportunities for competitive advantage, and collaborate with suppliers to monitor progress and help them improve," according to Brammer, who suggests that we shouldn't just drop suppliers when they don't meet our standards, but invest the time and resources to work with them until they do. In fact, they've even created an infographic:

So who's on their way to doing it right? "The researchers found that companies including Coca-Cola, Ikea, Unilever, Nestlé India and Mountain Equipment Co-Op all show evidence of taking such steps to improve their supply chain practices." Being preemptive has its merits -- and by spending money on the actual purpose can help prevent those PR disasters in the first place. But learn from Ikea and don't forget your own facilities as well.

- Sheena Moore and Jason Busch

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