New Report: Are Our Supply Chains Less Responsible Than We Think?

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Corporations are becoming wealthier.

As of last year, 69 of the world’s 100 biggest economic entities are not nations but businesses, an increase from 63 in 2015. Can it be argued that those behemoth private sector corporations should be held to stricter procurement regulations and transparency, more like, dare one say, public procurement?

This is a question that arises from the findings of a recent report from The Economist Intelligence Unit on supply chain responsibility. For this study, the researchers surveyed 800 executives from eight countries, looking at five aspects of supply chain responsibility: environment; health and safety; labor standards; gender equality; and business ethics. The respondents represent a diverse range of industries and revenues.

For many companies, supply chain responsibility has in fact become less prioritized in the past five years, the survey responses show. Despite evidence to the contrary, many executives are complacent about the state of their supply chains. Four in five of the respondents agreed with the statement that their supply chain is responsible, and only 2% disagreed.

 

Source: The Economist Intelligence Unit, 2017

However, the percentages of companies paying active attention to key supply chain responsibility issues are much lower. Only 22% of respondents said that their companies address child labor, and the figures are similar for climate change (23%) and gender equality (28%).

According to current UNICEF estimates, child labor involves 150 million children worldwide. Depending on industry, the chances that there is child labor in an organization’s supply chain may be considerable.

A ‘Culture of Responsibility’

The survey respondents suggested that having an overall corporate culture of responsibility is a huge factor in how they approach supply chain responsibility.

This makes sense, of course. If the shareholders and C-Suite do not value corporate responsibility, what benefits are there for supply chain teams to do so? But there are more factors that play into how corporate cultures are shaped. The report brings up governmental regulations, the media, activists and societal expectations as all potentially having an effect.

Customer expectations are also a big one. While there is plenty of debate on the question of how much consumers really care about responsible supply chains, a fiasco like the Rana Plaza disaster of 2013 that sweeps through the media can do significant damage to company reputation.

Tackling Persisting Challenges

Source: The Economist Intelligence Unit

Complexity is the top challenge here, cited by 49% of survey respondents as preventing them from having more responsible supply chains. Another thorny challenge is the difficulty of measuring issues like child labor, an area that does not yield immediate proofs of success — unlike, for instance, compensating workers for injuries or recycling.

The report offers up a number of recommendations for dealing with these challenges. Digital technologies can help monitor supply chains and make possible a new level of transparency (blockchain, anyone?). Companies can also consider reducing the supply base and working more closely with core suppliers to increase supply chain standards.

Third-party experts and consultants can help companies measure those hard-to-quantify issues, as well as act as a “broker” for companies reluctant to collaborate with even non-competitors on supply chain standards. And as one interviewee told the researchers, “the butcher checking his own meat is probably less credible.”

The report authors also recommend that companies bring in corporate social responsibility (CSR) experts to help break down these big, messy issues like child labor and climate change into discrete “risks and opportunities pertinent to business leaders,” who can then get financial stakeholders onboard.

Some of these recommendations are more practical than others, of course. But quite a few of the survey respondents believe that a broader cultural and generational shift is needed to drive supply chain responsibility. Others believe this shift is already taking place — albeit very slowly.

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