Adoption of Sustainable Sourcing Practices Remains Limited, First Large-Scale CSR Study Finds

For all the corporate sustainability reports that many companies dutifully release every year, how widespread are sustainable sourcing practices really? A new paper published in the Proceedings of the National Academy of Sciences suggests that adoption of these practices remains limited, particularly when it comes to non-consumer-facing companies and lower-tier suppliers.

A team of researchers from Stanford University recently conducted the first large-scale study of whether and how the private sector is tackling sustainable sourcing and contributing to the United Nations’ Sustainable Development Goals.

“Given that the vast majority of a company’s social and environmental impacts happen in their supply chain, it is key to understand what companies are doing to address sustainability issues among their suppliers,” said Tannis Thorlakson, lead author of the paper.

The researchers analyzed the sustainable sourcing practices of 449 global companies, which were randomly selected from among publicly-listed companies in the food, textile and wood products industries that publish annual reports in English.

In order to find out both what practices companies are adopting and which ones are the most common, the researchers applied content analysis to these companies’ corporate sustainability reports, annual reports and websites. Then they identified 16 distinct sustainable sourcing practices.

About half of the companies have adopted at least one of the 16 practices. The most common practice by a significant margin is a supplier code of conduct, which more than 40% of the companies have adopted. By contrast, adoption rates for the other practices, which range from training and screening suppliers to adhering to voluntary standards from governments or NGOs, are below 20%.

The supplier code of conduct appears to be a foundational part of a sustainable sourcing program. Eighty-two percent of companies that have adopted one of the other practices also have a code of conduct.

Most companies with sustainable sourcing practices report some form of verification, be it external or internal. The researchers found that 37% of the practices are audited by a third party, 25% by internal intervention, 20% by the buying company or the supplier itself, and 18% undisclosed as to the audit approach.

Unsurprisingly perhaps, companies that are consumer-facing and hence vulnerable to pressure and criticism are much more likely to adopt sustainable sourcing practices. High revenues, serving European markets and having headquarters in a country with high NGO density were positively correlated with sustainable sourcing.

“From a consumer perspective, the pressure consumers put on firms when demanding more sustainable products might just be paying off,” Thorlakson said. “Our findings suggest that consumer-facing companies are more likely to adopt sustainable sourcing practices than firms that do not engage directly with an end consumer.”

Companies also tend to focus their sustainability efforts on the first tier of suppliers. The researchers found that 60.5% of the sustainable sourcing practices applied only to first-tier suppliers.

The same situation applies with specific materials. The majority of sustainable sourcing practices cover only one input material or a subset of materials, with wood and palm oil most commonly given the sustainable sourcing treatment.

In short, plenty of sustainable sourcing challenges — or better put, opportunities — remain. Considering that “supply chains play an outsized role in many of the most pressing social and environmental challenges,” as the authors of the paper write, that sustainability is a responsibility of sourcing and supply chain professionals should be no question.