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Making the sustainable supply chain puzzle simpler - five ways to start

Date: 14 Nov 2011

Companies like what they can control, for obvious reasons. It's why so many will be attracted to the corporate responsibility issues they can most easily affect, so that they can report on year on year improvements in a straightforward way.

By definition, companies are not in control of their supply chain. They may be able to influence, and there are certain areas where they can require. But their ability to use these tools to control outcomes are only as good as the company's intelligence as to what's going on out there - and if you have thousands of suppliers across Asia or Africa - well, that's not going to be very easy.

Recently, I pulled out five basic tips for building sustainable supply chains in an article for Ethical Corporation - and I thought it would be worth reprising them here.

1. Create a clear picture of what's out there. You may think you know what your supply chain looks like, but that's no guarantee that you fully understand where the hidden issues lurk.

For instance, Marshalls wasn't aware some years ago of the issue of child labour in Indian sandstone quarries - until an NGO report focused on the issue and led them to make their own investigations. The company went on to take more strategic and focused action to ensure they tackled the problem of any of their peers.

Some of those peers have not emulated this action - even though the problem is now well known and well publicised, mostly by Marshalls itself.

If you simply looked at a description of suppliers to computer hardware manufacturers, you wouldn't necessarily pick up on some of the problems that have beset Foxconn - the company that became famous for having a surge of worker suicides at the factory that manufactured products for Apple.

It's easy when issues hit the public domain of course - you should assume that within your supply chain will be some fairly important ones that COULD hit the public domain - but haven't yet.

2. Prioritise your engagement. Sure - it would be great to purge the supply chain of every social, ethical and environmental problem. Unless you have a very small pool of suppliers, that's not going to happen. So at least you can start by identifying the areas of the biggest risk.

Everyone has seen the basic risk mapping approach - where your suppliers, or your purchases, are ranked on a grid that matches likelihood of a problem or negative impact versus severity of that problem if it does occur.

Of course, you still have to make certain choices in how you identify and weight the criteria. If a product is made in a country known to have endemic child labour, or routine corruption, does that automatically push it into the 'high risk' category? What if it's a low profile, low volume product?

Different companies will work it out in different ways - the important thing is that it makes sense for the kind of business you're in - and the kind of dialogue it will then lead you to have with your suppliers.

3. Be clear about your own standards. If these were your own factories we were talking about, in your total control, what would be the standards you would expect to enforce? If I came to one of your actual sites tomorrow - whatever country they may be in - would they recognise that as a description of the real day-to-day operating practice for the company?

There's a fine balance here. At what point do you pass the line of demanding that companies based in a very different social context, with very different norms and expectations, behaves just the way that you behave? There's a line somewhere, but where the line is drawn is highly controversial.

You may find it easy to say that you never, ever tolerate forced labour in your supply chain. Fine. That's over the line. The argument 'but that's how it's done around here' will not be accepted in that case. What about cultures where longer hours are the norm than would be considered acceptable in your head office? Ah, so that's definitely the right side of the line, is it? Until what point? How many hours become too many hours?

Before you can meaningfully engage with your suppliers, you need to know what is acceptable, and the areas where you might have to compromise for the sake of the competitiveness of your supply chain, and even the need to avoid unintended negative social outcomes.

4. Focus on ways to measure performance - So you engaged with your suppliers. So what? What changed as a result? How do you know?

I am never so unimpressed with a company's maturity in its CSR if its reporting on supply chain solely focuses on the processes it has put in place to engage suppliers. And they report number of communications, numbers of suppliers that say they have read the code of conduct, numbers of workshops carried out.

What are the things that happen on the ground that we most care about in relation to those issues. Child labour? Don't tell me you've got a policy on it, tell me whether there is any child labour in your supply chain, and if so what it looks like.

5. And, as always, get top level buy-in. Any list of 'top tips' on some aspect of CSR or sustainability includes getting top-level buy-in. With good reason. There are risks in your supply chain that could attract seriously bad publicity if they go bad - and your senior management expect to know about them before that happens. And dealing with those risks, although there may be some payback if done well, will certainly have an initial price tag attached.

They have to get the strategic business case for prioritising action in this area - or else it will be the first thing to go when times get tough.

That would be now, of course.

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Interested in the issues raised in this article? You may want to look at Ethical Corporation's forthcoming conference on supply chain issues, where some of the companies that have been at the leading edge of building sustainable supply chains will be sharing what they have learned. See http://www.mallenbaker.net/jump.php?Link=191 for more info.

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