How are organisations advancing ESG strategies through their supply chains?
Knowledge sharing, listening to consumer demands and investing in technology will all drive transparency and ethical practices, but there is much work to do, according to our expert panel
Simon Finch, supply chain director, Harrods
Michael Ford, global lead environmental, health and safety and sustainability, Avetta
Aileen Wilkins, head of procurement, The Midcounties Co-operative Ltd
Paul Williams, group head of ethical trading and human rights, Princes Group
How has the supply chain landscape evolved in the last 18 months?
SF: The coronavirus chaos exposed significant overconfidence in global supply chains and an absolute obsession with a lean inventory. Pre-pandemic, we were so used to being able to plan and move things quickly, and it was a big challenge when those plans were disrupted, and we couldn’t move stuff. We have learnt to reintroduce agility and multiple inventory nodes, which supports the ESG agenda. In the last 18 months, we have had to dig a lot deeper with our suppliers because if you are not doing the right thing, consumers won’t buy from you.
AW: At Midcounties Co-operative, we had already embedded a procurement strategy that used local suppliers – rather than big national suppliers – before Covid-19 hit. This approach meant we could be agile, and the stock has been accessible throughout. In addition, we went against the grain and reached out to smaller businesses, including those were unable to trade during parts of the pandemic due to government regulations, to source PPE and spare stock. Because our supply chains are much smaller and more local than some other organisations, we have had good visibility, meaning minimal disruptions.
MF: The pandemic fallout has changed the whole approach to supplier evaluation, which was primely focused on fiscal integrity and safety. Now things like business continuity are becoming part of evaluating suppliers, and it’s created massive problems. Avetta is on a learning curve, too, but the social element of ESG concerns more clients. It’s an area that needs a lot of development. There is no question the ‘S’ is as important as the ‘E’ and the ‘G.’
PW: I often wonder whether consumers are unaware of social sustainability risks in the supply chain. I sense there is an implicit expectation that companies are operating ethically. It’s only when there are human rights exposés – such as exploited workers in textile factories in Leicester – that they start to ask more questions about responsible sourcing. Businesses have to go beyond compliance to better manage and mitigate these risks. At Princes Group, we have increased transparency through publishing our supply chain map of direct suppliers and working with third-party providers, such as Provenance, to bring to life the sustainability credentials of Napolina tomatoes. It is fundamental to know what’s going on in the fourth and fifth tiers of the chain to tackle modern slavery and find the root causes of any issues.
What is the role of supplier evaluation in driving transparency?
MF: Traditionally, when companies have evaluated suppliers, they have been one dimensional: to award a contract, they tend to look at their fiscal integrity, insurance and their safety record. Because of the pandemic – and Brexit – our clients, who realise there are environmental and reputational risks, want to scale things up to see far greater assessment levels, adopt a more holistic approach, and use technology to help facilitate more educated purchasing options. Tech pulls together the relevant data in different departments to provide a complete picture.
AW: In many of our contracts now, we include an unannounced audit clause that allows two audits up to two years after the contract has ended because something in the news might have affected our business. This lets our suppliers know that we are taking this seriously and ensures that they comply with what we expect through our values and ethical trading. We also run modern slavery training for the suppliers, in conjunction with the community, to look out for the signs of anything unusual happening in the supply chain.
PW: We have an award-winning initiative to offer survivors of modern slavery in Italy long-term employment opportunities with Princes, and building those relationships is very beneficial. In-person audits have been challenging during the coronavirus crisis, and virtual audits have their place, but at Princes, we try to demonstrate and embed best practices in-house to the supply chain. For example, all members of our procurement team are signed up on the International Chartered Institute of Procurement and Supply Ethics Register. We realise that no supply chain is perfect, but we recognise that we need to work together to solve these challenges. The net is closing in on unethical suppliers, and whistleblowing mechanisms are improving.
SF: Deep supplier relationships are so important. As we learnt in the last year, picking up the phone and talking to suppliers to collaborate and work a way through strengthens bonds. I believe we will continue that closer collaboration as we move out of the pandemic. We’re working much more with strategic partners across a range of products and taking a more pragmatic approach.
How can companies build a sustainable supply chain today to win tomorrow?
PW: Nobody wants to pay more than necessary for products, but the reality is that, at the moment, responsibly sourced products often do come at a premium. We could challenge ourselves as organisations about what weighing we need to give to ESG versus service availability and technical requirements, which cost more but hopefully high ESG standards are precompetitive and will become the norm for all responsibly sourced goods.
AW: Admittedly, it can be challenging to keep up with trends. Who can say what will be deemed unethical in 10 or 20 years? We have to listen to consumer demand and communicate with customers and across the industry to improve agility and drive more ethical practices. For those leading the way in terms of transparency, there is a competitive advantage to be gained, and they should be shouting about it to inspire others to clean up their acts.
SF: We have learnt so much from the pandemic fallout, and it’s clear if you have a product closer to the customer, then it will naturally drive sustainability and reduce environmental impact. Ecommerce has grown significantly, and by using technology, we have been smarter about our stock on harrords.com. As a global brand we are shipping worldwide, but with more distribution nodes through brand partnerships, we are nearer to where customers are buying the goods.
MF: Many clients are starting on their ESG journeys, and many are struggling because the two key things we see at the moment are modern slavery and climate concerns. Additionally, people are struggling to get to grips with diversity. How do we create a more diverse supply chain? There is a lot of information out there, but there needs to be more simplification and communication of expectations. Finally, we should applaud what we are doing; we are realistic, but by sharing knowledge and working together, we can improve this industry.
For more information please visit avetta.com