Supply chain transparency is vital to meet sustainability goals and ensure companies use partners who share their values. But how practical is it to check everyone’s credentials?
When it comes to managing a supply chain, transparency is everything. But it’s no longer only about improving efficiency and maintaining the visibility of moving goods. Instead, more companies are expanding the concept of supply chain transparency to check up on the sustainability credentials of their partners.
Of course, achieving oversight of the supply chain for the purposes of sustainability can be a daunting prospect – especially if the supply chain in question has many stakeholders or crosses borders. And, understandably, many companies have prioritised simply getting their supply chains moving again after the pandemic, rather than focusing on sustainability.
Broad definitions of sustainability can further complicate the process. Does it cover pay, working conditions and human rights, for example, or does it mean a tight focus on carbon footprint reduction and environmental stewardship?
If it’s going to work, then, examining the sustainability practices of supply chain partners needs to be an embedded practice from the outset, rather than an afterthought. Ralph Kirkwood, head of procurement at electric bike manufacturer FreeFlow Technologies, says sustainability needs to be considered “at the point of contracting, [because] this is where you have the most leverage to demand some output from suppliers to align to your requirements, be that in relation to the product or service specification, or to wider sustainability goals.”
He recognises that it can be “tricky” to assess commitment to sustainability during the tender evaluation but adds that these questions need to be asked from the outset to help companies work out if first-tier suppliers will “roll your commitment down the supply chain”.
That requires leadership. “Suppliers want to see that the ultimate customer is serious about sustainability,” says Malcolm Harrison, CEO of the Chartered Institute of Procurement and Supply. “Often the ultimate customer is a larger organisation with more resources than other companies in the supply chain. A commitment to support and educate smaller suppliers is a positive action.”
Increased public awareness of sustainability issues can also spur companies to examine their supply chains more closely. The textiles industry is one example of this, particularly after many clothing manufacturers were exposed in the media for poor working conditions, low pay and dangerous factories.
Rob Webbon, CEO of sportswear manufacturer Presca Sports, says that when the business launched, few companies were creating sustainably made fabrics. “We would go to trade fairs and ask exhibitors to see their recycled or renewable fabric lines. We’d be taken to the back of the stand and shown a small sample of hangers – as if it was an afterthought,” he says. “Fast-forward a few years and now every textile company is desperate to show how sustainable they are. In many ways that’s great for the industry. But it does mean the market is much more open to greenwashing – and we need to be aware of that.”
So, what’s the best way to get to the truth? Is it better to build confidence in that relationship by getting to know suppliers and seeking assurances on the basis of trust, or to set firm metrics that suppliers are expected to hit?
Max Winograd, VP for connected products at manufacturing specialist Avery Dennison, says both approaches are important. “Trust is a foundational element in every business relationship but firm metrics are needed to ensure that these standards are adhered to.”
He adds that genuine traceability means companies can prove where their components originated, can demonstrate regulatory compliance in all markets where products are made and sold and can show that environmental and ethical considerations have been followed.
For Harrison, metrics are essential, even if they’re not used as hard targets. Instead, they can be useful for showing progress, especially early in the relationship: “Sustainability is a long-term goal and, as such, continuous improvement is key in the short term. Then it’s about hitting targets in the long term.”
At flooring manufacturer Interface, a supplier code of conduct requires everyone along the supply chain to comply with all relevant environmental regulations and conduct operations in ways that minimise the impact on the environment. The company is helping 26 priority suppliers to identify projects in their operations to reduce greenhouse gases and is providing technical support to reduce the carbon footprint of manufacturing.
“[We share] lessons we’ve learned and [collaborate] on potential solutions or new approaches, including sourcing alternative raw materials,” says Erin Meezan, Interface’s chief sustainability officer. “We are capturing more detailed life-cycle assessment data on the [26 suppliers’] materials to understand their carbon impacts better. These assessments will form a baseline that allows our supply chain team to develop a strategy to reduce carbon across that ecosystem.”
But what about complicated, cross-border supply chains where monitoring, oversight and communication are all more of a challenge? Thankfully, this is where technology can play a greater role.
Automating processes, such as questionnaires for stakeholders to complete during the movement of goods, and even live location analytics, can flag up risks. If compliance can be checked in real time, concerns can be managed before they become bigger issues.
“With mobility analytics, companies can evaluate their supply chain networks, improve site selection for warehouses or distribution centres, and better understand supplier performance, which all can lead to a smaller carbon footprint,” says Jeff White, co-founder and CEO of location intelligence provider Gravy Analytics.
“For example, location analytics can help companies understand truck traffic patterns within their supply chain and determine where bottlenecks might be occurring. With these insights, organisations could address logistics issues to reduce overall carbon emissions.”
Interface’s Meezan agrees, noting that leveraging real data “is the most effective way to move the needle on achieving sustainability in our supply chain”.
“We encourage our suppliers to measure their impacts by establishing tools like greenhouse gas inventories, as well as developing strong assessments of their current impacts through life cycle assessments,” explains Meezan. “Given that the raw materials in our products contribute the bulk of our impact, life cycle assessment data helps us – and our suppliers – understand the impacts.”
Introducing the right technology, then, along with fostering a culture of trust and open communication, can not only help companies choose the right partners, but also retain relationships with existing partners.
As Bob Glotfelty, chief growth officer at supply chain fintech company Taulia, puts it: “Since changing suppliers can be disruptive to the business or, in some cases, isn’t even possible, many businesses focus on encouraging improvements by their existing suppliers to match their commitment to sustainability.”