UK poised for era of who cares wins?

Responsible sourcing and sustainability must become a positive part of a brand’s aspiration as economic revival risks unethical practices in the supply chain, writes Jim McClelland

Holistic is hard. This is the blunt message coming out of many boardrooms faced with the leadership double-whammy of combining supply chain complexity and crosscutting sustainability in one clear, communicable strategy for responsible sourcing.

Difficulty, however, can prove a brand differentiator, with benefits of joined-up thinking on values-based procurement both attractive and advantageous, according to global head of Plan A Delivery at Marks and Spencer, Adam Elman.

“It does require focus and effort, but it is extremely important that business leaders develop a holistic strategy,” he says. “Apart from calls for greater transparency that organisations are increasingly receiving from customers, NGOs, the media and so forth, the positive business case is becoming clearer – from security of supply to increased trust and lower costs, plus more motivated and engaged workforces.”

Success stories suggest engaging with the issues pays, whether measured in the £180-billion global turnover of Ethical Trading Initiative (ETI) member companies, the 1,149 Fairtrade producer organisations worldwide or 89 per cent of all concrete produced in the UK certified as responsibly sourced.

However, Professor Jacqui Glass, architecture and sustainable construction lead at Loughborough University and manager of the responsible sourcing network APRES, cautions against over-optimistic expectations of mainstream corporate capacity or desire to integrate supply chain policy and practice across environmental and social matters alike.

“Much as sustainability professionals might prefer the C-suite to take an even-handed approach to both concerns, this simply isn’t likely in most cases, with businesses adopting a pragmatic viewpoint prioritising specific issues, based on the scope of their own activities, as affected by legislative, local or media pressures – sustainability pick ‘n’ mix, if you will,” she says.

The economic upturn is a threat to sustainability, possibly more than a recession

To tackle selective voluntarism, Professor Glass advocates frameworks such as the Global Reporting Initiative that can steer organisations towards addressing a breadth of sustainability impacts and prevent tactical games being played.

“Organisations would find the issues simpler to frame, interpret and communicate if they made use of sustainability management standards like BS 8900: 2013. With a number of countries, including Denmark, now certifying companies against ISO 26000 on social responsibility, it is only a matter of time before these new tools start to become the lingua franca of the C-suite.”

Might such trends then herald the start of a “reverse-flow” model, where advances downstream in supply chain management influence agenda-setting options upstream? Tom Smith, director of insight and planning at Sedex, describes the current dynamic.

“The C-suite needs both to listen and dictate,” he says. “On-the-ground insight is crucial, but senior-level support is also essential for real change. From HR to risk management, PR to procurement, legal to investor relations, responsible sourcing needs to involve multiple business functions – and this underlines the need for top-level endorsement.”

For many sectors, client spend with the supply chain can exceed 50 per cent of revenue or more, in the case of the construction industry, making it critical to realistic expectations of achievement against sustainable business goals. Responding to this challenge is the award-winning Supply Chain Sustainability School, a 4,000-member organisation, strongly supported by a Leadership Group comprising 13 of the UK’s largest construction contractors.

Chairman of the school is Shaun McCarthy, director, action sustainability and former chairman of the Commission for a Sustainable London 2012. Much as the London Olympics raised the bar significantly for sustainability of major world events, harsh lessons were still learnt regarding relationships between reputational risk, branding and responsible sourcing, he says.

“Even London 2012 failed to tackle some important aspects of ethical business practices. Despite the efforts of LOCOG [organising committee], the supply chain for merchandise was cruelly exposed by the Play Fair Alliance. They put undercover workers into two Chinese factories and discovered breaches of all ten principles of the ETI in both. Their report Toying with Workers’ Rights exploded the myth that form-filling and audits can mitigate labour-standards risk in the supply chain,” says Mr McCarthy.

The global marketplace for sustainable supply chain partners brings with it big numbers, good and bad. The International Labour Organization has estimated 129 million children aged 5-14 are employed in agriculture worldwide and such widespread problematic practices are neither going to disappear nor readily be policed. With business budgets in recovery, though, can things only get better for responsible sourcing? Not necessarily, counsels Mr McCarthy.

“The economic upturn is a threat to sustainability, possibly more than a recession. In business-to-consumer sectors, marketing more aspirational products and services can create waste, while perpetuating the race to the bottom in the supply chain, going round the world looking for the next country to exploit for cheap labour and governments with a relaxed attitude to ethics, health and safety,” he says. “The trick will be to make the sustainability of the brand part of the aspiration. This is happening in the car industry and we look to leaders such as Unilever, Marks & Spencer and Kingfisher to drive this agenda.”

Rather than being regarded only as a matter of managing negative impacts and mitigating reputational risk, responsible sourcing needs to be seen as part of the positive sell that drives desirability, if the push for competitive advantage is to enter a new era of “Who cares wins”.