As the European Commission (EC) prepares its new five-year strategy for Corporate Social Responsibility (CSR), delegates at their Multi-Stakeholder Forum on CSR on 3rd and 4th February urged the EC to pick up the pace. Given that this 2015–2020 strategy is still in the making, they have a point.
The forum attracted over 450 delegates interested in shaping the EC’s future CSR strategy, many of whom see the formulation of the strategy as a key mechanism to drive innovation, competitiveness and growth for Europe, whilst furthering sustainability goals.
I was honoured to be invited to be speak on the panel, “Managing a Responsible Supply Chain.” Given the prominence of the event and how the future strategy will impact on businesses across Europe, I wanted to share some important insights.
Firstly, supply chain transparency is key. According to a 2013 study by PwC and MIT, only a third of companies globally are actively seeking transparency below tier 1 in their supply chain, at scale. However, Sedex data shows that both the number and criticality of risks increase the further down the supply chain you go, so many businesses have no idea of the risks that may be lurking in their supply chain.
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This can be compounded by a lack of trust. Suppliers often feel unable to be open and honest about challenges in their operations for fear of losing business, which can in turn result in increased audit frequencies as companies try to uncover issues – further exacerbating the sense of mistrust. While both suppliers and purchasing companies tell us that they would rather work in long-term relationships of trust, this can be a challenge where procurement teams are still primarily measured on cost and quality criteria.
One way to build this trust and gain better visibility is through collaboration, and in fact, only via collaboration can certain large-scale issues be tackled. Collaborative initiates such as Sedex, AIM-PROGRESS and the Bangladesh Accord have helped to boost the availability of supply chain data. Through collaboration, participants can streamline CSR inputs and maximise outputs, creating additional leverage that smaller purchasing companies might not possess on their own.
So how should companies go about managing their supply chains in order to best identify risks down the tiers and collaborate effectively? Unsurprisingly, there is a wide range of methods: multi-tier, top-down, bottom-up, risk-based, balanced scorecard and end-to-end, to name a few. Out of these I want to highlight three examples:
- Pre-competitive collaboration. Sustainability is not a competitive selling point and we cannot advance if it is treated as such.
- Bottom up. Engage with SMEs and use mechanisms and communication channels that allow their voice to be heard
- Whole supply chain. Organisations cannot assume that they know where the issues lie and need to assess the whole supply chain before prioritising activities.
None of this is particularly revolutionary — if anything, it’s more common sense — but the message is clear: We need to be building responsible supply chains now without getting caught in the debate of political procrastination. Many organisations, both large and small, are already doing it. It was encouraging to see delegates at the session interested in being part of the solution and driving the sustainability agenda through practical action.
UN secretary general Ban Ki-Moon declared 2015 “the year of sustainability.” To achieve the huge task ahead and to create an enabling environment for responsible supply chains, I suggest that we will need:
- A recognition that this is now part of doing business; a licence to operate
- A globally aligned framework that sets clear expectations for both public and private sectors and offers recommendations that are equally applicable to both
- True multi-tier supply chain visibility
- Supplier relationships built on trust and empowerment
- Recognition of the power of data — with CSR programmes built around specific supply chain issues rather than knee-jerk, emotive or topical issues
- Increased collaboration to drive synergies and boost the data pool to facilitate change at the pace and scale we need
- A pragmatic approach from organisations, to support compliance programmes with capacity-building — with clear expectations on minimum standards, a focus on continuous improvement and recognition of progress made
- Stricter reporting and disclosure requirements using an aligned framework and metrics to enable comparability
If we can do this, then maybe 2015 really will be the year of sustainability.
This post first appeared on the Sedex blog on February 23, 2015.