Building Ethical Supply Chains

Sustainability Building Ethical Supply Chains Jon Chorley Contributor Opinions expressed by Forbes Contributors are their own. I am Oracle’s chief sustainability officer and GVP of SCM. New! Follow this author to stay notified about their latest stories.

Got it! Aug 31, 2022, 04:40pm EDT | New! Click on the conversation bubble to join the conversation Got it! Share to Facebook Share to Twitter Share to Linkedin Heading into 2023, it is clear that most U. S. consumers—and businesses wanting to sell to those consumers—want to ensure that goods and services are sourced ethically and sustainably.

A growing segment of consumers have become educated and engaged on Environmental, Social, and Governance (ESG) initiatives and are letting their activism guide their purchasing behavior. According to one recent study , 93 percent of consumers surveyed believe that social and environmental issues are more critical than ever, and 88 percent now consider the sustainability impact of both the business and its partners (i. e.

its supply chain) before buying from it. And yet, despite this growing sentiment, most businesses still only have visibility into their tier one suppliers. Their longer-distance view into their suppliers’ suppliers tends to be hazy at best.

Gaining a better look into tier one, tier two, and tier three suppliers (suppliers of their suppliers’ suppliers) can be incredibly complex, but for U. S. companies, it’s now a legal requirement.

Shipments of goods from certain regions into U. S. ports can now be stopped due to concerns about how the products were manufactured, with what materials, and by whom.

Ethical Sourcing Requires Supplier Visibility As organizations review their supplier base, some cases of strong sustainability and environmental policies and practices will be obvious. Many suppliers will already be making public statements about their operations through their quarterly and annual reports. Businesses should start by looking at how mature their suppliers’ initiatives are to determine which of them need to be reviewed.

Technology can improve supplier visibility by screening manufacturers and automatically flagging changes in their profiles based on first-party data, public information, and news stories. Supplier relationship management software often uses a supplier survey mechanism to collect information such as critical capabilities and certifications from internal staff and external partners. This allows organizations to easily detect potential risks and monitor the compliance of their suppliers.

MORE FOR YOU Is Carbon Capture Another Fossil Fuel Industry Con? Sustainable Fashion Wants Brands To Redefine Business Growth Trouble With Predicting Future Of Transportation Is That Today Gets In The Way Engage With Problematic Suppliers Most businesses have long-term strategic relationships that require high levels of engagement, meaning continuous back-and-forth feedback about processes and standards to ensure they are working as effectively as possible. When issues arise, communication becomes even more important. Organizations should talk with problematic strategic suppliers and communicate their own brand standards and ethical position informally, as well as in more formal sourcing documents and supplier agreements.

The goal should not be to cut off suppliers that aren’t operating with the highest code of ethics. After all, there are good reasons for selecting the supplier in the first place – be it quality, cost, performance etc. Instead, it’s better for purchasing organizations to bring those suppliers along and align them with their own brand values.

This requires understanding where the suppliers are, explaining your goals and priorities, and then engaging with the suppliers to foster continuous improvement. Consolidate to Reduce Risk and Better Manage Spend Through the process of strategic supplier engagement, a long tail of less important suppliers accumulated over time may emerge. Consolidating suppliers can reduce the potential for ethical violations in the supply chain, while also increasing an organization’s influence over the supplier’s business practices.

Too much consolidation can limit supply chain flexibility and lead to shortages but reducing the long tail of the supply base can help companies manage spending and reduce risk. They must navigate the fine line between too few and too many supply chain partners. Embrace Transparent Technologies Technology can help with supplier recommendations, relationship management and global trade compliance.

Much of this technology has been around for years. But there is also a newer breed of blockchain-based services designed to boost transparency between an organization and its suppliers. Managing suppliers on a blockchain-based distributed ledger enables purchasing companies to validate the lot, lineage, and provenance of a product, capturing every step in the product lifecycle on a tamper-proof ledger.

For example, using Internet of Things (IoT) sensors and a blockchain-based track and trace solution (from raw materials through to finished product) would enable an organization to see if any in-coming components originate in a problematic region and prompt a discussion on the origins of the component. When it comes to compliance with existing and emerging laws, this immutable record of each component’s journey to final product could validate origin claims and prevent shipment disruptions. In addition, there is growing demand for supply chain risk software, which often uses AI and machine learning to monitor an organization’s supply chain partners and detect vulnerabilities.

This can be additional software that must be integrated with existing supply chain systems, or as in the case with Oracle, risk assessment capabilities which mine public data sources for potential risk events, pre-integrated into the core supply chain systems. Sell Your Supply Chain Consumer pressure is not going away and risks of inaction include damage to corporate reputations and legal exposure. You can see several startups prioritizing ESG and promoting ethical sourcing as a key differentiator to larger competitors with more established and complex supply chains.

Ultimately, brands are now selling their supply chains as much as they are selling a product or service. As businesses rush to comply with the new regulations and consumers become more aware of sustainability practices and demand ethically and environmentally conscious sourcing, businesses must provide more transparency into the working conditions and environmental impacts of their suppliers. That means businesses can’t afford to overlook any dark practices that may exist in their supply chains.

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