Gap, one of the world’s largest clothing retailers, has recently been faced with child labour issues in India. Somewhere down the supply chain, a vendor had subcontracted to an unauthorised supplier without the parent company’s knowledge or approval. This occurred in spite of Gap’s very strict vendor code of conduct which stipulates that ethical and humanitarian standards must be respected.
This, and other similar cases that have hit the headlines in recent months, highlights one of the many problems linked to building an extensive and complex supply chain, and also illustrates how difficult it is to establish and manage supplier qualification, evaluation and monitoring.
Identifying and monitoring the standards, ethics and practices of suppliers across the world is a complex and long-term challenge and it is clear that the role of risk management in the supply chain and sustainable procurement has never been more vital. An unreliable or unethical supplier could cause a national or international product re-call or a significant fall in customer confidence, leading to poor sales performance. Share prices and reputations can take a long time to recover.
Other audiences, such as institutional investors are now taking as keen an interest in companies’ ethical and CSR policies as financial factors, and some overseas governments are starting to ask questions about CSR before awarding contracts. Consumers are also expressing interest in understanding the processes that exist behind well-known brands. Beyond child exploitation and ethical standards, environmental concerns are also putting pressure on international supply chains. To meet the challenge, suppliers are required to provide detailed information and to be as transparent as possible.
As the level of expected responsibility increases, it is essential for organisations to review the process of mitigating supply chain risk by reviewing standards and contractor management tools.