First step: admit you have a problem

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Progress in raising ethical standards in global supply chains has stalled in many places, a new study by the Economist Intelligence Unit has revealed.

Malory Davies FCILT, Editor.

Malory Davies FCILT, Editor.

It found that less than a quarter of global businesses address climate change and child labour in their supply chains.

And it highlighted the fact that while four out of five executives say their companies have a responsible supply chain, some 30 per cent of firms have decreased their focus on supply chain responsibility over the past five years.

Only 27 per cent of firms are willing to cooperate with non-competitor firms to raise supplier standards, and on 23 per cent are willing to cooperate with competitors.

The report, entitled “No more excuses – Responsible supply chains in a globalised world” points out that globalisation has rushed in an era of industrialisation in many emerging markets at a pace that has made it hard for local governments, businesses and civil society to adjust to while adequately protecting local communities.

“This phenomenon places a moral responsibility onto multinational firms, to ensure that standards viewed as acceptable in advanced economies are applied in the markets from which they source.”

However, the report does recognise that more firms are recognising a corporate responsibility towards the social and environmental impact of supply chains.

The problem is that some firms have thousands, or even millions, of suppliers. “Large multinational businesses face a bewildering array of constantly-evolving regulatory and reputational risks. Dealing with these requires sophisticated systems with appropriate internal structures, well-designed supplier management systems and in many cases, outside support.

“The scale of the challenge is not yet well recognised.”

Nevertheless, it says, “in a world in which 69 of the world’s 100 largest economic entities are corporations rather than countries, responsible supply chains are a moral imperative”.

The report identifies a number of best practice elements including the role of supply chain leadership; rebalancing power to raise the impact of supply chain professionals on core business decisions; and moving from a transactional approach to longer term partnerships.

A host of well-known brands have been caught out in recent years for CSR failures in their supply chains, and they have been punished by consumers – after all who wants to be associated with a brand notorious for mistreating its workers. Responsible supply chains are certainly a moral imperative – they are also good for business.

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