In recent years, investors and consumers have encouraged companies to buy from suppliers that adhere to high ethical, social, and environmental standards. Despite this push, along with the potential legal, financial, and reputational risk of having an exposed supplier, many companies do not have a process in place to ensure a sustainable and ethical supply chain. Cartica outlines how businesses can adopt supply chain practices that satisfy stakeholders.
1. Understand industry standards
It is likely easier than ever to understand your industry’s sustainable supply chain standards. Industry-specific supply chain guidelines already exist for the electronics, chemicals, garments, and footwear industries, for instance. The World Wildlife Fund, GRI, and CDP also provide resources on sustainable supply chain management. Undertake a review of the guidelines that your customers and peer companies say that they use. If your industry peers generally have better supply chain strategies, you might be pushed by your customers to improve.
2. Conduct supply chain mapping
Companies often lack a comprehensive understanding of the environmental and social impacts of their supply chain. Many are also unaware of the key challenges of sustainable supply chain management, such as increased costs or the difficulty of monitoring complex supply chains. You can begin to understand your impact by evaluating the ethical, social, environmental, and global regulatory risks of your largest suppliers. Engage with those suppliers and ask them to provide you with information on their own supply chain, from the raw material stage to the final product.
3. Engage with suppliers and set baseline standards
Communicate with suppliers on sustainability goals, and collect data from suppliers through a regular questionnaire or sustainability audit. Best-in-class companies have a Master Services Agreement in place that requires suppliers to comply with their policies on ethics and business conduct, prohibitions on the use of forced and child labor, and industry-specific issues such as zero deforestation or conflict minerals. Engage with suppliers to understand areas they are planning to improve, and note any red flags that could expose your business. If issues with suppliers persist, create a plan to transition to other vendors who have a better understanding of their supply chain impact.
4. Set goals that align with core business objectives
After outlining sustainable supply chain risks and standards, set goals for improvement. These ambitions should align with overall business objectives ensuring that supply chain risks are integrated into the long-term business strategy. Set specific goals for each supplier segment, as each industry has its own unique pathway to becoming more sustainable. Actionable and specific goals are a signal to investors that creating a sustainable supply chain is a serious commitment.
5. Develop a crisis communication plan to address potential issues
Supply chain incidents can damage the reputation of customers, and even the most careful companies may be exposed because of the actions of suppliers. Recognizing this, develop a communications plan in advance to engage stakeholders (customers, employees, nonprofit groups, etc.) should something go wrong. Develop a plan to engage quickly with an affected supplier to remediate the problem or sever the relationship.
6. Create a performance improvement process
Setting supply chain standards and goals is just the start. Driving behavioral change and improving sustainability practices along a company’s supply chain requires constant work. To make continued strides, many companies share best practices and case studies with their suppliers and offer training programs. They also often connect their suppliers with industry networks. With a measurable audit and engagement process, you can evaluate the data and communicate the results and future expectations to suppliers.
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