Environmental, Social & Governance Briefs

Why Manage Sustainability in your Supply Chain?

October 08, 2018

In today’s digitally connected world, transparency in general, including the way a company procures, is under a constant spotlight. Recent legislation (e.g. UK's Modern Slavery Act, France’s Corporate Duty of Vigilance Law) aimed at improving social (child labor, human rights, slavery, working conditions, etc.) practices and evolving expectations of what's acceptable in relation to environmental and social practices in the supply chain has further reinforced the need to manage sustainability within the supply chain.

This blog is based on insights from the Sustainable Procurement: Lessons from Leading Companies report [The Conference Board membership required.].

While some businesses have established mature sustainable procurement practices, many are still at an embryonic stage trying to grapple with the question, "Is sustainable procurement really necessary?"

The case for embracing sustainable procurement practices is very strong and clear. Sustainable procurement practices can help companies manage business risks, achieve costs savings through material efficiency gains, enhance their brand reputation, and manage suppliers more effectively. However, the level of benefit that a company can realize is dependent on the nature of its program, as illustrated in the figure below.

Although many companies start their sustainable supply chain program keeping compliance in mind, only a minority transition to a beyond compliance approach. One of the questions this raises is how can companies make this transition?

Companies can make a start by thinking about the change they would like to achieve – developing a program that focuses on the outcomes can help companies take a long-term view, which in turn can encourage a shift from the tick-the box approach. 

Further, closely reviewing the supply chain practices of companies that demonstrate outcomes and impact orientation might also provide insights for those who are looking to achieve greater impact. Such companies as BASF, BT Group, CNH Industrial and Metro exemplify commitment to outcomes and impact through their supply chain.