3 steps to a more socially responsible supply chain

Prioritising sustainability issues in the supply chain yields a number of quantifiable benefits to organisations, including increased competitiveness. In a recent study, researchers identified three advantages of adopting such measures, including a reduction in supply chain costs of between 9% and 16%.

As consumer pressure encourages companies to take a closer look at the global social economic impact of their supply chains, these practices can increase brand value by 15% to 30%, according to Beyond Supply Chains—Empowering Value Chains, a report by the World Economic Forum in conjunction with Accenture. Furthermore, responsible products generate up to 20% more revenue, the report said.

Greater emphasis on sustainability issues in the supply chain, such as environmental impact and contribution to local economic development in production areas, improves local welfare and labour standards. There are environmental benefits in those locations, too, with the report citing carbon gas reductions of 13% to 22%.

Companies adopting more holistic concepts that drive profitability and socio-environmental benefits simultaneously also reduce their exposure to reputational damage from association with unethical suppliers as well as risks related to resource scarcity, which could disrupt production.

Based on a study of best practices by consumer goods companies such as Unilever and SABMiller, the report outlines 31 processes that have proven to help other companies take advantage of these benefits.

For example, leading businesses source from sustainable suppliers and conduct audits of their facilities and processes to ensure stringent health and safety standards are in place.

Implementing these best practices begins in the design stage. For example, leading companies design products with the aim of reducing the use of energy, water, and materials throughout the product’s life cycle. They also look to reducing packaging.

Cutting emissions in both production and distribution is a further environmentally focused aim, and many organisations cited in the report offer schemes to dispose of their products at the end of the life-cycle to reduce the potential environmental impact.

“Sustainability must become a higher priority in supply chain management, given the scarcity of natural resources, rising commodity prices and greater consumer expectations for responsible sourcing and production. Those who act now and capture the market opportunity of more sustainable supply chains can differentiate themselves and generate higher margins,” Mark Pearson, senior managing director, Accenture Strategy, said in a news release. “This is not about trade-offs; it is about behaving in a socially responsible way that can also deliver a competitive edge.”

The report’s authors recommend three steps to develop a more socially responsible supply chain:

1. When prioritising sustainability initiatives in the supply chain, adopt a long-term approach.
2. Create a business case for investments in such initiatives, and use it to gain buy-in within the organisation. Consider a holistic value concept that goes beyond short-term financial effects and factoring in long-term revenue growth, cost reduction, brand improvement, and risk mitigation.
3. Ensure that supply chain initiatives are strongly supported by the leadership and that value tracking capabilities are in place.

—Samantha White (swhite@aicpa.org) is a CGMA Magazine senior editor.