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Better Together

With environmental and sustainability issues coming to the fore in supply chain operations, a collaborative approach among businesses – even between competitors – is an effective way of improving ethical operations on all fronts

Sustainability and ethics are increasingly becoming core elements of good business strategy. However there is often a big gap in knowledge and understanding of the real issues when looking down the supply chain. This article will highlight how addressing the risk in the supply chain through a collaborative approach with other companies and initiatives will not only lead to real improvements in working conditions and the environment but will also save money.

Until recently, brave employees that raised the topic of sustainability or ethics in the board room would typically have their ideas dismissed as a ‘great thing to do’ but something that did not affect the bottom line.

Things have certainly changed. Not only have consumers increased their pressures on businesses to improve corporate social responsibility (CSR) practices, but there are now new groups pushing the CSR agenda such as investors, governments and employees themselves. This changing landscape has moved ethics and sustainability from a ‘nice to do’ to an essential business activity.

It is rare to not find some kind of statement about a company’s ethical and environmental policy on their website. But how would this statement stand up if scrutinised? With the biggest risks embedded deep in the supply chain, how many companies can confidently say they have robust processes for ensuring that their statements are being followed by all their suppliers?

The common reply to the question of ‘Are you aware of standards in your supply chain?’ is – ‘It’s a complicated and difficult area to address.’ With complex supply chains, subcontracting, cultural barriers and secretive suppliers, the process of understanding risks in your supply chain is certainly a challenging process.

However, companies with a simple understanding of the benefits of collaboration in this area of business can mitigate risk in their supply chain in a cost effective manner and help drive improvements for workers worldwide.

Different industries will have different priorities and higher risk areas depending on a variety of factors; however, the questions faced are similar:

  • How should a business establish a robust ethical assessment process?
  • What is the best way to minimise risk?
  • How can the company engage with suppliers?

Even when answering these questions, the reality in the current economic climate is that buyers and compliance managers can’t visit every single supplier and review standards first hand. Even if a company spends a huge amount of resources mapping standards in their supply chain, the challenge has only just begun. Keeping track of standards and activities in the supply chain is the key to addressing risk. For suppliers to really improve, they need to be guided and directed and not just told if they pass or fail.

How does Collaboration Help?

Approaching the challenges in a collaborative manner will not only save buyers and suppliers time and money, but it will help suppliers understand what they really need to do to improve standards. For example, if a supplier is asked to complete a company-specific questionnaire when they have already filled out multiple questionnaires for different customers, will the information they provide be accurate and thought-through?

One of the easiest ways of helping suppliers to improve is to reduce the unnecessary burden that they face when completing multiple questionnaires and paying for multiple audits. By reducing these inefficiencies, they will be able to spend less time completing paperwork and more time actually making improvements. Key to improving standards in the supply chain is understanding that addressing risk is not just about looking out for problems but also developing opportunities where suppliers can improve. Through collaborative dialogue, companies can learn from industry peers who have already been engaged in these type of projects on how to best create comprehensive programmes to increase capacity and drive improvements.

The Challenges and Opportunities

Collaboration offers both challenges and opportunities. One of the biggest challenges is breaking down the perception that working with competitors is bad for business. This misconception is rooted in a lack of understanding about the benefits of collaboration around non competitive information.

Two great examples of how this collaborative approach has been successfully adopted by some of the world’s largest companies are the collaborative initiatives in the pharmaceutical Pharmaceutical Supply Chain Initiative (PSCI) and fast moving consumer goods (AIM-PROGRESS) industries.

This has shown that close competitors, if anything, can sit in a room together and share ideas and experiences.

Collaborative Initiatives

There are a number of key collaborative initiatives that are helping a huge number of companies from a variety of different sectors approach ethical and environmental standards in their supply chain. These initiatives can be roughly divided into four groups:

  • Industry specific – examples of industry organisations include the Electronic Industry Citizenship Coalition, the International Council of Toy Industries, AIM-PROGRESS, and the PSCI
  • Multi-stakeholder – this includes the Ethical Trade Initiative, the Fair Labour Association, the Ethical Trading Initiative Norway and the Fair Wear Foundation
  • Global cross industry – this includes the Global Social Compliance Programme
  • Platform tools – this is represented by the Supplier Ethical Data Exchange

Practical Steps

Talking about collaboration is one thing – creating the technology that facilitates it is quite another. CSR is a rapidly changing landscape and creating a process that keeps pace with these changes, meets the needs of advanced CSR reporting, as well as interacting with suppliers that don’t necessarily have any computer skills (let alone an internet connection) is no easy task. Ultimately, the most important steps are: understand the supply chain, use intelligence to find out what suppliers are already doing, find out how other companies have addressed risk, and be proactive.


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Tom Smith is the Head of Marketing and Business Development at Sedex. Since joining Sedex in 2007, Tom has helped the organisation grow from a staff of four and 12,000 members to a team of thirtyfi ve based in London, New York and Shanghai with over 20,000 members including some of the world’s largest brands and retailers. Prior to Sedex, Tom worked at Canning House, a Latin American think-tank based in London. Tom holds a BA in Politics from the University of York (UK), specialising in theories of inequality and the role of religion in Middle Eastern politics. Email: tom.smith@sedexglobal.com
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