“Procurement has an opportunity, indeed an imperative, to transform from an enabler of cost reduction to a creator of sustainable competitive advantage,” said McKinsey in its 2019 article, Shifting the dial in procurement. And the ante for procurement has since only shifted up.
For years, if not decades, the world’s supply chains continued on the quest to drive out costs, relying on low-cost country sourcing (LCCS), eliminating heavy inventories and opting for leaner, more cash flow friendly JIT models— ultimately creating complex, brittle supply chains that were just as slow to innovate as they were to transport their goods.
Depending on where you were in the world, sustainability remained either a fleeting thought, a “to-do” item that continued to be pushed down the list, or perhaps even something to argue the merits of, or worse, waved away with performative, greenwashing antics.
But no longer. To say there is a revolution at hand would not be out of pocket.
The ongoing disruptions to supply chains brought on by the global pandemic, the suddenly all too real and highly visible need for sustainability as the UN calls code red, and a social movement that is looking to buy from and work for ethical, sustainable companies have all collided, forcing a need for action that has seemingly landed squarely on the shoulders of procurement and supply chain.
It’s time for procurement to dial-up and transition from opaque and sluggish processes limited by disparate systems, siloed communication and information channels to actionable visibility that propels innovation and continuous improvements.
In today’s environment, with the high volume of risk— whether it be reputational, financial, operational, or organisational- that lay buried within our supply chains, and under our own rooves, a placative check box exercise simply won’t do.
As we make our way out of the global pandemic, now acutely aware of the high costs of opaque, overly intricate global supply chains, the need for transparency, traceability and actionable visibility has never been greater. So much so that it’s garnered global awareness at the highest levels, with governments over just the last few months beginning to legislate for transparency and ethical practices, removing ignorance as an excuse.
Supply Chain Transparency and Traceability- It’s Time
Due to take effect in 2023, with further expansion planned for 2024, Germany’s new Supply Chain Due Diligence Act (initially called the Supply Chain Act) holds organisations responsible for upholding social and environmental standards – requiring companies to identify, prevent and address human rights and environmental abuses throughout their supply chain.
Similarly, the Norway parliament adopted the Transparency Act requiring large and mid-size companies to conduct human rights and decent work due diligence, not only on their own operations but throughout their entire supply chain and all business relationships in their value chain. Companies are now required to respond to information requests about human rights risks in their operations and report their due diligence activities on their corporate websites.
Cracking down on unethical labour practices in supply chains, the UK government has proposed changes to the Modern Slavery Act. If enacted, future breaches may result in large fines and, in extreme cases, prison sentences. The changes would also add significant pressure on verifying the accuracy of modern slavery statements published under the Act.
Proposed Canadian modern slavery legislation and the New South Wales Modern Slavery Act include similar provisions. In Australia, the Senate has passed an amendment to the Customs Act banning goods produced or made using forced labour during any stage of the production.
In California, The California Transparency in Supply Chains Act is providing consumers with the critical information that allows them to make more educated purchasing decisions, mandating the posting of information by certain companies. “In enacting the Transparency in Supply Chains Act, the California Legislature found that slavery and human trafficking are crimes under state, federal, and international law; and that slavery and human trafficking does exist in the State of California and in every country, including the United States; and that these crimes are often hidden from view and are difficult to uncover and track.”
The Very Real Human Rights and Environmental Risks
Why are governments around the world suddenly cracking down on supply chains? Well, not so suddenly, really. You may remember back in 1996, one of America’s sweethearts of the moment, Kathie Lee Gifford, co-host of a popular talk show Live! with Regis and Kathie Lee, catapulted sweatshops into the news, two and a half decades later, and supply chain atrocities still run rampant throughout the industry.
Sedex, a leading online platform that helps companies manage and improve the working conditions within their supply chains, highlights the repercussions of the previously mentioned LCCS trends that have been splashed all over headlines.
“Human rights groups, fca media and whistle-blowers frequently highlight social issues in the apparel manufacturing industry such as excessive overtime, low wages, poor access to social security provisions, verbal and sexual harassment, and forced labour.”
“Complex global supply chains, insufficient enforcement of labour laws, and focus on low-cost production hinder brands’ ability to identify and resolve problems within their supply networks.”
Sedex points specifically to the fast fashion model as being linked to significant social and environmental risk. “Items are low cost to consumers often at the expense of garment workers’ wages. Increased pressure on production targets means increased risk to workers health and safety. Emphasis on high output uses vast amounts of natural resources and produces increasing volumes of waste and pollution.”
The food sector is another industry ripe with supply chain risk—the child slavery lawsuit against the chocolate giants, the latest example to gain media attention. And of course, the much talked about documentary Seaspiracy further highlighted the need for complete supply chain transparency, and traceability, from dock to fork.
Frictionless Access— Palpable Collaboration, At Every Level
Transitioning from a mindset of managing supply partners to cultivating an innovative ecosystem of accountability and continuous improvement grounded in hard data requires supportive frameworks that provide both big picture analysis and granular visibility.
Whether it be a long list of compliance requirements where ongoing activity calls for contribution by responsible parties (e.g. to provide photographic evidence as proof of working conditions) or Corporate Social Responsibility (CSR) KPI’s deployed and regularly monitored for progression, all must be discussed, reviewed and tracked for progress, as a group.
Supply chain management, however, is about much more than just data.
Thus also a frictionless platform minimising barriers to engagement, Suppeco was created on the basis that relationships are at the heart of all initiatives. The platform provides a dynamically structured framework that nurtures trust through reciprocal access designed to enable real-time granular and actionable visibility. Suppeco majors in meaningful collaboration to support innovation (and growth) across a more sustainable ecosystem and supply chain.
Procurement and supply chain teams are at the epicentre, the ring leaders, if you will, of organisational initiatives that look to drive more sustainable ways that uphold company values while meeting overreaching company objectives. To win, they must leverage the right technologies that remove barriers and allow for easier, frictionless and effective ways of working for all.