Toby Webb ponders 12 supply chain lessons that can take sustainability to scale

In October, Ethical Corporation held its annual supply chain conference in London. Amid the usual barrage of good practice ideas and anecdotes, some solid lessons emerged. 

Lesson 1: When it comes to selecting countries or regions to source from, sustainability is usually considered too late. In some cases (a handful at most), it’s considered at the same time as other factors, but it doesn’t greatly influence selection. Sustainability usually only comes in afterwards to help mitigate problems, lower risk, and in some cases, help improve supply chain conditions and field/factory management.

Lesson 2: Supply chain risk is front and centre for companies buying commodities. Access to food, timber and clothing resources, for example, are priorities for forward-looking companies. One speaker at the Ethical Corporation conference noted that although the Uzbek government has this year stopped using child labour for the cotton harvest, Chinese buyers have purchased the harvest for the next two years. Likewise, the German government is doing resource deals in countries such as Kazakhstan to ensure minerals supply.

Companies that want their share of the dwindling pie will need to think hard about buying way beyond the spot market. Supplier partnerships are clearly a key part of this thinking, but by no means the only part.

Lesson 3: Community investment is now becoming strategic when it comes to access to commodities. For example, if you want to sell beer in east Africa, not only do you now need to think about local ingredient sourcing and farming, but also about long-term community permission to manufacture and sell your product. If you don’t you will risk local or national wrath. When votes are at stake, companies usually lose out.

Lesson 4: A few years ago having a portion of your agricultural commodities sourced from certified farms, forests or fisheries was enough to be able to say “look, we’re working on this”, now some large companies are realising that given the lack of scale for all sustainability certifications, their own, internal standards that come close to, or go beyond these, are increasingly needed.

Lesson 5: With regard to supplier partnerships to drive sustainability performance, companies are much more forthcoming on environmental improvements and data in the supply chain. Aside from the odd exception, (UK retailer New Look is one) they lack the confidence to discuss social and management improvements publicly.

Many hands

Lesson 6: Don’t forget that resources count. One leading company’s representative noted at the conference that the group had a global corporate social responsibility team of 60 people. This, in their view, is what’s needed to drive progress and worker communication.

Lesson 7: Competitors can collaborate, and the rate of progress is speeding up. Clothing companies are collaborating via industry groupings and bilateral cooperation. Companies are also finding ways to work together on capacity building in sustainability education.

Lesson 8: Legal risks around corruption are increasing for companies, particularly from the US Department of Justice. However, Europe has been much slower to enforce laws and the UK Bribery Act is not taken as seriously as the FCPA in the US, given the UK’s lack of enforcement.

Lesson 9: Despite slow progress on the enforcement of anti-corruption laws, transparency is going to continue to move up the agenda. Companies are being asked to disclose more and more about labour standards and product origins in general. And consumers who may not pay an “ethical” premium absolutely expect the brands to manage the issues.

Lesson 10: Supply chain collaboration is not just for western brands. Leading companies in Asia are now working with the implementation NGOs – organisations that drive change through cooperation – that only western brands worked with until recently.

Lesson 11: Activist NGOs are keener than ever to talk to business. The old notion that they just want to hammer brands to get attention/money/backslapping is harder than ever to justify. It’s becoming clearer to both NGOs and companies that campaigning without offering or contributing to pragmatic change is unsustainable.

Lesson 12: In a few companies the entire approach to products is becoming wrapped up in sustainability. This is still rare, but in the cases of Nike, Golden Agri Resources and Marks & Spencer (and a handful of others) we can now see this beginning to happen. The long road ahead has a hazy destination becoming more visible in the distance.

Toby Webb is founder of Ethical Corporation and Stakeholder Intelligence. He blogs daily at tobywebb.blogspot.co.uk.

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The Ethical Corporation awards 2013 include a category for Best Supplier Engagement - for full details on the 2012 winners and this year's awards criteria, visit http://events.ethicalcorp.com/awards