Responsible Sourcing: Who cares wins?

Holistic is hard. This is the blunt message coming out of many board rooms faced with the leadership double-whammy of combining supply-chain complexity and crosscutting sustainability in one clear, communicable strategy for responsible sourcing. Difficulty, however, can prove a brand differentiator, with benefits of joined-up thinking on values-based procurement both attractive and advantageous, as Global Head of Plan A Delivery, Marks and Spencer, Adam Elman explains:

“It does require focus and effort, but it is extremely important that business leaders develop a holistic strategy. Apart from calls for greater transparency that organisations are increasingly receiving from customers, NGOs, the media and so forth, the positive business case is becoming clearer – from security of supply to increased trust and lower costs, plus more motivated and engaged workforces.”

Success stories suggest engaging with the issues pays – whether measured in the £180bn global turnover of Ethical Trading Initiative (ETI) member companies; the 1,149 Fairtrade producer organisations worldwide; or 89 per cent of all concrete produced in the UK certified Responsibly Sourced.

However, Professor Jacqui Glass, Architecture and Sustainable Construction lead at Loughborough University and manager of the responsible sourcing network APRES, cautions against over-optimistic expectations of mainstream corporate capacity, or desire, to integrate supply-chain policy and practice across environmental and social matters alike:

“Much as sustainability professionals might prefer the C-Suite to take an even-handed approach to both concerns, this simply isn’t likely in most cases, with businesses adopting a pragmatic viewpoint prioritising specific issues, based on the scope of their own activities, as affected by legislative, local or media pressures – sustainability pick ‘n’ mix, if you will.”

To tackle selective voluntarism, Professor Glass advocates frameworks such as the Global Reporting Initiative that can steer organisations towards addressing a breadth of sustainability impacts and prevent tactical games being played.

“Organisations would find the issues simpler to frame, interpret and communicate if they made use of sustainability management standards like BS 8900: 2013. With a number of countries, including Denmark, now certifying companies against ISO 26000 on social responsibility, it is only a matter of time before these new tools start to become the lingua franca of the C-Suite.”

Might such trends then herald the start of a ‘reverse-flow’ model, where advances downstream in supply-chain management influence agenda-setting options upstream? Tom Smith, Director of Insight and Planning at Sedex, describes the current dynamic:

“The C-Suite needs both to listen and dictate. On-the-ground insight is crucial, but senior-level support is also essential for real change. From HR to risk management, PR to procurement, legal to investor relations, responsible sourcing needs to involve multiple business functions – and this underlines the need for top-level endorsement.”

For many sectors, client spend with the supply chain can exceed 50 per cent revenue, or more in the case of the construction industry, making it critical to realistic expectations of achievement against sustainable business goals. Responding to this challenge is the award-winning Supply Chain Sustainability School, a 4,000-member organisation, strongly supported by a Leadership Group comprising 13 of the UK’s largest construction contractors. Chair of the School is Shaun McCarthy OBE, Director, Action Sustainability and former Chair of the Commission for a Sustainable London 2012. Much as the London Olympics raised the bar significantly for sustainability of major world events, harsh lessons were still learned regarding relationships between reputational risk, branding and responsible sourcing, as he explains:

“Even London 2012 failed to tackle some important aspects of ethical business practices. Despite the efforts of LOCOG, the supply chain for merchandise was cruelly exposed by the Play Fair Campaign. They put undercover workers into two Chinese factories and discovered breaches of all 10 principles of the ETI in both. Their report ‘Toying with Worker’s Rights’ exploded the myth that form-filling and audits can mitigate labour-standards risk in the supply chain.”

The global marketplace for sustainable supply-chain partners brings with it big numbers, good and bad. The International Labour Organization has estimated 129M children aged 5-14 are employed in agriculture worldwide and such widespread problematic practices are neither going to disappear nor readily be policed. With business budgets in recovery, though, can things only get better for responsible sourcing? Not necessarily, counsels Shaun McCarthy:

“The economic upturn is a threat to sustainability, possibly more than a recession. In business-to-consumer sectors, marketing more aspirational products and services can create waste, whilst perpetuating the race to the bottom in the supply chain, going round the world looking for the next country to exploit for cheap labour and governments with a relaxed attitude to ethics, health and safety. The trick will be to make the sustainability of the brand part of the aspiration. This is happening in the car industry and we look to leaders such as Unilever, M&S and Kingfisher to drive this agenda.”

Rather than being regarded only as a matter of managing negative impacts and mitigating reputational risk, responsible sourcing needs to be seen as part of the positive sell that drives desirability, if the push for competitive advantage is to enter a new era of ‘Who cares wins’.