As the world becomes more focused on, and aware of, the ways social and environmental issues are impacted by the many decisions companies make, the importance of ensuring a reliable and resilient supply chain that is ethical and consistent with consumer and company values has become clear. Companies and corporations that prioritize supply chains and procurement practices that protect the environment and uphold human rights are not only more likely to win favor with socially-minded consumers, but are also more likely to be immune to disruptions caused by sanctions, broken trade agreements, and controversy.
According to one study, 70% of people said they would be willing to cut ties with a brand or company that does not take environmental and social issues seriously, and 93% said they thought the factors of sustainability and social good are more important than ever before. MIT Sloan School of Management also found that consumers would be willing to pay 2-10% more for products from companies whose supply chain they trusted to be transparent and ethical. These statistics highlight the high priority that consumers place on buying products that are consistent with their values. Adhering to these value principles and prioritizing transparency makes the supply chain more trustworthy, as it allows consumers to feel good about the products they are using, and allows them to trust that the sourcing process is transparent and ethical.
Apart from just being attractive to consumers, building supply chains that only rely on companies that respect the fundamental human rights of all people and abide by environmental standards makes them far less susceptible to the upheaval caused by national security and foreign relations issues. In this day and age, the environment, agriculture, trade, and human rights are all important national security issues. Trade agreements, treaties, and sanctions often address these issues, and many place prohibitions on using inputs that undermine human rights or the environment. In order for a supply chain to bring holistic value, and meet today’s needs for resilience, companies should design and police their supply chains to meet the law, their values, and the expectations of their customers. Otherwise, supply chains risk being compromised by sanctions, controversy, or conflict.
Many companies have already reached these conclusions, and are prioritizing these and other ESG initiatives. Patagonia, for example, has built its entire brand identity on being environmentally friendly and upholding safe working conditions. This extends as far down as using only organically grown and pesticide-free cotton crops. Starbucks has implemented a program to ensure their supplier farms are protecting biodiversity, forestation, and water quality, adhering to fair wages, and working towards lower uses of chemicals. And Ford has made a commitment to become carbon neutral by 2050 and to drastically increase their electric vehicle production.
At a time of diverse and globally efficient supply chains, “decoupling” and “de risking” supply chains can take time especially where, as the Washington Post points out, “[t]he benefits of access to China’s vast, skilled workforce, modern logistics and low manufacturing costs helped to drive US-China trade to a record last year, even as the pandemic continued to disrupt industrial supply chains.” While geographic supply transitions are complex and can take time, a faster and more globally comprehensive approach to advance core ethical gains involves adopting, implementing, and auditing compliance against a core set of defined ethical responsibilities that every element of even the most globally complex supply chain must adopt and implement.
In the technology sector, the supply chain issue is inherently more complicated than most other sectors given the complexity of the technology itself and the supply chain that goes into the final product. However, even here we are seeing increasing focus on ensuring ethical practices throughout the vast supply chain. For example, a recent report released by Apple, “People and Environment in Our Supply Chain” highlights their efforts to adopt comprehensive standards throughout their global supply chain – through a supplier code of conduct that guarantees rigorous labor, health and safety, environment, and respect for fundamental human rights. While companies within their supply chain can sometimes be located within countries where there have been credible reports of human rights and environmental violations, Apple now has a way to carefully manage and audit activities at every stage of the chain to ensure high standards regardless of geographic location.
These efforts to support a more ethical and trustworthy supply chain, especially among large and already profitable corporations, show that not only are companies taking their global responsibilities seriously, but they are also finding that robust supply chain management is also good for the bottom line. As our world becomes increasingly more connected through global trade, technology, and diplomacy, we expect more companies to step up and see the advantages of building a reliable and trustworthy set of supply chain practices. By prioritizing upholding human rights, safe working conditions, and environmental stewardship, companies will be more likely to gain and maintain consumer trust in their products and services and grow their consumer base because a more reliable supply chain is a more trusted supply chain.