The Next-Generation of Responsible Supply Chains

A few years ago, changing consumer perceptions shaped the first socially responsible supply chain management practices. Those initial concepts, meant to demonstrate to consumers that companies were sensitive to growing concern about environmental and social issues, previously targeted one or two key areas such as recycling, waste management, improved water use, or carbon dioxide emission reductions.

Now that the ideas around social responsibility have matured, companies are looking for ways to roll up one-off types of practices applied to particular niche areas into broader business and supply chain strategies that generate more competitive advantages and opportunities.

Beyond Supply Chains: Empowering Responsible Value Chains , a World Economic Forum (WEF) report prepared in collaboration with Accenture, points out that leading companies are shifting their approach towards creating “the triple supply chain advantage” to achieve profitability while benefiting society and the environment.

Identifying a set of 31 sustainability-related supply chain practices that have now become mainstream in the corporate world and cut across product design, sourcing, production, distribution and end-of-life activities, the report provides guidance to companies that want to go beyond those single practices and codify their own specific portfolio of improvement measures.

Modeled on consumer good supply chains and now being tailored for other sectors, the benefits of these so-called triple advantage practices could achieve results like this:

  • Improved profitability: A 5% to 20% improvement in revenue; supply chain cost reduction of 9% to 16%; brand value increase of 15% to 30%, and significant company risk reduction
  • Better social conditions: Improved customer health, local welfare and labor standards, mainly for wages and working conditions
  • A greener environmental footprint: Carbon gas reduction of 13% to 22% on the company's overall footprint

The framework highlighted in the report aims to help companies prioritize practices and identify gaps in existing sustainability and social responsibility plans. For instance, one of the barriers many companies have faced in expanding their social responsibility activities beyond basic practices is making a strong enough business case for sustainability and being unable to justify deeper investment. Other challenges stem from the need to be able to demonstrate full transparency on choices made and the need to move forward with the hands-on implementation.

To get beyond these hurdles and develop strategies that positively impact profitability, society and the environment, WEF recommends looking beyond typical supply chain performance. Here are a few ideas on how to do that:

  • Examine what practices your company is engaged in now, and identify the imbalances. Use that to screen for possible improvements.
  • Provide detailed and “hands on” information that will help make the business case. Offer an overview about which practices can best deliver profitability and social and environmental benefits.
  • Use a decision matrix to determine when to invest in which initiative. Customize the framework to meet the company's business and social objectives.
  • Commit to the journey of having a responsible supply chain. Evaluate wages, working conditions, human rights issues, and other related ethical issues.

How have your company's social responsibility strategies evolved and what supply chain practices have developed or changed as a result? Let us know in the comments section below.

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