Several stories this month highlight the difficulty of eliminating the risk of malpractice from complex global supply chains.
Illegal dumping of factory waste or use of leather linked to Amazon destruction seems a million miles away – both literally and figuratively – from the values and commitments held aloft by companies such as Gap or Nike. To their credit, the companies implicated in both incidents have responded positively. Gap and Levi’s immediately began investigations and even terminated contracts with one supplier. The footwear companies have come out in support of Greenpeace’s concerns and have committed to no longer purchase from cattle ranches linked to newly-deforested areas. This in turn has led to large leather exporter, Bertin and beef trader Marfrig making similar commitments.
Some clear signs of progress, but why did it take Greenpeace blowing the whistle on the issue? How can companies ensure they stay ahead of the NGO and media campaigns?
In truth, it is incredibly difficult if not impossible to monitor what is happening in every part of what are often complex, fragmented and globalised supply chains. Companies simply do not have the resources to do this alone. Hence the rise of industry collaborations such as AIM-PROGRESS, a food and beverage industry initiative and SEDEX.
However for a company starting out, our advice is to take a step back before launching forth. Often in the rush to get something done – questionnaires sent out, audits conducted – companies can expend a lot of energy without achieving very much.
Companies need to carefully prioritise their supply chain and in doing this, take a risk-based approach. This means that as well as prioritising by spend and size of supplier, companies should look at the likely inherent risk in various parts of their supply chain, either linked to the type of product they are purchasing or the geographies associated with their raw materials. And this will mean looking further down the supply chain – beyond first-tier suppliers – for the most important purchases. Arguably this is what should have happened for raw materials such as leather, rubber and textiles for footwear manufacturers, rather than an almost exclusive focus on contracted manufacturing sites, which has been the historic approach of companies like Nike.
Another way of looking at it is to understand the complete life-cycle of your products, in addition to the operations and activities most closely associated with your direct business operations. It is this life-cycle perspective that will help companies spot the biggest risks and opportunities in their supply chains.