UN Global Compact and Ernst & Young (EY) interviewed 70 companies across different regions and industries in order to uncover the current state of global supply chains. In the recently-released report “The State of Sustainable Supply Chains: Building Responsible and Resilient Supply Chains,” Global Compact and EY presented 6 key findings on how companies are pursuing supply chain sustainability:
Each of the 70 companies assessed in the study are investing in supply chain sustainability. Strategies include aligning suppliers on company culture via a supplier code of conduct, complying with regulations, and following guidelines from international organizations such as the United Nations, OECD, and the International Labor Organization (ILO). Companies are collaborating on voluntary initiatives with industry associations, non-profits, as well as disclosing transparency efforts on corporate websites or through sustainability reports.
One third of the companies interviewed stated that supply chain sustainability efforts are initiated primarily to address regulatory and compliance risk. They tend to first and foremost address risk mitigation through regulatory compliance before approaching supply chain differentiation. However, more and more companies are moving toward “unlocking strategic opportunity” through supply chain sustainability. 54% of companies said that they are driving sustainability to increase efficiency and find opportunities to innovate.
Supply chain sustainability governance models varied between the 70 companies that were interviewed for the study. 24% of companies took a siloed approach to governance, where the sustainability function is separated from supply chain logistics or procurement management, and criteria are managed separately. 39% of companies took a hybrid approach, where the sustainability function develops strategies and provides input into the supply chain process. The hybrid model most often took the form of cross-functional working groups in most cases. 37% of companies took an integrated approach, where sustainability is thoroughly embedded within the supply chain procurement or logistics processes.
Leading companies consider sustainability as an embedded aspect of company culture. They work closely with suppliers, considering them as an extension of the company workforce, and helping them embed sustainability in their work culture as well. Some companies are going so far as to explicitly select suppliers based on their sustainability criteria.
Many companies engage successfully with Tier 1 suppliers, but engaging suppliers beyond that is reported commonly as a challenging task. In order to strive toward true supply chain transparency, companies need to engage as many suppliers as they can, and in the most successful cases, trace to the source of the materials. Many companies are turning toward platform and regulatory compliance solutions to aggregate supplier data and perform analytics. Technology helps companies track supplier activity, continuously identify and mitigate risk, and have an organized space to engage suppliers upstream.
Because supply chain sustainability is such a complex endeavor, companies realize that they cannot tackle the issue alone. 78% of companies interviewed in the study are engaging with non-profits, industry associations, NGOs, and government entities in order to create communities of supply chain collaboration. The study found several advantages in collaboration, such as creating a common voice, leveraging resources, learning from experts, and creating innovative solutions.
Although companies are increasingly utilizing innovative methods to address supply chain transparency, their efforts are ineffective unless they succeed in engaging beyond the first tier of the supply chain. More and more companies are engaging with third party compliance solutions and supplier networks that provide supply chain management solutions.
Source Intelligence is an award-winning solution that provides companies with a 360-degree approach to supply chain resiliency and risk mitigation. Services include assistance with regulatory compliance, continuous engagement with suppliers, data analytics, and forward-looking programs such as ethical sourcing, anti-corruption, and human trafficking prevention. Would you like to start engaging your supply chain today? Click the button below to schedule a demo.