Why Executives Are Embracing Supply Chain Transparency

by Source Intelligence

on September 28, 2016

With the effects of the 2008 global crisis still being felt in industries the world over, supply chain uncertainty remains a hot-button issue. A recent McKinsey survey reported that 68 percent of global executives say supply chain risk will increase in the coming five years. In response, much of the conversation has been focused on improving supply chain sustainability - driven by innovation in approaching traditional organizational structures in ways that both ensure resilience and mitigate negative environmental, social and cultural impacts.

"We need innovation now at all different levels," Kate Wylie, Global Sustainability Director at Mars Incorporated, told the assembled industry leaders at the edie.net Sustainable Supply Chain Conference in London. "We need agricultural science to understand what is the right technology to use on the ground."

When describing the way that innovation should be brought to rural farmers, Wylie went on to add that manufacturers "need innovation in terms of how to reorganize [their] organization, in how to measure success, and incentivize both employees and suppliers." This measurement of success has been a topic of much debate within the supply chain world, with many saying that greater sustainability could be a foundation for a more secure future.


"Embracing transparency in supply chain practices is smart business."


Not Just Altruism - Smart Business

This last point is particularly crucial: With all this talk about sustainability in manufacturing and supply chain practices, it can be easy to miss the underpinning need for increased transparency and insight into present supply chain practices. Only by understanding how things are currently being done can we move the industry toward greater accountability.

Embracing sustainability in supply chain practices isn't simple altruism, it's smart business. The Beyond Supply Chain report by the World Economic Forum reported that sustainable supply chain practices resulted in a 9 percent to 16 percent cost reduction for enterprises who engaged in them. More broadly, a study-of-studies by Oxford and Arabesque showed that 90 percent of the studies on the cost of capital exhibited lower the costs for companies engaging in sustainability practices.


Supply Chain Transparency Driving Sustainability

The connection of transparency and sustainability is reinforced by the fact that global food and beverage firms Nestlé and Mondelez International have both adopted innovative practices related to traceability and transparency among their supply chain partners. By offering transparency into "responsible sourcing" practices and adopting the new UN Guiding Principles on Business and Human Rights Reporting Framework, Nestlé now allows external stakeholders to monitor the company's progress in the areas of human rights issues and environmental impact.

It is no accident that both Nestlé and Mondelez International have found their way to the top ten of Oxfam's Behind the Brands sustainability rankings, scoring No. 2 and No. 7 respectively. This showcases that the worlds of sustainability and transparency are intertwined, with major firms able to reduce costs and mitigate long term risk by embracing integrated supply chain solutions. By being unafraid of exposing existing practices to increased scrutiny and accountability, executives can help boost their bottom line and reinforce the sustainable priorities of their entire enterprise.

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