By working in partnership with suppliers to improve their social, ethical and environmental performance, companies can reduce business risks for both parties, says Melanie Eddis
Do you remember the premier league soccer club whose branded footballs were linked with child labour in Pakistan? Or the problems of the British egg industry after a politician suggested that much of the nation’s supplies were contaminated with Salmonella?
Not fair and not funny. Yet these are precisely the type of reputational issues faced by companies with international sourcing and distribution strategies. Being ethical nowadays is as important as being price-competitive.
Many companies are seeking to screen out the worst risks and are working with suppliers, non-governmental organizations, customers and other stakeholders to improve the long term social and environmental credentials of products, and also to enhance brand integrity.
Most companies will have many hundreds of suppliers, providing thousands of goods and services. The task of distinguishing and verifying ‘green’ credentials is not an easy one. A basic benchmark is to ask suppliers to provide an environmental or social policy. The presence of a policy, however, is no evidence of implementation.
It is for this reason that many companies choose to rely, for evidence of a supplier’s performance, on third-party verification to management standards such as ISO14001, the Eco-Management and Audit Scheme (EMAS) or the Institute of Social and Ethical Accountability’s standard for social audit.
Product standards are also available. If, for example, sourcing of timber presents a risk, then the Forest Stewardship Council trademark will give reassurance that wood is derived from a sustainable source. The problem here is that there are few product-specific standards.
If you want to use suppliers that understand and manage your business risks, the only really effective solution is to work in partnership. This means offering the suppliers support and training as well as investing in screening, audit and selection.
In conclusion, effective evaluation of supply chain issues informs strategic decision-making and helps to reduce exposure to business risks. In addition, working in partnership with suppliers enables positive planning to manage stakeholder concerns. A mutual approach, which incorporates shared objectives, drives innovation and can result in business efficiencies that benefit both parties.
Melanie Eddis is a manager within KPMG’s
Sustainability Advisory Services group