The demands faced by supply chain leaders are evolving.
Pre-pandemic, speed and cost-containment were more or less the start and end of conversations about successful supply chain management. Supply chain managers alluded to sustainability, but lax reporting standards and easy carbon credit trading made “net zero” and “carbon positive” claims easy enough.
The mounting horror of the climate crisis has changed things, however. Worsening economic conditions, extreme weather, and other destabilising factors related to climate instability, have shifted the conversation.
As noted in a recent report by IBM, “From fast fashion to fluorite, consumers and stakeholders are keyed into product provenance—expecting brands to uphold ethical, responsible sourcing practices.”
Today, the majority of customers (73%) agree that traceability in the supply chain is important to them, and 71% would be willing to pay a premium. The motivation certainly exists, as does the mounting threat of regulatory penalties for organisations found to be operating in violation of not just climate regulations, but labour rights, and human rights.
Delivering supply chain transparency
Achieving supply chain transparency requires companies to disclose and share critical information within their ecosystem. By doing this, they ensure both consumers and enterprises gain insights into the origins and processes of goods’ production. This practice validates the source of materials, components, and final products. As these goods move through teh supply chain, it also tracks each stage, ensuring that all existing standards are met.
Visibility, traceability, and openness with customers and ecosystem partners is paramount. However, none of this is possible unless it starts at the highest point in the value chain: sourcing.
Rather than focusing exclusively on procurement at the lowest possible price, a company practising strategic sourcing takes into account the total cos of ownership. This includes the ESG impact.
By formalising the process by which a supply chain function gathers information about its supplier ecosystem, it can create a more holistic view of that ecosystem and increase supplier transparency.
Strategic sourcing, supply chain transparency, and sustainability
Supply chain transparency allows for the identification and mitigation of environmental impact. By enabling companies to trace raw material origins, assess supplier environmental practices, and identify areas for sustainability improvements, a strategic sourcing initiative can allow for more informed decision making to reduce carbon emissions, water usage, waste generation, and shrink ecological footprints.
In addition to emissions, strategic sourcing can help to ensure social responsibility. Better supply chain data can be critical in monitoring and addressing labour conditions, human rights violations, and worker safety throughout the value chain. Similarly, more transparent supply chains can verify their ethical sourcing of raw materials. This is crucial and badly needed in industries like fashion, electronics, and mining, where the risks of conflict minerals, worker exploitation, and harm to local communities are high.
Transparency through strategic sourcing also helps build consumer trust. Those consumers demand more information on environmental and social impacts when purchasing, so a more transparent supply chain directly translates into benefits for the bottom line. An increase in the trustworthiness of a supply chain can mean a meaningful boost for brand value.
- Sourcing & Procurement
- Sustainability
