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UN Global Compact Calls on Chief Executives to make Supply Chain Sustainability a Top Business Priority; Engaging Suppliers beyond Tier 1 Still Poses a Big Challenge

What can we as a global community achieve in 14 years?

In September of 2015, 193 members of the United Nations signed on to the “2030” Agenda. At the core of the 2030 Agenda lie the Sustainable Development Goals (SDGs), which outline a focus of bringing an end to global poverty, protecting the environment, and the protection of human rights. More than ever, the United Nations is calling on corporations to play their part in advancing the SDG agenda.

The UN Global Compact is the self-proclaimed “world’s largest corporate sustainability initiative,” and acts as the central steward for corporations regarding the Sustainable Development Goals. The UN Global Compact asks companies to first and foremost do business responsibly, and after achieving this, to create business opportunities that will tackle the world’s problems using innovation and collaboration. “Companies must not make our world’s problems worse before they try to make them better.”

In the 2016 report “The State of Sustainable Supply Chains: Building Responsible and Resilient Supply Chains,” UN Global Compact and Ernst & Young (EY) offer businesses a “new benchmark” that also serves a wake-up call. The report calls for chief executive officers to set supply chain sustainability as a top corporate priority, and urges them to view supply chains as an “extension of the workforce.” The report reveals information from interviews conducted with 70 companies across different regions, sectors, and business models. Despite the vast differences between these companies and how they conduct business, several common themes emerged, highlighting how they have embedded sustainable practices throughout their supply chains. Some of the major themes include shared commitment, collaboration, and the use of technology as a “transparency enabler.”

Here are the main 7 steps leading corporations are implementing to achieve resilient supply chains:

  1. Companies work together with suppliers to strive toward sustainable supply chains, leading to shared value and risk mitigation.

  2. One way to ensure that suppliers meet expectations is through clear communication and enforcement through monitoring and auditing. Forward-looking firms are implementing ways to engage suppliers and incentivize continuous improvement.

  3. No man is an island. Corporations are creating communities across departmental functions, non-profit groups and the academic world in order to collaborate on tackling supply chain challenges.

  4. Companies are uniting by sector to share value and responsibility in progressing towards responsible supply chains. Often, businesses within the same sector will have overlapping supply chain networks. Why not pool resources and tackle an issue together? This helps reduce costs and prevent supplier fatigue.

  5. Stakeholders such as investors, non-profit groups, special interest groups are expecting companies to be transparent regarding risks along their supply chains. A recent study by MIT Sloan Management Review and Boston Consulting Group found that 90% of investors are likely to measure a company’s sustainability performance before making any investment decisions.
  1. Although supply chain management is becoming a new normal, many companies have trouble investigating beyond Tier 1 suppliers. It is beyond the Tier 1 suppliers where the highest risks reside, such as corruption and human rights abuses. Many companies find investigating, understanding and engaging suppliers beyond the first tier to still be a huge challenge.

  2. Companies are increasingly using technology solutions to manage the many aspects of supply chain management, such meeting demands from compliance regulations, stakeholders, non-profit groups, and perhaps most importantly, the consumers.

According to Mathew Nelson, Global Climate Change and Sustainability Services Leader for Ernst & Young, companies that are implementing these steps are experiencing various business benefits, through product differentiation and growing support from consumers. However, it is important to remain cognisant that implementing sustainability practices can be a daunting and challenging task, especially when it comes to engaging suppliers beyond the first tier. This is the reason for which more and more corporations are engaging with third party services 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 here to schedule a complimentary demo.