Whether motivated by their customers, corporate values or business opportunity, traditional priorities such as quality, efficiency and cost regularly compete for attention with concerns such as working conditions and environmental impact.
However, the increasing environmental, social and economic costs of these networks and growing consumer pressure for eco-friendly products has led many organizations to look at supply chain sustainability as a new measure of profitable logistics management.
[11][12] Forced labor, understood as work that is performed involuntarily or under coercion,[13] occurs in different industries, often upstream in the supply chain with limited visibility to buyers, customers, and end-users.
[14] For example, in the United States, the 2010 Dodd–Frank Wall Street Reform and Consumer Protection Act requires manufacturers to audit their supply chains and report use of conflict minerals to the Securities and Exchange Commission.
This can involve promoting diversity among suppliers, ensuring equitable treatment of workers throughout the chain, and creating an inclusive environment where everyone feels empowered to contribute.
Buyers screen their supply chains for appropriate governance practices such as a company’s purpose, the role and makeup of boards of directors, shareholder rights and how corporate performance is measured.
Companies in the role of buyers acquire goods or services through organizational functions such as purchasing, procurement, or sourcing, typically for use or consumption in their own organization.
The practice of collaboration — such as sharing distribution to reduce waste by ensuring that half-empty vehicles do not get sent out and that deliveries to the same address are on the same truck — is not widespread because many companies fear a loss of commercial control by working with others.
Investment in alternative modes of transportation — such as use of canals and airships — can play an important role in helping companies reduce the cost and environmental impact of their deliveries.
[21] A sustainable sourcing strategy positions the company for increasing demands of higher disclosure and investor scrutiny, more environmentally focused consumers, and scarce resources.
[22] Customers and consumers also demand supply chain responsibility and sustainability as part of a company’s value proposition under a growing ethical consumerism movement.
Environmental and social change often takes time to measure and must be considered by private companies or governments over a long term period to accurately assess the results.
Another strategy is to award suppliers for their improvement on their sustainability performance, for instance, by developing new materials sourced from waste or by making operations more energy efficient.
Harvard Business School created the Impact-Weighted Accounts Initiative (IWAI)[33] to assess the degree of impact that many large companies have on social, environmental, and economic areas.
Impact data is often more sparse or inaccessible than it should be, which allows institutions such as HBS to hold companies accountable in their supply chains and encourage greater transparency.
Additionally, lower tiered suppliers operate in relative obscurity compared to the companies they supply, so they tend not to face the same level of scrutiny if failing to meet sustainability standards.
Additionally, in striving to be more socially responsible, a company can inadvertently make it harder for smaller, diverse suppliers to compete with the larger, more established ones.