Case Studies: Supply Chain Transparency and Accountability

Sustainability

Case Studies: Supply Chain Transparency and Accountability

  • Case Studies: Supply Chain Transparency and Accountability Companies today continue to face increasing pressure from on supply chain accountability. The following case studies feature leading companies - including Genting Berhad and Sime Darby Plantation - which have demonstrated what greater oversight
  • Date: Oct 23, 2019
  • Category: Sustainability
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Supply chains have become increasingly global and highly complex structures, exposing businesses to additional risk areas. Over the recent years, companies are facing growing expectations on supply chain transparency, as consumers, business customers, investors, NGOs and other stakeholders ask critical questions around the systems and sources that deliver a company’s goods/services. These probing questions by stakeholders are unsurprising – a 2018 report by The Sustainability Consortium suggested that for most consumer-facing companies, 80-90% of the total end-to-end environmental and social impacts are embedded in the upstream supply chain. Large shifts in industry practices also occurred in the aftermath of recent scandals, including the 2013 Rana Plaza collapse in Bangladesh and the 2014 Thai seafood scandal which exposed human rights abuses in the garment and fishing industries respectively.

Procuring from suppliers who focus on sustainability also increases supply chain resilience. According to a 2018 BCI report, 56% of companies surveyed suffered a supply chain disruption in the past 12 months. These disruptions were largely attributable to, amongst others, adverse weather, cyber-attacks and data breaches, loss of talent/skills, transport network disruption, health and safety incidents. The latest reports from the Intergovernmental Panel on Climate Change (IPCC) also highlighted the rising threat of adverse weather on humanity caused by climate change, including rising sea levels, changing ocean chemistry and extreme coastal weather events.

Creating and maintaining a sustainable supply chain has therefore been recognised as a key success factor for businesses today, helping companies to build resilience, reduce risk of disruptions, enhance efficiencies and safeguard their reputation.

The following case studies feature leading companies which have demonstrated what greater oversight and accountability on their supply chain can look like – and the steps which other companies can learn from.

As you read through these case studies, consider the following questions:

  • Have you identified the key risks and opportunities in your supply chain?
  • Do you have a robust due diligence process to mitigate identified supply chain risks?

Practical Steps to Establish a Sustainable Supply Chain

Many companies are expanding the scope of their sustainability strategy to include suppliers, taking steps to actively manage and minimise the negative economic, social or environmental impacts in their supply chains.

This usually includes the following steps:

  1. Establish sustainability expectations for your suppliers
    1. Mapping your supply chain and evaluate where risks lie to understand where to prioritise efforts (e.g. certain countries, industries)
    2. Develop a sustainability policy for suppliers and incorporate it into the selection and evaluation process

Genting Malaysia Berhad: Embedding sustainability criteria into supplier code of conduct

Why

Genting Malaysia is committed to the responsible sourcing of products and services, which includes food and beverage, hotel amenities, disposable paper products, transport services, and others.

How

Suppliers are required to operate in accordance with their Supplier Code of Conduct, which outlines expectations of conduct pertaining to human rights, health and safety, environmental protection, ethics and management practices. The Code applies to the supplier’s employees, contractors, agents and related entities.

Benefits

By setting clear expectations and standards for suppliers, Genting Malaysia is able to minimise risk associated with unsustainable business conduct in their supply chain, such as reputational damage.

More info (p.28-29)

  1. Engage your suppliers
    1. Broader engagement: Asking suppliers to self-assess their sustainability performance, conducting on-site audits of selected suppliers
    2. Deeper engagement: Providing training, resources and support for suppliers to meet the company’s requirements

Sime Darby Plantation Berhad: Support for suppliers on sustainability requirements

Why

Sime Darby Plantation’s business is highly dependent on having a sustainable supply chain. If they are to meet their No Deforestation, No Peat, No Exploitation (NDPE) policy, they will have to ensure compliance by suppliers both in Malaysia and beyond.

How

To manage its supply chain sustainability risks, Sime Darby Plantation has put in a place a comprehensive strategy with a high level of long-term engagement with its suppliers. This includes:

Developing a Policy for Suppliers: Responsible Sourcing Guidelines (RSG)

Their RSG covers various environmental and social aspects in line with their NDPE policy. It is applicable to all third-party suppliers in all countries. They have also recently strengthened their policy, such that suppliers must also have time-bound plans to meet targets. These plans are externally verified and monitored on an ongoing basis. Suppliers which are unwilling or unable to meet their standards will be also disengaged.

Constructive Engagement with Suppliers

To help suppliers meet these strict requirements, Sime Darby Plantation also has programmes to support their third-party suppliers and smallholder farmers, helping them to eventually achieve relevant certifications. If non-compliant suppliers commit to meet Sime Darby Plantation’s conditions, the company will re-engage with them and support their progress. This is in line with their belief that simply suspending suppliers could lead to the unintended consequence of driving poor practice elsewhere into the system.

Benefits

Its global supply chain is currently 98% traceable to the mill. It is also currently the world’s largest producer of Certified Sustainable Palm Oil, accounting for 4% of global output.

More info

  1. Monitor the performance of suppliers
    1. Set goals for overall supplier performance
    2. Track the performance of suppliers against goals and report on progress
    3. Establish transparent and effective grievance mechanisms to cover potential blind spots

Adidas: Third Party Complaint Mechanism

Why

For third parties to raise complaints where there are concerns regarding labour standards or human rights in the company or its suppliers

How

On its website, Adidas has communicated information about its Third Party Complaint Mechanism and the steps which third parties – such as trade unions or NGOs – need to take to raise concerns about “any violation of our Workplace Standards, or any potential, or actual, breach of human rights linked to Adidas’ operations, products or services”.

According to information on its website, complainants should email sustainability@adidas-group.com the relevant information and explain what they want to see happen. The website also details the complaint process, including how Adidas will respond to their complaint and the time taken for each step. It also lists external channels to raise complaints, if complainants are unsatisfied with the way the case has been handled. Details on the complaints process are available in English, Spanish, Portugese, Turkish, Chinese, Khmer, Thai, Vietnamese, Indonesia and Japanese.

Every year, Adidas also discloses on its website the number of complaints it received related to labour and human rights violations, and the status of these complaints (e.g. being investigated, successfully resolved). Most of these complaints were raised by trade unions and from labor and human rights advocacy groups.

Benefits

Third parties such as NGOs and trade unions have a clear understanding of how to raise complaints with Adidas on human rights

Provides an early-warning system for Adidas before supply chain risks aggravate and escalate, or are published by media outlets

Enables Adidas to evaluate trends and patterns of grievances, so they can identify systemic issues, understand the effectiveness of its due diligence systems and ultimately futureproof its supply chains

By disclosing detailed information on complaints raised, Adidas also demonstrates to its stakeholders its commitment to transparency

Similarly, agribusiness Wilmar has also published its Grievance Procedure in detail, including a list of grievances received – as well as disclosing the company involved and the subject of concern for each case.

Screenshot of Wilmar’s grievance list on their website

 For further details: Supply Chain Sustainability: A Practical Guide for Continuous Improvement

Author
Corporate Citizenship

  • Tags : Supply Chain, Sustainable

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