You are here
Supply Chain Data Exchange: Enabling Global Collaboration to Manage Supply Chain Risk
Companies today are increasingly aware of their responsibility to effectively manage social and environmental risk in their global supply chains. Pressure from the media, investors, NGOs and other stakeholders continues to highlight that many of the highest risks lie hidden in complex global supply chain structures.
If companies are to truly understand and manage these risks, they must gain transparency into their supply chains, and this is where the challenge for buying companies begins. Companies have operations all over the world, sourcing millions of products and services from thousands of first tier suppliers, that are in turn sourcing thousands of materials and services from second tier suppliers… and so it continues with multiple layers of the supply chain. The response is often to ask more of suppliers in terms of completing different questionnaires and undergoing audits. But the scale of the challenge for companies is extremely daunting, with obvious implications on budgets and resources.
Gaining transparency of supply chains also has huge impacts on the supplier community. While there is an understanding and willingness from many to improve social and environmental practices, the result of so many customers requesting wide-ranging information in various different formats can create a huge burden for suppliers. This burden reduces the ability of suppliers to allocate resources to making the improvements their customers are asking for.
To do away with such problems, there arises a need for standardized supply chain management tools. With the rise in number of companies operating in multiple countries, it also becomes necessary for the tool to be capable of being used anywhere in the world by companies at any level of the supply chain. This kind of uniformity not only provides transparency of multi-tier supply chains but also reduces the burden on suppliers. For example, any supplier of goods or services can register on an online system, complete a common questionnaire around Labour Standards, Health and Safety, Environment and Business Ethics, upload all the relevant certifications and audits and share this with all their multiple customers.
Buying companies and/or procurement departments can then keep track and run reports on their supplier’s performance and progress in a standard format that is consistent with the rest of the industry. This not only ensures avoidance of continuously updating the internal system every time there is a change in standards, but also creates an information flow that directly engages with the supply chain without putting a cost burden on suppliers.
The Sedex system, for instance, is flexible and not aligned to any one code of conduct. Acknowledging the wide range of opinion on how to interpret CSR data, Sedex enables its members to review their information based on their own or industry standards.
Because of greater reporting and disclosure strictures, a growing number of companies are recognizing the benefits that using a combined approach towards supply chain risk management can bring.
India is an important player in global supply chains, and incidentally over 1,700 Indian companies are Sedex members. As the Indian Government and individual States take tougher steps to eradicate issues such as child labour and sumangali schemes (a form of forced labour whereby young women are recruited into work with the promise of a dowry), supply chain management tools will become an increasingly powerful tool for Indian companies.
As companies understand more about their global supply chain, the next stage of responsible sourcing is to identify the areas where suppliers need support for effective improvements. Collaboration between companies and suppliers is central to reducing risks and driving positive change. The most successful examples of collaboration are based on trust and honesty, which creates a firm foundation for open dialogue. This enables the company to fully understand the root cause of any problem and provide tailored support to their suppliers.
In India some of the common audit findings are problems with fire safety, a lack of management systems, environmental concerns and issues around wages. Sadly, the media is filled with cases from all over the world of why these issues must be taken seriously. We have seen hundreds of lives lost due to fires at Pakistani and Bangladeshi garment factories; attacks on migrant workers over wages in Greece; and a fatal arson attack on a tea plantation owner over poor working conditions.
We know that suppliers want to be more pro-active and take action to improve working standards and minimize impact on the environment. One way to drive improvements in businesses is by providing comprehensive information and guidance on relevant social and environmental issues. The Sedex Supplier Workbook does this and couples it with examples of how Sedex members from all over the world, including India, have worked together to achieve hugely successful results, thus incentivizing such behaviour in other companies as well. Many suppliers have reported increased productivity, reduced worker turnover and financial savings as a result of introducing responsible sourcing practices to their business. The Supplier Workbook is available publicly and free of charge from the Sedex website (www.sedexglobal.com/resources/supplier-workbook/).
Sedex has also worked on a multi-stakeholder project that developed a Guide, titled the ‘Practitioner’s Guide for Sustainable Sourcing of Agricultural Raw Materials’. The Guide is aimed to support those companies that are seeking to source their agricultural raw materials sustainably, by asking and answering crucial questions. The Guide is the result of a cooperative effort by the Sustainable Agriculture Initiative (SAI) Platform, the CSL Learning Platform of IMD’s Global Center for Sustainability Leadership (CSL), the International Trade Centre, and the Sustainable Trade Initiative and Business for Social Responsibility.
In order to drive further improvements in responsible sourcing, we are now seeing a shift in attitudes towards collaborating on capacity building. Companies are recognizing that while they have reduced the burden of questionnaires and audits on suppliers, there is increasing fatigue around capacity building events and projects. Again, this is an area where companies are looking for the same end results – improvements in social and environmental issues. The need of the hour is to engage with both member companies and stakeholder organizations on what next steps might look like and how a lasting change that the supply chain needs can be facilitated.
Carmel Giblin is the CEO of Sedex and has been with the organization since April 2010. Sedex was created in 2004 in response to an increasing need for greater transparency across complex global supply chains. Before joining Sedex, Carmel was Head of Corporate Responsibility & Accessibility at the UK’s largest digital broadcaster Sky.