Why CSR initiatives must extend to the supply chain

Until recently, organisations were largely disinclined to prioritise Corporate Social Responsibility (CSR) in their core strategies. It was largely considered a ‘nice-to-have’, used to bolster a company’s image or build its brand. A 2017 study by Boston Consulting Group and the Global Fashion Agenda highlighted this attitude in a major industry, noting the environmental and social practices in fashion were weak, scoring just 32% in its sustainability assessment.

However, organisations can no longer shy away from the issue of CSR, as poor practices can impact the business. For instance, retail giant Boohoo faced allegations of poor working conditions and underpayment among its suppliers in its Leicester factory, which led to £1 billion being wiped from its share value. Other retailers – including ASOS and Next – also suspended the sale of Boohoo items from their websites.

In future, organisations must seriously consider their environmental and social impacts, as responsible practices are more than just an added bonus – they are vital for protecting the bottom line.

The supply chain is vital for CSR

We are already seeing many organisations adjust their priorities and take positive steps towards becoming more socially responsible. For instance, Sainsbury’s, Microsoft, and IKEA have all pledged to reduce net carbon emissions to zero by 2030. Addressing sustainability in a meaningful way helps to mitigate environmental concerns – but it is vital that organisations consider the environmental impact of their supply chains as well.

Procurement is the gatekeeper to all suppliers. As such, any organisation’s green initiatives must extend to the supply chain to build a truly sustainable business. Without procurement’s involvement, many environmental measures fall short; if organisations cannot build a 360-degree view of their suppliers, they will struggle to collaborate and understand the full extent of their impact on the environment. A recent study found that 93% of UK businesses find it challenging to gain visibility into their suppliers to track environmental impact. If organisations do not have the right tools to track their suppliers, sustainability initiatives will inevitably miss the mark.

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Transparency is the best policy

Organisations that do not deliver on their promises risk reputational damage, financial implications, and legal battles that can take years to resolve, consuming time and resources. Over 10 months later, Boohoo is still recovering from the damage caused by the Leicester factory scandal. More recently, it had to publish a full list of its suppliers and sever ties with hundreds of UK manufacturers to meet a pledge on transparency.

Against a backdrop of economic and geopolitical instability caused by Covid-19 and Brexit, organisations must step up their efforts to deliver on their CSR promises by being proactive – rather than reactive – with their supply chains. Having better visibility into suppliers enables organisations to more easily identify any CSR issues during the sourcing process.

Cloud technology will give organisations the tools needed to build a 360-degree view of their suppliers, so they can draw upon reliable data and prevent being ‘caught out’ by CSR crises. Inaccurate and unreliable supplier data is an industry-wide problem, which is why procurement needs to get smarter, and provide businesses with the data needed to create transparent supply chains. This will help to identify, manage, and prevent CSR problems before they escalate.

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Collaboration is key

The reality is that all organisations have room to improve, often drastically so, when it comes to sustainability. As a result, improving sustainability in the supply chain is not just about selecting suppliers that currently have more sustainable practices, but those most willing to improve. Organisations that facilitate collaboration across multiple tiers of the supply chain by actively working with suppliers will be in the best position to drive real change. For instance, Groupe ADP adopted a smarter approach to procurement to collaborate with suppliers on CSR initiatives. This led to it almost doubling its independently-rated CSR score, while still driving savings of 10% each year.

However, without the right data, tier two, three, and four suppliers cannot share information and collaborate, which risks poor CSR going unnoticed. Opting for a cloud-based procurement solution can offer access to better data plus mechanisms to communicate and track progress, which in turn allows sub-tier suppliers to collaborate, share data on environmental impact and drive continuous improvement. Collaborating with the entire supply chain on sustainability initiatives, rather than just the first tier, helps to improve CSR as it ensures every tier is working together to identify and eliminate poor practices.

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CSR is not optional

Organisations that take a reactive approach to their environmental and social impact risk being left behind by more forward-thinking competitors. CSR is no longer just a ‘nice-to-have’ – organisations that fail to understand this could face serious reputational and financial damage if they fail to collaborate or gain visibility into suppliers.

Taking a smarter approach to procurement provides the solid data foundation and collaboration tools needed to allow organisations to work with stakeholders across the supply chain and drive green initiatives. This data enables organisations to manage CSR risk, identify areas to collaborate more with suppliers, and drive efficiency to increase savings, adding to the business case. A cloud-based procurement solution will give organisations the best platform to ensure responsible practices extend from the business and across its suppliers, which will ultimately protect their bottom line and drive real change.

Written by Alex Saric, smart procurement expert at Ivalua

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