In February 2016, EY (also known as Ernst & Young), the global tax and advisory firm, issued a report on supply chain sustainability. Titled “The State of Sustainable Supply Chains: Building Responsible and Resilient Supply Chains,” it was produced in collaboration with the UN Global Compact. EY specialists interviewed representatives from over 70 companies around the world (all are EY clients) to find out how sustainability is currently being implemented in the supply chains. Respondents were supply chain, procurement, or sustainability executives and represented a wide variety of sectors and geographies.
It is no coincidence that EY collaborated with the United Nations Global Compact on this report. The organization bills itself as “the world’s largest corporate sustainability initiative” and counts over 9000 companies from 166 countries among its members. The UN Global Compact helps businesses align their operations with the Ten Principles on human rights, labor, environment, and anti-corruption; and advance the broader sustainable development goals. It recently published a spotlight on sustainable supply chain and procurement, with tips and case studies.
The EY report came up with six key findings, summarized below.
- Supply chain sustainability can no longer be ignored. The report confirms what is by now obvious: every company that wants to grow needs to think about sustainability issues related to its supply chain. These issues range from human rights protection to managing the environmental impact of the production process, to the larger impact of production on local communities.
- Companies focus on managing risks before they think about benefits when it comes to supplying chain sustainability. This finding is also unsurprising, given the scandals that have dominated headlines in recent years, like the collapse of the apparel factory in Bangladesh; or the increasing regulation around supply chains. The report does mention that companies with long-established supply chain management programs are starting to look beyond risk management and focusing on developing collaborative, mutually beneficial relationships with their suppliers.
- Companies are using a cross-functional approach to managing supply-chain sustainability. Procurement or sourcing specialists typically take the lead, but other business functions are contributing as well. EY expects that the role of these other departments, such as R&D, legal, or product design, will grow.
- Leading companies are deepening collaboration with their suppliers. EY ranked companies on their approach to creating sustainable supply chains, on a continuum from basic to leading. The companies ranked as “leading” or “mature” tend to work very closely with their suppliers, not just monitoring and auditing them, but providing them with training and other types of support.
- Technology can help improve transparency and traceability. These have been identified as significant challenges by all companies, especially when looking beyond Tier 1 suppliers. Stakeholder expectations have increased dramatically in recent years, and businesses are struggling to catch up. The report notes that companies are beginning to use various software solutions (like Inspectorio) not only to monitor their suppliers but also to track progress over time and improve business analytics.
- Collaboration is critical. Given the complexity of modern-day supply chains and their impacts, companies need to team up not just with suppliers, but also with peers, academia, and non-profit organizations. This explains why organizations that unite stakeholders within an industry, geography, or commodity (like the Sustainable Apparel Coalition) have proliferated in recent years. EY expects this trend to continue.
To summarize, supply chain sustainability is an increasingly important topic for companies; collaboration within and outside the company is crucial, and technology can help improve transparency.
What does this mean for quality management?
The report focused on sustainability in supply chains, but many of its findings apply to quality management as well. Two findings stand out. First, the fact that leading companies take their collaboration with suppliers beyond monitoring and auditing, focusing on training, capacity-building, and other ways of building long-term relationships. Such an approach can also improve quality. And second, the finding that technology solutions (like Inspectorio) can help dramatically improve transparency and traceability, both of which are crucial for quality assurance.
To learn more about the report, download it here.
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