How to Build a Socially Conscious Supply Chain
By Hugo Britt | June 23, 2020
While socially conscious consumerism is not a new concept, it has very quickly shifted to the center stage of our hearts and minds as recent political unrest and social injustice dominate the headlines. Choosing causes to support with your personal budget is an easy decision for some people, but if you’re not sure where to start, committing to learn more about the issues affecting your community should be the first step. With education will come action, and no step is too small to start.
Maybe you attended your first Black Lives Matter protest, volunteered at a food bank to serve meals to workers displaced due to the pandemic, or championed diversity and inclusion in your workplace. To reduce your carbon footprint, perhaps you’ve recently started cycling to work or made the switch to a “waste-free” lifestyle.
These seemingly small steps can make a big impact on an individual, but what about taking on the socially-conscious spend strategy for an entire organization?
Now, that sounds intimidating.
In recent years, though, it’s precisely this consumer mentality that has inspired businesses to address the social and environmental impact of their practices. Today, 86% of consumers believe that businesses should take a stand for societal issues. 77% claiming they feel a stronger connection to purpose-driven organizations. Ultimately, this means consumers are more likely to pledge their loyalty to (and spend money with) companies they deem to be operating ethically.
Protecting your customer base is just one of the reasons it pays to build a more socially conscious business. Other reasons include:
- Better employee retention – 56% of Gen Z consider themselves to be socially conscious, and don’t want to work for brands that do not align with their values.
- Improved brand reputation – 65% of companies with socially conscious supply chains say it has improved their reputation.
- Bigger profits – Sustainability efforts are proven to reduce costs in the long-run. Plus, 55% of consumers will pay more for products from socially responsible companies.
- Increased workplace productivity – When employees feel as though their work is meaningful, they are more motivated, which means output increases.
Building a socially conscious supply chain
For procurement and supply chain professionals, there is scope to make an enormous impact in this area. According to Deloitte, “the concept of responsible supply chains integrates environmental, social (including human and labor rights), and good governance factors into the life cycles of goods and services.”
Here are four steps to building yourself a more socially conscious supply chain.
Acknowledging, and talking about, the importance of socially conscious supply chains is important. Actually making it happen, though, requires hard work and long-term commitment. First, start by conducting thorough research and collecting data that will help you to identify areas for improvement within your supply chain and set realistic goals.
After that, you can develop a solid plan of action that specifies targets and avoids the use of arbitrary figures and vague promises.
Companies who have excelled here, for example, include IBM, who became the first IT company to spend over $1 billion with minority businesses and McDonald’s, who pledged to source 100% cage-free eggs by 2025. Coca-Cola committed to reducing its carbon footprint by 25%. Additionally, a recent study by Loyola University Chicago’s Supply and Value Chain found that 64% of company executives are tying compensation to ethical results.
Big changes won’t happen quickly. In reality, it’s more likely you’ll end up focusing on small incremental changes, like package reduction or minimizing overproduction, but the pay-off will be worth it.
Visibility is a crucial factor when it comes to building a more socially conscious supply chain. For example, it’s estimated that Consumer Packaged Good (CPG) companies must cut their greenhouse gas emissions by over 90% in order to adhere to climate change agreements. Less than 20% of supply chain managers believe they have the required visibility to make this happen.
Increased supply chain transparency will also flag problems like unfair labor conditions or modern slavery. Implementing streamlined processes for monitoring suppliers and increasing communication will help improve transparency. Conducting risk analyses and setting standards and policies to protect workers and monitor the environmental impact of processes are also ways to improve supply chain visibility.
Focus on minority suppliers
Investing time and funds in minority suppliers will aid you in the development of a socially conscious supply chain. It will also provide significant returns through cost savings and increased innovation. Minority-run businesses are growing at a rate that is twice the national average which means they play a large part in economic growth and that shouldn’t be ignored. Likewise, companies that invest in a supplier diversity program report up to 15% of their earnings stem from such initiatives.
It should go without saying, but all suppliers should be treated as they would be in your workplace, especially when it comes to ensuring fair and on-time payments. If feasible, SMEs can be further accommodated via flexible onboarding processes and contract conditions, including the option for pre-payments and business loans.
Invest in technology
The latest supply chain tech not only drives efficiency and innovation, but can aid the development of socially conscious supply chains.
Artificial Intelligence (AI), for example, enables collaborative shipping (also known as sharing shipping), which sees organizations sharing shipping and transport methods to reduce their costs and carbon footprint. Deep reinforcement learning trains AI to make complex supply chain decisions such as determining the precise amounts of products that need shipping and when and how to ship them.
Blockchain can put a “digital ledger” on a company’s entire supply chain. This provides assurance that your suppliers’ suppliers are who they say they are, and not involved in unethical sourcing.
With everything this year has handed out so far, it’s only fitting Forbes recently declared 2020 as the year of sustainable business. If you’re not already addressing the steps above, now would be the perfect time to start.
Get in touch with the experts at Una to learn how you can commit to building a socially-conscious supply chain.