Sustainable supply chains not driven by risk worries

7 April 2011

7 April 2011 | Paul Snell

Satisfying customers is a bigger motivation than risk management when firms decide to set up a sustainable supply chain, research has found.

The past four years has seen a shift away from “defensive” drivers such as managing brand reputation, to more proactive aspects, such as tackling moral and social obligations.

“Many companies today talk about developing ‘sustainable’ supply chains, but they’re actually talking about managing risk and preventing public relations crises,” said Stephen Brammer, professor at Warwick Business School (WBS) and author of the research. “Those companies end up implementing costly and ineffective punitive actions against suppliers after labour issues or supply disruptions have already occurred. In the end, nobody wins.”

The study, conducted by WBS and the University of Bath School of Management, looked at academic and industry research over the past 25 years to identify why and how organisations implement sustainable supply chains.

The research found just 21 per cent of literature focused on environmental issues in the supply chain, compared with 44 per cent concentrated on the social or ethical dimension. It also found pieces related to working conditions dominated the thinking.

In addition, integrating sustainability aims with organisational goals and clear statements on policy and conduct were determined to be the most effective ways to implement these programmes. It also found honesty, respect and trust between buyers and suppliers and collaboration in sectors were the two major external success factors. 

“Our research suggests that a developmental, supportive, and mutually trusting approach to managing sustainability issues in international supply chains may offer the most robust set of practices by which firms can minimise their exposure to risks and at the same time exploit a range of opportunities for performance enhancement in the buyer-supplier relationship,” said the report.

It identified three underlying areas of best practice buyers could focus on. Inclusiveness, working with vendors, peers and groups such as NGOs; supplier development, including investment and changes in behaviour; and reflexivity and learning – to make sure experience is translated into good practice.

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