Companies can increase revenue by up to 20 per cent by improving their supply chain, according to new research.
A report from World Economic Forum (WEF), produced with Accenture, says that firms that create responsible supply chains see a “triple supply chain advantage”, with increased revenue, reduced supply chain costs and a boost to their brand.
Beyond Supply Chains identifies a set of 31 practices to promote socio-environmental and commercial advantages, which it calls a “blueprint for triple advantage”.
It covers product design, sourcing, distribution and end of life and includes practices such as using more sustainable raw materials and components, establishing supplier audits and controls, sourcing from local and sustainable suppliers, sharing network facilities and transport and using innovative vehicle technology.
Although the model uses consumer goods companies as a reference, it can be tailored according to the conditions of a specific industry or an individual enterprise, WEF says.
It says that applying these practices can increase revenue up to 20 per cent. Supply chain costs can be reduced by up to 16 percent, with brand value increasing by up to 30 percent.
Companies can also shrink their carbon footprint by up to 22 per cent and contribute to local development, the report finds.
Beyond Supply Chains includes case studies of companies that are implementing these types of changes to their supply chains.
It also makes recommendations for corporations, including giving workers access to formal complaint structures within a company, and encouraging them to join unions, setting new purchasing practices and benchmarks, committing to a living wage, and adopting and implementing a code of conduct.
The report suggests governments should strengthen legislation on wages and working conditions, ensure independent factory inspections and enforce regulations.
They should also invest in infrastructure and education to increase overall productivity and competitiveness, the report concludes.
WEF says that over the last few years, pressure has mounted on global supply chain directors to increase their supply chain performance for commercial gain, but also to have a positive social impact on the environment and local communities.
But the report warns the benefits of implementing these supply chain changes can be limited because of the need for a supporting business case. “It is important, however, when deciding on ethical measures, for companies to go beyond the business case. Human rights in particular should be non-negotiable,” the report says.