Three barriers to supply chain transparency and how to remove them

posted by Sal Cesario
4 August 2017

Consumers, governments and companies concerned about quality, safety, ethics and environmental impact of their products, and are looking for detailed insight into how materials are sourced, the values that guided the production process and more. They expect that information to be freely available.

The call for transparancy is pushing many companies to reassess and expose their sources. This level of insight isn’t possible without the cooperation of the supply chain, which today is a complex network of links that reach all the way down to farms and raw material suppliers, and mapping this information requires participation from each one.

Although barriers can arise with partners while trying to improve transparency, there are concrete steps an organisation can take to address them for mutual benefit.

Barrier 1: Unclear expectations

“Sustainability” and “transparency” are ambiguous terms with many definitions, so it’s important to provide partners with precise details about what they need to do to meet your standards. If possible, these stakeholders should be involved from the start, and establish clear and specific accountabilities, timelines and goals.

Emphasise that transparency is a means to an end, not the goal itself: simply increasing oversight without providing context can be interpreted as a lack of trust in your partners. If you can justify the insights you’re trying to acquire, you’re more likely to elicit cooperation. 

Transparency is an industry-wide problem and it requires shared responsibility. If everyone has the same expectations, suppliers and contractors will have no choice but to change. Since the devastating Rana Plaza factory fire in Bangladesh, for example, 200 companies have signed the Bangladesh Safety Accord to make garment factories safer. The long-term initiative brings together government and business to encourage responsible workplace management.

Barrier 2: Lack of resources devoted to sustainability and transparency

Many large organisations have developed their own assessment tools for the factories in their supply chains. Factories often become overwhelmed by the time and resources required to fill out the various assessments for each brand that sources from them – leaving them little time to implement improvements.

Using reputable third-party organisations to assess your own practices and those of your partners helps eliminate this roadblock. Organisations in several industries have developed a single tool for use by suppliers, which allows factories to fill out one assessment for all customers and focus more time on making improvements. In the apparel and footwear industries, for example, companies can use the Higg Index to assess sustainability performance and highlight areas for improvement, and Greenblue’s Material IQ uses centralised performance data to provide manufacturers with the environmental impact of every chemical and material that goes into their products.

Modern technologies can more efficiently track a product through the supply chain too. Many products already rely on internal RFID tracking for sales and shipping, and using the data stored on these tiny devices can reveal a step-by-step history of a product’s journey.

Barrier 3: Financial structures that support the status quo.

Not all of today’s consumers are willing to pay more for products made by companies with sustainable, transparent practices. Although 70% of consumers in a McKinsey study said they would pay a premium for sustainably sourced products, this holds up only to a point. As the price increases, the willingness to pay melts away. For all but one category (packaging), less than 10% of consumers said they would choose sustainable products if the premium rose to 25%.

Educate consumers and encourage them to change their shopping habits. When products with unsustainable and unethical manufacturing processes stop selling, factories will stop making them. Financial incentives will force industry-wide change.

The shifting focus on ethical business practices is bringing undeniable change to every step of manufacturing and producing lifecycles, from agribusiness to retail. Even the strongest of partnerships along the supply chain can benefit from best practices to increase transparency – an essential part of meeting the call for responsive, responsible practices.

Sal Cesario is global sales and marketing director for Micro-Pak

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