We predict 2015 will be the year global businesses take real action to address sustainability in their supply chains, responding to inescapable pressure from governments, consumers and shareholders.
This year saw the emergence of a swathe of national, regional and international laws which mean organisations face serious consequences if they fail to act responsibly.
Here are five tips businesses should consider to ensure their supply chain is socially, economically and environmentally sustainable:
1. Update pre-qualification questionnaires
Increasingly, governments are encouraging businesses to deliver social, as well as commercial, benefits through their work. Across the globe we are seeing a plethora of new regulations, including mandating big businesses to use local suppliers and SMEs, involve people from ethnic minorities and make charitable donations.
To meet the requirements, businesses should include questions about social aspects in pre-qualification questionnaires in order to select suppliers that support their sustainability goals.
2. Get to grips with the provenance of goods and services
We predict 2015 will see much greater scrutiny of the origin of products and services, particularly those associated with slave labour and conflict minerals – elements sourced in areas that fund terrorism or war.
The UK government has announced large businesses will have to include in their annual reports details of how they are tackling slavery. Meanwhile, the European Union will require European companies that import ‘conflict minerals’ to voluntarily self-certify that they have shown due diligence in the trade of tin, tantalum, tungsten and gold from conflict-affected or high-risk areas.
We expect pressure groups will name and shame companies which fail to fulfil their human rights responsibilities.
Any business questioning the origin of its products should map its supply chain to identify suppliers beyond the top levels. Once businesses know who is in their supply chain, they can determine whether companies are aligned to their sustainability values.
3. Energy and carbon reduction
2015 will be a key year for environmental management, with negotiations underway to develop a new United Nations climate change agreement covering 196 countries. The EU has set an ambitious target for member states to reduce energy consumption by 20 per cent by 2020. The UK government has introduced the Energy Savings Opportunity Scheme (ESOS) which will see 10 times more businesses required to report on energy use.
Global corporations must manage their supply chain’s energy consumption and carbon emissions as well as their own, and businesses with advanced systems to monitor suppliers’ sustainability credentials will reap the benefits.
We estimate that of the $60 billion that businesses spend each year managing supplier information, at least half could be saved through working collaboratively.
Despite this, millions of businesses are still repeatedly asking the same suppliers for the same information.
In our experience this process is more efficient when industries agree common requirements of suppliers and use a standardised process to collect, validate and manage vital supplier information.
5. Improve your database
The growing need for accurate supplier information means it will become a priority for businesses to gather and store data about suppliers and how they are fulfilling sustainability credentials.
In our experience, businesses do this best when using a centrally-managed database which allows them to source either globally, or on a country-by-country basis, depending on political and economic factors.
Only then can businesses really risk-assess suppliers, carry out audits, benchmark, track and report on suppliers’ compliance.
☛ Adrian Chamberlain is chief executive of Achilles.