Taking a proactive approach to supplier management

- Increasingly, many businesses, particularly multinationals, are pledging to revolutionize their supply chains, procuring all the materials and services they need from companies committed to fair labor practices and environmental protections. And the idea is that a trickle-down concept where a company really sets out SLAs to ensure their first tier suppliers comply with their standards and that suppliers, in turn, ask for the compliance from their own suppliers and so on. That really is the best way to make it happen. Sounds great, right? But the reality is that this trickle-down concept hasn't been fully realized, and many suppliers, especially those at lower levels of the chain, often violate the required sustainability standards whilst the brand on top is looking the other way. A couple of years ago, two leading supply chain academics conducted a study into supplier management and sustainability. They looked at three multinationals who were really considered to be sustainability leaders across automotive, electronics, pharmaceuticals, and consumer product industries. And as a part of their analysis, they also studied a representative set of each of the company's suppliers, a mixture of top and lower tiers based across Mexico, China, Taiwan, and the United States. But what they soon discovered was that many of the suppliers were violating the standards that the multinationals expected them to adhere to, exposing those multinationals to very real financial, environmental, and even social risk. In Mexico, they visited five lower tier suppliers, all of which lacked environmental management systems, and four actually lacked procedures for handling social problems like sexual harassment and hazardous labor conditions. And then in China and Taiwan, they visited 10 lower tier suppliers, all of which had marginal environmental practices, dangerous working conditions, and even chronic overtime issues. In the United States, they studied seven lower tier suppliers, three of which had high concentrations of airborne chemicals and a lack of systematic accident reporting. Remember, all of these suppliers were connected to industry leaders that were working proactively to encourage sustainability. It just goes to show that your supplier network has the potential to make or break your sustainability strategy. So as a business, you know, looking to make a real impact with your sustainability program, you really can't afford to rely on that idealized trickle-down effect and just assume everything is working as it should. Taking that proactive approach to your supplier management is the only way you can ensure that all those important standards are being met every step of the way. It's not easy, but there are a few core practices you can introduce and processes you could update to make positive steps in that right direction. When you're choosing new suppliers, they should have a clear vision and ethics that align with your own. They should have their own rigorous SLAs so they aren't relying as heavily on you to guide them when it comes to meeting core sustainability standards. And, you know, look for suppliers who already have a proven commitment to sustainability. Choosing the right supplier is a traditional courtship, not a speed date. Take the time, ask the questions and stringent due diligence are really your allies in this whole process. Ensure you have regular checkpoints and assessments in place, and then try not to get stuck in a rut with legacy suppliers. If they're not aligned with your current strategy, it's okay to make that change. So I want you to ask yourself, are you certain that your sustainability targets run through every tier of your supplier network and hit every link in your chain? Why not go back and take a closer look.