How are organisations advancing ESG strategies through their supply chains?

Speak­ers:

Simon Finch, sup­ply chain direc­tor, Har­rods
Michael Ford, glob­al lead envi­ron­men­tal, health and safe­ty and sus­tain­abil­i­ty, Avet­ta
Aileen Wilkins, head of pro­cure­ment, The Mid­coun­ties Co-oper­a­tive Ltd
Paul Williams, group head of eth­i­cal trad­ing and human rights, Princes Group

How has the sup­ply chain land­scape evolved in the last 18 months?

SF: The coro­n­avirus chaos exposed sig­nif­i­cant over­con­fi­dence in glob­al sup­ply chains and an absolute obses­sion with a lean inven­to­ry. Pre-pan­dem­ic, we were so used to being able to plan and move things quick­ly, and it was a big chal­lenge when those plans were dis­rupt­ed, and we couldn’t move stuff. We have learnt to rein­tro­duce agili­ty and mul­ti­ple inven­to­ry nodes, which sup­ports the ESG agen­da. In the last 18 months, we have had to dig a lot deep­er with our sup­pli­ers because if you are not doing the right thing, con­sumers won’t buy from you.

AW: At Mid­coun­ties Co-oper­a­tive, we had already embed­ded a pro­cure­ment strat­e­gy that used local sup­pli­ers – rather than big nation­al sup­pli­ers – before Covid-19 hit. This approach meant we could be agile, and the stock has been acces­si­ble through­out. In addi­tion, we went against the grain and reached out to small­er busi­ness­es, includ­ing those were unable to trade dur­ing parts of the pan­dem­ic due to gov­ern­ment reg­u­la­tions, to source PPE and spare stock. Because our sup­ply chains are much small­er and more local than some oth­er organ­i­sa­tions, we have had good vis­i­bil­i­ty, mean­ing min­i­mal dis­rup­tions.

MF: The pan­dem­ic fall­out has changed the whole approach to sup­pli­er eval­u­a­tion, which was prime­ly focused on fis­cal integri­ty and safe­ty. Now things like busi­ness con­ti­nu­ity are becom­ing part of eval­u­at­ing sup­pli­ers, and it’s cre­at­ed mas­sive prob­lems. Avet­ta is on a learn­ing curve, too, but the social ele­ment of ESG con­cerns more clients. It’s an area that needs a lot of devel­op­ment. There is no ques­tion the ‘S’ is as impor­tant as the ‘E’ and the ‘G.’

PW: I often won­der whether con­sumers are unaware of social sus­tain­abil­i­ty risks in the sup­ply chain. I sense there is an implic­it expec­ta­tion that com­pa­nies are oper­at­ing eth­i­cal­ly. It’s only when there are human rights exposés – such as exploit­ed work­ers in tex­tile fac­to­ries in Leices­ter – that they start to ask more ques­tions about respon­si­ble sourc­ing. Busi­ness­es have to go beyond com­pli­ance to bet­ter man­age and mit­i­gate these risks. At Princes Group, we have increased trans­paren­cy through pub­lish­ing our sup­ply chain map of direct sup­pli­ers and work­ing with third-par­ty providers, such as Prove­nance, to bring to life the sus­tain­abil­i­ty cre­den­tials of Napoli­na toma­toes. It is fun­da­men­tal to know what’s going on in the fourth and fifth tiers of the chain to tack­le mod­ern slav­ery and find the root caus­es of any issues.

What is the role of sup­pli­er eval­u­a­tion in dri­ving trans­paren­cy?

MF: Tra­di­tion­al­ly, when com­pa­nies have eval­u­at­ed sup­pli­ers, they have been one dimen­sion­al: to award a con­tract, they tend to look at their fis­cal integri­ty, insur­ance and their safe­ty record. Because of the pan­dem­ic – and Brex­it – our clients, who realise there are envi­ron­men­tal and rep­u­ta­tion­al risks, want to scale things up to see far greater assess­ment lev­els, adopt a more holis­tic approach, and use tech­nol­o­gy to help facil­i­tate more edu­cat­ed pur­chas­ing options. Tech pulls togeth­er the rel­e­vant data in dif­fer­ent depart­ments to pro­vide a com­plete pic­ture.

AW: In many of our con­tracts now, we include an unan­nounced audit clause that allows two audits up to two years after the con­tract has end­ed because some­thing in the news might have affect­ed our busi­ness. This lets our sup­pli­ers know that we are tak­ing this seri­ous­ly and ensures that they com­ply with what we expect through our val­ues and eth­i­cal trad­ing. We also run mod­ern slav­ery train­ing for the sup­pli­ers, in con­junc­tion with the com­mu­ni­ty, to look out for the signs of any­thing unusu­al hap­pen­ing in the sup­ply chain.

PW: We have an award-win­ning ini­tia­tive to offer sur­vivors of mod­ern slav­ery in Italy long-term employ­ment oppor­tu­ni­ties with Princes, and build­ing those rela­tion­ships is very ben­e­fi­cial. In-per­son audits have been chal­leng­ing dur­ing the coro­n­avirus cri­sis, and vir­tu­al audits have their place, but at Princes, we try to demon­strate and embed best prac­tices in-house to the sup­ply chain. For exam­ple, all mem­bers of our pro­cure­ment team are signed up on the Inter­na­tion­al Char­tered Insti­tute of Pro­cure­ment and Sup­ply Ethics Reg­is­ter. We realise that no sup­ply chain is per­fect, but we recog­nise that we need to work togeth­er to solve these chal­lenges. The net is clos­ing in on uneth­i­cal sup­pli­ers, and whistle­blow­ing mech­a­nisms are improv­ing.

SF: Deep sup­pli­er rela­tion­ships are so impor­tant. As we learnt in the last year, pick­ing up the phone and talk­ing to sup­pli­ers to col­lab­o­rate and work a way through strength­ens bonds. I believe we will con­tin­ue that clos­er col­lab­o­ra­tion as we move out of the pan­dem­ic. We’re work­ing much more with strate­gic part­ners across a range of prod­ucts and tak­ing a more prag­mat­ic approach.

How can com­pa­nies build a sus­tain­able sup­ply chain today to win tomor­row?

PW: Nobody wants to pay more than nec­es­sary for prod­ucts, but the real­i­ty is that, at the moment, respon­si­bly sourced prod­ucts often do come at a pre­mi­um. We could chal­lenge our­selves as organ­i­sa­tions about what weigh­ing we need to give to ESG ver­sus ser­vice avail­abil­i­ty and tech­ni­cal require­ments, which cost more but hope­ful­ly high ESG stan­dards are pre­c­om­pet­i­tive and will become the norm for all respon­si­bly sourced goods.

AW: Admit­ted­ly, it can be chal­leng­ing to keep up with trends. Who can say what will be deemed uneth­i­cal in 10 or 20 years? We have to lis­ten to con­sumer demand and com­mu­ni­cate with cus­tomers and across the indus­try to improve agili­ty and dri­ve more eth­i­cal prac­tices. For those lead­ing the way in terms of trans­paren­cy, there is a com­pet­i­tive advan­tage to be gained, and they should be shout­ing about it to inspire oth­ers to clean up their acts.

SF: We have learnt so much from the pan­dem­ic fall­out, and it’s clear if you have a prod­uct clos­er to the cus­tomer, then it will nat­u­ral­ly dri­ve sus­tain­abil­i­ty and reduce envi­ron­men­tal impact. Ecom­merce has grown sig­nif­i­cant­ly, and by using tech­nol­o­gy, we have been smarter about our stock on harrords.com. As a glob­al brand we are ship­ping world­wide, but with more dis­tri­b­u­tion nodes through brand part­ner­ships, we are near­er to where cus­tomers are buy­ing the goods.

MF: Many clients are start­ing on their ESG jour­neys, and many are strug­gling because the two key things we see at the moment are mod­ern slav­ery and cli­mate con­cerns. Addi­tion­al­ly, peo­ple are strug­gling to get to grips with diver­si­ty. How do we cre­ate a more diverse sup­ply chain? There is a lot of infor­ma­tion out there, but there needs to be more sim­pli­fi­ca­tion and com­mu­ni­ca­tion of expec­ta­tions. Final­ly, we should applaud what we are doing; we are real­is­tic, but by shar­ing knowl­edge and work­ing togeth­er, we can improve this indus­try.

For more infor­ma­tion please vis­it avetta.com