By Alex Saric, Smart Procurement Expert at Ivalua
Not long ago, Corporate Social Responsibility (CSR) was largely considered a ‘nice to have’, used to improve a company’s image or build its brand. A 2017 study by Boston Consulting Group and the Global Fashion Agenda highlighted this attitude in a major industry, noting the environmental and social practices in fashion were weak, scoring just 32% in its sustainability assessment.
Previously, organisations were less inclined to prioritise CSR in their corporate strategies, but this is now beginning to impact the business. For instance, retail giant Boohoo faced allegations of poor working conditions and underpayment among its suppliers in its Leicester factory, which led to £1 billion being wiped from its share value. Other retailers – including ASOS and Next – also suspended the sale of Boohoo items from their websites.
Organisations can no longer approach CSR as just an added bonus – they must now take the opportunity to revaluate their environmental and social impacts, as poor practices can impact the organisation’s bottom line.
CSR must extend to the supply chain
Many organisations are already adjusting their priorities and taking positive steps towards becoming more socially responsible. Sainsbury’s, Microsoft, and IKEA have all pledged to reduce net carbon emissions to zero by 2030. Addressing sustainability in a meaningful way such as this helps to mitigate environmental concerns – but it is vital that organisations also consider the extended environmental impact of their supply chains as well.
Procurement is the gatekeeper to all suppliers. As such, any organisation’s green initiatives must extend to the supply chain to build a truly sustainable business. Without procurement’s involvement, many environmental measures fall short; if organisations cannot build a 360-degree view of their suppliers, they will struggle to collaborate and understand the full extent of their impact on the environment. A recent study found that 93% of UK businesses find it challenging to gain visibility into their suppliers to track environmental impact. If organisations do not have the right tools to track their suppliers, sustainability initiatives will inevitably miss the mark.
The need for greater transparency
Organisations that do not deliver on their promises risk reputational damage, financial implications, and legal battles that can take years to resolve, consuming time and resources. Over 10 months later, Boohoo is still recovering from the damage caused by the Leicester factory scandal. More recently, it had to publish a full list of its suppliers and sever ties with hundreds of UK manufacturers to meet a pledge on transparency.
While navigating such a volatile economic and geopolitical environment caused by COVID-19 and Brexit, organisations must increase efforts to deliver on their CSR promises by being proactive – rather than reactive – with their supply chains. Having better visibility into suppliers enables organisations to more easily identify any CSR issues during the sourcing process.
Cloud technology will give organisations the tools needed to build a 360-degree view of their suppliers, so they can draw upon reliable data and prevent being ‘caught out’ by CSR crises. Inaccurate and unreliable supplier data is an industry-wide problem, which is why procurement needs to get smarter, and provide businesses with the data needed to create transparent supply chains. This will help to identify, manage, and prevent CSR problems before they escalate.
Collaborating to drive real change
In reality, all organisations have room to improve when it comes to sustainability. As a result, enhancing sustainability in the supply chain is not just about selecting suppliers that currently have more sustainable practices, but those most willing to improve. Organisations that facilitate collaboration across multiple tiers of the supply chain by actively working with suppliers will be in the best position to drive real change. For instance, Groupe ADP adopted a smarter approach to procurement to collaborate with suppliers on CSR initiatives. This led to it almost doubling its independently-rated CSR score, while still driving savings of 10% each year.
However, without the right data, tier two, three, and four suppliers cannot share information and collaborate, which risks poor CSR going unnoticed. Opting for a cloud-based procurement solution can offer access to better data plus mechanisms to communicate and track progress, which in turn allows sub-tier suppliers to collaborate, share data on environmental impact and drive continuous improvement. Collaborating with the entire supply chain on sustainability initiatives, rather than just the first tier, helps to improve CSR as it ensures every tier is working together to identify and eliminate poor practices.
CSR is more than an added bonus
To facilitate real CSR change in the supply chain, it needs to start at the very top, either at board or C-suite level. Organisations must take a more proactive approach to their environmental and social impact, or they could face serious reputational and financial damage if they are caught out by poor practices. Those that don’t recognise that CSR is no longer just a ‘nice-to-have’ risk being left behind by more forward-thinking competitors.
Opting for a smarter approach to procurement provides the solid data foundation needed to allow organisations to work with stakeholders across the entire supply chain, and collaborate to drive green initiatives. This data enables organisations to manage CSR risk, identify areas to collaborate more with suppliers, and drive efficiency to increase savings – all of which add to the business case. A cloud-based procurement solution will put organisations in the best position to ensure that responsible practices extend from the business and across its suppliers, which will ultimately protect their bottom line and drive meaningful change.