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Home » The Social Responsibility Imperative for Supply-Chain Executives
ANALYSIS

The Social Responsibility Imperative for Supply-Chain Executives

February 1, 2021
Bill McBeath, SCB Contributor

A combination of trends is making sustainable, responsible supply chains no longer something that are “nice-to-have,” but rather an imperative. To attract scarce procurement and supply-chain talent, companies increasingly must offer meaningful, socially responsible jobs. The need for ever-growing investments in environmental, social and corporate governance (ESG) makes working capital scarcer and more expensive for companies with poor sustainability records. Investors, boards, and the public are demanding greater transparency and accountability. As more companies embrace sustainable practices, laggards increasingly stick out as isolated and irresponsible global citizens.

Procurement and supply chain practitioners have the power to influence trading partners’ behavior. They may control hundreds of millions of dollars’ worth of spend, creating a powerful force for doing good for the world, as well as for the company. Supply-chain executives can champion socially responsible initiatives, influence metrics and compensation policies, and motivate actions to achieve sustainability goals. The entire executive team can help by coordinating and rationalizing various corporate social responsibility (CSR) initiatives within the company. More broadly, they can shape its identity into a culture of integrity and ethics.

Procurement and supply-chain organizations face chronic shortages of qualified professionals. Surveys have shown that young people increasingly expect meaning and purpose in their jobs. Making sustainability and responsible supply chains a key part of the job is an important element in attracting and retaining scarce talent.

In August, 2019, the Business Roundtable issued an updated “Statement on the Purpose of a Corporation,” moving away from the concept of shareholder primacy to a commitment to a broader set of stakeholders. The World Economic Forum’s annual Davos meeting was dominated by pledges of action for corporate social responsibility, with concrete, measurable, and in some cases bold public commitments. The WEF put forth its “Davos Manifesto 2020: The Universal Purpose of a Company in the Fourth Industrial Revolution.” Meanwhile, NGOs have expanded their impact, acquiring more members, funding, and sophisticated tactics. More consumers today care about products being produced ethically. The momentum is toward increased corporate social responsibility.

There is growing pressure on public and private firms for transparency and full disclosure of supply-chain sustainability and social-responsibility initiatives. Social accounting methodologies provide standardized approaches to measuring and communicating social and environmental impact. Dozens of frameworks, standards, certifications, and guidelines are becoming more widely adopted, such as Triple Bottom Line, the Global Reporting Initiative, B Corporation certification, Forest Stewardship Council, and many more. Each year these efforts become more substantive and meaningful. This 

At the same time, ethical investors have been “putting their money where their mouth is.” Between 1995 and 2018, sustainable and responsible investments expanded at a compound annual growth rate of 13.6%. Sustainable investing strategies now represent about half of all assets under management in Canada and Europe, and well over a quarter in the U.S. We’ll soon be in a world where the majority of investment money uses socially responsible investment strategies. Companies lacking social responsibility standards and programs will find capital increasingly expensive and hard to come by.

Outlook

It takes many years to develop the culture, competencies, practices, and systems for creating socially responsible supply chains. And it’s a never-ending journey. Dealing with the pandemic may be all-consuming, but the push for sustainability also presents companies with the opportunity to rethink their fundamental purpose, systems, and ways of doing things. Now is the time to commit to change, not tomorrow. Supply-chain and procurement professionals can make a profound difference in the world. It is within your power.

Bill McBeath is Chief Research Officer with ChainLink Research.

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