The COVID-19 pandemic raises critical questions about the future of sustainability. Will sustainability programs be harnessed to help companies manage pandemic-related risks? Will there be a higher reputational risk for companies as worker welfare and safety issues attract more attention? Or will sustainability be sidelined until companies regain their pre-pandemic strength? Answers to these questions will emerge in the year ahead.
In 2019 and early 2020, companies were under pressure from various stakeholders to toe a sustainable line. This is one of the major findings of the inaugural State of Supply Chain Sustainability report published in July 2020, that surveyed over 1,100 supply chain professionals in 71 countries. For almost half of the companies questioned, multiple stakeholders including government, mass media, executives, and consumers, were driving their sustainability efforts.
However, the report also found that while companies broadcast big sustainability goals, their level of investment in those goals often lagged behind their stated commitments — especially for social sustainability goals such as forced or child labor.
The report also highlights how companies were devoting time and resources to making these programs accountable to customers and markets through disclosures. Some 55% of respondents in the survey confirmed that their organizations disclose supply-chain sustainability practices or planned to make such disclosures public.
While the imperatives of sustainability are as relevant now as in 2019 and 2020, related programs may be overshadowed by the coronavirus pandemic. Past experience of large-scale disruptions indicates that COVID-19 may put the brakes on sustainability programs while companies focus on survival. However, our initial research shows this not to be true. Supply-chain sustainability is still very much on corporate agendas, but it’s evolving in response to pandemic-related impacts and is industry-specific.
We expect to see more emphasis on social and labor issues. This is evident even as the pandemic rages. The crisis has served to highlight the importance of workplace safety and the impact of labor-related disputes on global supply chains. For example, in April 2020, spikes in coronavirus infections among meat-processing workers owing to close and unsanitary conditions led to shutdowns of plants, causing severe disruptions of meat supply. The controversy publicized a dangerous lack of social-distancing practices in many close-knit industrial environments such as production lines, and posed a significant reputational risk for the companies involved.
Labor-related problems in supply chains remain neglected despite massive public outcry. For instance, the human rights report on China’s forced-labor practices against the Uighur population has implicated virtually every apparel company. Major providers of cloth masks have been linked to using forced labor to produce millions of masks distributed globally. This series of events also triggered the U.S. government to write a bill, the Uighur Foreced Labor Prevention Act, that could ban imports from Xinjiang Province and those responsible for human rights violations there, potentially disrupting global supply chains sourcing from the Xinjiang region and related companies.
The upsurge in social unrest globally — especially in the U.S. — has brought a greater focus on workforce issues in supply chains. Our investigation for the second State of Supply Chain Sustainability report will likely uncover an uptick in commitment to supplier diversity, equity, and inclusion and an expansion of longstanding programs in this area.
We believe that in 2021, as the world begins to emerge from the COVID-19 crisis, sustainability will remain a high priority for companies, but in a different context compared with its role in pre-pandemic supply chains. There will be more emphasis on managing risks related to social and workplace issues. Practices such as upstream supply-chain visibility and transparency, close supplier relationships, conscientious labor management, stakeholder engagement, and supply-chain circularity, will become critical for companies, and not just “nice to have.”
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