With companies relying increasingly on complex global supply chains, their need for verifiable manufacturing ethics and supplier transparency is growing.
Trickle-down policies and one-to-one accountability aren’t enough to achieve widespread ethical compliance. Technologies, including the implementation of supply networks, have the potential to drastically improve global compliance, and promote better industry standards across key problem areas.
Ethical manufacturing can be broken down into three key issues:
To help combat these issues and strengthen supply-chain sustainability, the CDP Supply Chain program has brought together 115 major purchasing organizations globally. Another example is the United Nations Global Compact, which advocates for creating one-to-one sustainability and ethical agreements between individual manufacturers, or alternatively cascading these agreements into sub tiers. This cascade effect is an attempt to trickle down ethical and sustainability policies to sub tiers that are not in direct contact or contract with the product owner, but contribute to the end product within the supply chain.
Across the industry, there is remarkably low visibility into first-tier suppliers. The lack of any direct contact with lower-tier suppliers opens the door to ethical misconduct going untracked. Corporations such as Adidas, Nike, H&M, Apple and countless others have been caught using unethical manufacturing practices through investigative journalism in recent years. Outside these highly publicized examples, there is an unimaginable amount of unreported, unvalidated and unexposed cases that have been left without repercussions. Global businesses may operate within a hidden supply chain, but this doesn’t excuse corporations from taking responsibility once they know they can make a difference.
Within one-to-one relationships, technology can help validate malpractices, monitor factory conditions and foster better communication of agreements to avoid overworking human labor. In a recent Harvard Business Review report, journalists asked a supplier why work week limits are often violated. A representative stated, “We didn’t want to tell our customer that we can’t produce its products on time, because otherwise it’s going to try to find someone else that can. But our customer didn’t give us enough notice to hire enough skilled people to do the job.”
Although steps have been taken in the right direction, every company and relationship must have its own systems and agreements in place. Many-to-many networks are the key to creating global visibility, standardization, and accountability. Cloud-based supply-chain solutions have the opportunity to centralize data within a network that can be leveraged to make smart decisions as an industry.
There is an innate sense of shared responsibility within complex global supply chains. According to Opentext, “trading partners have a vital role to play in ensuring ethical operations. Having access to the right data at the right time is vital for these responsibilities. Companies can no longer absolve themselves of responsibility for what happens at any point in their supply chains. Business partners demand visibility into whom they are dealing with and their business practices before establishing working relationships.”
Visibility consists of more than just monitoring first-tier suppliers. It allows all stakeholders to view top-performing and even non-conforming suppliers within the supply chain. It gives insights and valuable data into processes such as raw materials acquisition and production waste management. Historically, this level of visibility has been scarcely attainable. Research has shown that the average company knows approximately 7% of what’s going on in its supply chain.”
In reality, the hoped-for cascade effect rarely occurs in supply chains today, and is simply not enough. Through implementing a supply network, whereby a virtual connection is created to and from every member of a supply chain, an entirely new level of transparency and accountability becomes the norm.
Maintaining a many-to-many network offers both customers and vendors the ability to interact directly with all other industry players and hold each other, and the entire network, accountable. If all incidents are exposed to the network, malpractices are impossible to hide or deny.
To promote ethical manufacturing, technology can be used to:
The key to these goals is keeping evaluation metrics standardized, centralized and comparable. Competition through statistics in networks, credibility and relationships formed is often a strong motivator to encourage ethical performance.
Global supply chains are complex, run deep and have multi-tiered facets. With 93% of most companies’ supply chains being invisible, mapping systems is just the beginning. It’s time to eliminate one-to-one agreements due to their tediousness, inefficiencies and lack of transparency. In today’s interconnected business environment, global visibility, standardization and credibility are no longer optional. Moving from supply chain to supply network is simply the most efficient approach.
Dan Lionello is founder and CEO of Omnae.
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