A small tag on a t-shirt with an eco-friendly symbol might not seem noteworthy at first glance, but the tale behind that tag is a rich one.
It’s a story that begins with a wool supplier in Ireland, continues across intercontinental freight companies, includes a clothing manufacturer in Mexico, and ends with a retail store in Portland, Maine. Each of those companies tells its part of the story through data that is either actively shared with or discretely collected by supply chain partners or regulatory agencies around the world.
The interconnectedness of this story is critical to supply chain management, yet oftentimes is accidental in the sense that companies might not even be aware that this data is being shared. An apparel company, for example, might not realize that its shipping company’s data is readily available and shared within its own industry requirements. Worse, the shipping company might be reporting that data incorrectly by miscalculating the fuel costs or misattributing carbon emissions to electric trucks. It’s up to you to make sure the data is accurate, contextual and organized in a way that supports the narrative of your brand, while also looking for areas of improvement.
Three forces are driving the need for more data transparency today: consumer preference, investor interest and regulatory compliance. Consumers and investors want to make informed decisions about the products they buy or invest in: Are they good for the environment? Are the workers treated fairly? What are the company’s political and social positions? These stakeholders are looking for data to prove a company’s commitment to specific environmental, social, and governance (ESG) standards. Meanwhile, regulation requirements are popping up around the world, from the French Labeling Act to the New York Fashion Act, each with their own stringent requirements for data aggregation and presentation. More are sure to come. In both cases, the onus is on businesses not only to present reliable data in a consistent manner, but also collect and present this data across their entire supply chain.
As a supply chain expert, you're constantly focused on tracking and managing a million details, from shipping and transportation to manufacturing. Regulations might prompt you to consider how you'll amass all this impact data. To put it into perspective, imagine that you’re a furniture maker. In order to comply with new regulations, you not only have to show how your business is committed to environmentally responsible practices, but you’ll also need to show that your partners are too. Does the company that supplies your wood re-plant the trees it cuts? How much fossil fuel do your delivery trucks consume? Does the company that provides your leather dispose of its cow manure in an environmentally responsible way? Today, we’re all part of an interconnected supply chain, where even your manure is everyone’s business.
While we’re only starting to see the beginning of these data-sharing requirements, the data is already out there. The difference is in how it’s being reported. Right now, your suppliers might be disclosing some of this information themselves, and industry consortiums and regulatory groups might be uncovering other data as part of their reporting and oversight. The problem with this data is that it could be telling the wrong story based on inaccurate assumptions. Using our earlier illustration, there could be data around transportation miles that assumes you’re using fossil fuels, when in fact 25% of your transportation fleet is electric. If you let other businesses present your data, you’re letting them take control of the narrative.
As a supply chain professional, you must help your business control how it aggregates, disseminates and presents its data, and do so uniformly across your supply chain. This means data needs to be collected and shared in the right format with the right context —whether your partners are reporting on cow methane or carbon emissions — to ensure they’re using an agreed-upon set of metrics. The challenge is that each regulatory organization has its own definition of what’s right. The information that you collect and present to meet the requirements of the European Union’s directive for corporate sustainability due diligence will look very different than, say, the state of California’s plastic reporting requirements. Because your business will likely have to adhere to multiple regulations based on where you do business, make sure the data you collect gives you a comprehensive view of your supply chain, so that you easily plug it into new regulatory requirements no matter what their focus.
Businesses, like the products they sell, are a byproduct of their own supply chains. The COVID-19 pandemic cast a light on how fragile our supply chains are, but it’s not just a question of fragility; it’s about responsiveness as well. Taking responsibility within a global interconnected supply chain means being increasingly responsive to global events. Look no further than the front-page news of the Russia-Ukraine conflict to see the importance of having a flexible supply chain. If you were doing business with a Russian-based supplier three months ago, you’re probably not doing business with them now.
Businesses need to be able to pivot quickly to new suppliers, whether the catalyst is global solidarity or shifting consumer sentiment. Going forward, your supply chain is your business, and your supply chain data is everybody’s business. How you present that data is critical, both for regulatory compliance and for the story it tells your customers about your environmental and social values.
What you stand for as a business counts for a lot. Carbon usage counts. Corporate social responsibility counts. Even cow manure counts. It’s up to every business to take responsibility for their data and to stand up and be counted. Those businesses that take active ownership of their data first will be able to shape not only their own narratives but also the future industry direction as well.
John Armstrong is chief technology officer with Higg.
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