Supply chain: forging better relationships with suppliers

Supply chain: forging better relationships with suppliers

In the aftermath of the horsemeat scandal, what can companies do to manage supply chains and put sustainability at the heart of sourcing?

Findus, the frozen food brand at the centre of the horsemeat saga, last week announced it is taking action to address the shortcomings of its supply chain management.

The frozen food giant, whose beef lasagnes were found to contain up to 100% horsemeat, has joined the Supplier Ethical Data Exchange (Sedex), a not-for-profit organisation that allows suppliers to share responsible trading data with retailers and brands online.

With the support of Sedex, Findus will conduct ethical and health and safety audits of its suppliers and then, armed with this information, it aims to manage risks throughout its supply chain, engaging with suppliers to create greater transparency across its global supply network. The move is also intended to help restore trust in the wider food industry.

Retailers have come under intense scrutiny since the explosion of the ubiquitous horsemeat scandal. More than 5,430 Food Standards Agencytests have so far revealed 44 UK products containing horsemeat, putting retailers including Tesco, Aldi, Ikea and Asda under serious pressure to clean up their supply chains.

Supply chain disasters

Lack of visibility and a lack of direct influence over suppliers further down the supply chain can lead to distinct problems: work can be sub-contracted or even contracted directly to suppliers with poor health and safety standards, dismal labour rights records or detrimental environmental practices.

Just last week, it emerged that Zara is under investigation for ‘degrading’ factory conditions in Argentina, where Bolivian labourers, including children, allegedly worked 16-hour days without breaks. .

Labels belonging to Inditex (the parent company of Zara), Walmart and Sears were found in the ashes of the latest factory fires in Bangladesh, where more than 100 workers died in factories with appalling health and safety standards.

Elsewhere, Yum Foods!, the owner of fast food giant KFC, says it plans to stop sourcing packaging derived from tropical rainforests, following a scandal that erupted last year over its former supplier Asia Pulp and Paper trashing Indonesian forests to source paper for KFC ‘buckets’.

Similarly, fashion companies have been forced to address the issue of toxic chemicals being used in the dyeing process. The Roadmap to Zerocoalition now aims to stamp out harmful dyes from apparel manufacturing.

So, what can retailers do to avert further catastrophes? What are the challenges they face? And where do they start on the journey to greater transparency?

Current state of play

Climate change, more frequent extreme weather, unsustainable farming practices, water scarcity and population growth are taking their toll on global supply chains, sending raw material costs soaring and threatening the security of retailers’ operations.

However, the sheer size and complexity of global supply chains means tackling sustainability is a monumental task. Pinpointing risk is an uphill struggle; retailers can end up inundated with data, and suppliers become reluctant to ‘waste time’ completing check-lists and audits.

The food and fashion industries are leading the charge on supply chain sustainability. With many high profile brands operating in these sectors, criticism of food and fashion supply chains has been severe.

While some companies, including Unilever and Marks & Spencer (M&S), are seeing the commercial benefits of responsible sourcing, globally, there is still a huge amount of progress still to be made.

Clarity of purpose

“Retailers need clarity of purpose,” explains Sedex CEO Carmel Giblin.

“Establishing a code of conduct that sets clear, realistic expectations is vital. Taking a risk-based approach is also important, identifying the high risk areas and tackling these first.

“Getting robust data is great, but retailers must take this further by understanding suppliers’ business challenges, offering support and developing long-term relationships.”

Louise Nicholls, head of responsible sourcing and Plan A at M&S, also stresses the importance of setting clear standards. She advocates taking a pragmatic approach to reviewing supply chain issues, listening to suppliers, providing evidence-based training and highlighting the business benefits of sustainability. Importantly, she says, retailers should lead by example.

Effective communication is all important

‘Telling the story’ of how sustainability links to business growth using real life examples is essential. Suppliers should also be encouraged to tell their story back to their customers, clarifying the progress they’re making on specific sustainability challenges.

The role of collaboration

Nicholls recommends that retailers participate in working groups and joint initiatives, such as the Ethical Trading Initiative’s recent trip to Peru. This saw M&S, Tesco, Waitrose and Co-op meeting with Peruvian stakeholders in the fruit and vegetables sector to discuss common challenges.

Tackling industry-wide issues collectively can accelerate the pace of change in a cost-effective way and collaborative industry platforms are becoming increasingly popular. These include the Global Social Compliance Programme, the FMCG forum Aim-Progress and theElectronic Industry Citizenship Coalition.

Empowering the supplier who holds the direct relationship with companies further down the supply chain is also important. Retailers must ensure they ask relevant, searching questions of their first tier suppliers, working closely to make their expectations crystal clear.

When recruiting new suppliers, use credible, industry-standard scorecards, reinforced by mandatory data-sharing on carbon, environmental and social performance.

Engaging positively with suppliers

Retailer collaboration with NGOs and local groups on the ground can be instrumental in communicating more effectively with suppliers.

UK retailer John Lewis has established a sourcing office in India and launched a new bath mat range via its sustainable cotton farming project in Gujarat. This initiative, developed by CottonConnect, is helping to improve the environmental performance of the company’s cotton supply chain while enhancing supplier livelihoods.

HP has recently introduced new supplier guidelines to protect the rights of student and temporary workers in China, while Sony’s ‘Green Partner’ programme defines clear standards for its suppliers of chemical substances, ensuring that only approved suppliers are retained.

This article was originally published on the Guardian Sustainable Business website.