Do Not Wait for a Crisis to Take Care of Supplier Sustainability
Modern businesses are increasingly relying on extensive supply chains to deliver products at competitive prices. As a result, supply chains have become increasingly difficult to operate. One issue that came to prominence in recent years is the risk of dealing with suppliers that resort to unethical and environmentally damaging practices.
Because of the chain’s complexity, the violations may even go under the radar of the company’s management, leading to an unexpected backlash. Looking at the examples of other companies and their response to crises can teach much about the need for scrupulous sustainability management.
Corporate Social Responsibility Crises
There is no shortage of stories about corporations being caught red-handed on unsustainable practices. In this light, the fact that the public trust in organizations is on a steady decline will not surprise anyone. What is surprising, however, is that companies survive major incidents and the associated reputation crises even when they have CSR policies in place. Thus, in many cases, companies in question respond by elaborating their policies, eliminating loopholes, and increasing control.
Here are the two well-known examples that teach that ineffective populistic policies do not work any more and need to be substituted with effective means of control and prevention. Hopefully, other companies nip these risks in the bud by developing comprehensive CSR policies and using sustainable supply chain software to prevent harming the society, the environment, and the brand reputation.
Coca-Cola Case
One of the biggest producers of soft drinks has a long history of unethical business practices, especially in developing countries. Because of this, by the early 2000s its CSR policies had already covered sustainability across the supply chain. Nevertheless, in 2003, a reputed research center discovered high levels of pesticide residue in drinks manufactured in India. Further investigation revealed irresponsible water management practices, which was especially concerning for a region known for the shortage of drinking water.
Coca-Cola has since taken several measures to remediate the effects of the public outcry. These ranged from releasing environmental performance reports to developing the infrastructure for collecting and using rainwater to benefit the community. However, there is still much controversy over the effectiveness of their actions in terms of supply chain sustainability. Specifically, a comprehensive analysis of their manufacturing process still shows major discrepancies between how much water they actually use versus how much usage is reported.
Apple Case
Despite receiving near-unanimous praise for being at the forefront of innovation and exceptional user experience, Apple has also gained notoriety for a broad array of unethical practices, to the extent that there is an entire Wikipedia page dedicated to them. These issues include:
- Financial machinations
- Questionable corporate policies
- Unfair competition
- Environmentally damaging practices
- Numerous instances of deliberately flawed products
- Poor labor conditions
As with Coca-Cola above, by the time most of these controversies became known, the company had already had audits in place intended to eliminate such occurrences. Once their ineffectiveness was demonstrated, the company proceeded to add new sustainability reporting mechanisms and implement educational programs for employees on supply chain sustainability.
It should be mentioned though that despite extensive supplier responsibility reporting and considerable expenses on meeting sustainable goals, Apple still lags in aspects such as waste reduction, not to mention the irreparable damage to brand reputation.
Postponing Action Invites Disaster
From a corporate standpoint, it may seem that starting with an extensive supply chain sustainability policy is unreasonably expensive. Aside from financial considerations, CSR aligns poorly with traditional performance evaluation techniques, making it appear as misguided and ineffective.
Nevertheless, there are good reasons to choose the preventive approach and develop a supply chain sustainability policy before any issues arise. These are:
- Improved brand image
- Increased employee satisfaction
- Promotion of innovation
- Reduced environmental footprint
- Cost savings on remediation and legal proceedings
The latter is probably the most obvious point. In fact, because of their pragmatic nature, the economic considerations are somewhat controversial. Simply put, the argument of cost savings only works as long as the cost of neglecting social responsibility exceed the expenses on investing into being sustainable. Which is often the case. Thankfully, with the modern regulatory environment and public interest in sustainability issues, more and more brands prioritize benefits to society over short-term financial gain.
The same holds true for public trust. While it might be tempting to have a basic draft of a generic CSR policy and expand it each time an issue arises, this strategy is potentially more damaging to the corporate image than not having it in the first place. By demonstrating its commitment to sustainability, the company essentially makes a promise to its stakeholders. So once this trust is breached, it is not perceived as a failure anymore, but rather as betrayal, making it much more difficult to address. In other words, waiting too long not only increases the risk of disaster but actually makes it more difficult for the business to recover in the aftermath.
Supplier Sustainability Pays Off
The complexity of modern supply chains makes them particularly susceptible to unethical practices. In some cases, companies themselves may not be aware of the issues until the information becomes public. This is why business owners should be extra careful when monitoring and guiding their supply chains’ sustainability. Not only will it help avoid the crisis in the first place, it will actually be helpful in mitigating the backlash and fostering the trust of stakeholders.
