What does a study of 449 publicly listed companies in the food, textile, and wood-products sectors, tell us about sustainable supply chains?

Supply chains tied to multinational corporations represent over 80% of global trade and engage over one in five workers, write Tannis Thorlakson, Joann F. de Zegher and Eric F. Lambi, in a new paper “Companies’ contribution to sustainability through global supply chains

They also state that: “80% of global trade flow(s) through multinational corporations, one in five jobs (is) tied to global supply chains, and over 95% of environmental impacts of food and retail companies stem(ming) from their supply chains” (my edits in bracket for readability) 

Their new “a large-scale empirical analysis of corporate sustainable-sourcing practices across multiple sectors and geographies” published by the National Academy of Sciences, says it has: “develop (ed) a global database based on a random sample of publicly listed companies with annual reports in English to provide insight into how the private sector contributes to advancing global sustainability via their supply chains”. Sounds impressive.

So what are some of the findings?

The researchers developed a “global survey of 449 publicly listed companies in the food, textile, and wood-products sectors with annual reports in English to provide insight into how the private sector contributes to advancing the SDGs via such sustainable-sourcing practices”.

Findings include:

  • while 52% of companies use at least one sustainable-sourcing practice, these practices are limited in scope
  • 71% relates to only one or a few input materials and
  • 60.5% apply to only first-tier suppliers.

They “also find that sustainable-sourcing practices typically address a small subset of the sustainability challenges laid out by the SDGs, primarily focusing on labor rights and compliance with national laws.”

Unsurprisingly, they note that:

“Consistent with existing hypotheses, companies that face consumer and civil society pressure are associated with a significantly higher probability of adopting sustainable-sourcing practices.”

So useful numbers here, but nothing earth shattering. If you work in this field, this confirms more or less, what you thought you knew. So what else did they find? (Looking through the methodology, it looks about as solid to me, as these things can be)

Other findings include the figure below. Again, useful, again, not surprising: 

So, what else?

Well, there’s this:

 

(companies’ sustainable-sourcing practices (SSPs), defined as voluntary practices companies pursue to improve the social and/or environmental management of their suppliers’ activities. Such SSPs are distinct from a company’s approach to addressing social and environmental impacts within their own operations and from general philanthropic initiatives that are not tied to the company’s supply chain.)

And the conclusions are? (my selections)

  • First, our findings suggest that SSPs are most commonly adopted by downstream firms to address issues with their first-tier suppliers only. This raises concern about the potential impact of SSPs when the most pressing social and environmental practices are often taking place among subsuppliers
  • Given that non–consumer-facing companies are less likely to adopt SSPs, a transmission of sustainable-sourcing requirements down the supply chain may not be occurring, leaving many of the most challenging sustainability problems unaddressed.
  • we find that companies’ sustainability efforts in global supply chains are largely focused on workers’ rights and compliance with national laws. Important social (e.g., health, education, gender, inequality) and environmental (e.g., climate change, energy) issues are rarely the primary focus of SSPs
  • we also see a few leading companies finding innovative ways to address these more challenging topics, which suggests that there are opportunities for supply-chain initiatives to contribute to a more comprehensive range of SDGs. Companies also address the SDGs through internal or philanthropic activities, which is outside the scope of this paper.
  • Our results also illuminate the influence of external pressures on SSP adoption. Companies that face consumer pressures, either by having a consumer-facing product, a high brand value, or by serving European markets, are associated with a significant increase in uptake of SSPs. These findings support the hypotheses that companies facing consumer pressure are most likely to adopt sustainability initiatives.
  • We also find that civil society pressure, as measured by HQ NGO density, is associated with an uptake of SSPs. This supports hypotheses that external stakeholders are able to pressure companies into action around sustainability (42, 43). In contrast, there was no association between the strength of environmental regulations in the country where the company is headquartered and the uptake of SSPs

Lots more here: http://www.pnas.org/content/early/2018/02/07/1716695115

My conclusion is there’s little here I haven’t read before, thought I knew, have heard, seen or been told about. But it’s useful to have a study to back up what one thought one knew. The authors acknowledge the limitations of the study but those limitations by no means negate the findings. Overall, this is useful research to show us how far we have to go on sustainable supply chains, and how far most/all companies are from having genuine insight and transparency into what they source, and what the impacts of that are. This is understandable, given the complexity of supply chains and the lack of resources applied in most large companies to working on this area. As this begins to change, understanding the scale of the challenge ahead, and where average progress amongst large companies is up to, is helpful to grasp.

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