Supply chain - vital to CSR performance

The following article was provided by Rick Lambell, Senior Consultant at Australian Centre for Corporate Social Responsibility (ACCSR)

The increasing growth and inter-connectedness of the world economy has led to corresponding growth and inter-connectedness in the relationship between corporate social responsibility (CSR) and sustainable supply chain management.

Social responsibility is “the responsibility of an organisation for the impacts of its decisions and activities on society and the environment” (ISO 26000). Contemporary practices in CSR look not just at the impacts of the organisation itself, such as environmental policies and community investment, but at the entire value chain of activities from source to consumer and post-consumer.

This means that procurement managers are playing an increasingly central role in CSR, and sustainable supply chain practices are innovating to meet the challenge. 

A number of factors are driving greater alignment of CSR and sustainable supply chain management, including:

  • campaigns from NGOs such as Oxfam and Greenpeace,
  • shareholder and investor pressure,
  • extended user responsibility (EUR) legislation,
  • brand differentiation for companies like Patagonia, IBM and Unilever, and
  • industry-wide initiatives such as the Roundtable on Sustainable Palm Oil and Sustainable Apparel Coalition.

Growth of supply chain metrics in CSR performance frameworks

Accompanying these trends has been an increasing focus on supply chain management within international CSR performance frameworks and metrics.

The Dow Jones Sustainability Index (DJSI), which evaluates the sustainability performance of the largest 2,500 companies listed on the Dow Jones Global Total Stock Market Index, has recently developed new criterion for supply chain management. The new framework consists of four major parts: supply chain awareness and risk exposure, risk management, sustainability strategy and opportunities in the supply chain, and transparency with regards to supply chain risks and performance.

Similarly, the Global Reporting Initiative (GRI), the most widely used standard for sustainability reporting globally, plans to issue new guidelines (G4) in May 2013. The new guidelines expand the reporting boundary to include the ‘value chain.’ The value chain is defined by GRI as ‘those parties that are linked by the organization’s activities, products, services, and relationships, and may therefore impact and be impacted by the organization’ both from an upstream and downstream perspective.’ Thus all existing disclosure items including environmental and social aspects must include material impacts by suppliers and consumers.

A number of new supply chain disclosure items and indicators have also been added, such as adequate remuneration of workers in supply chains, human rights, supplier turnover rates, time taken to pay suppliers, labour dispute frequency and resolution, social performance and environmental performance, among others.

Implications for procurement managers

For procurement managers and CSR managers, the increasing focus on sustainable supply chain reporting has important implications. 

Firstly, the increasing scope of supply chain reporting requirements means that supply chain issues will likely be material for a broader range of organisations. As a result, there will be a need for stronger collaboration between CSR managers and procurement professionals to identify and prioritise material issues across an organisation’s entire value chain.

Secondly, there will be a growing pressure for high quality procurement and supply chain-related data to meet CSR reporting requirements. CSR managers and procurement teams will need to work closely to ensure necessary systems and process are in place for data collection and reporting.

Finally, there will be a need for stronger collaboration and partnerships between CSR managers, procurement teams and suppliers, to drive long term improvement in sustainable supply chain performance. This may include increasing openness to dialogue on sensitive supply chain issues, greater sharing of data and knowledge of best practices, and investments in supplier skills and capacity building.