Supply chains can be a silent killer, lurking in the background before devastating corporate reputation. Can sustainability unveil the hidden threat? Brittany Golob investigates

 Nearly a year and a half ago, Europe’s major food retailers were reeling from a scandal that threw question marks into the mix with every mince pie and hamburger. Then, high street clothing brands had to respond to a crisis that literally shook the foundations of one of the businesses upon which they were built.

The horsemeat scandal has become synonymous with the risks inherent in the food and drink supply chain and the Rana Plaza tragedy has become a worst-case scenario for many of the world’s retailers. Both opened, for perhaps the first time, inquiry by the public, government and internal stakeholders, into what really goes on behind the shining glass frontages of beloved high street chains.

For the unlucky few, Rana Plaza and horsemeat exposed dirty truths at the heart of the chain, most of which were unknown even to the retailer. That led to tough questions at the corporate level of just who these suppliers were. The chain is at once an operational challenge – one involving logistics and construction, trade and public policy – and an efficiency challenge – relying upon transparency, sustainability and risk management.

Risk management, one of the signposts for reputation, relies upon a sustainable approach and transparency both throughout the chain and in terms of communications about it.

Innocent, the upstart London-based smoothie company, offers a relatively straightforward product: smoothie drinks made from fruit, and nothing but fruit. Even as a medium-sized business, sourcing products is a herculean challenge that head of sustainability Louise Stevens and her team of two spend much of their time managing. With just north of 40 suppliers spread around the world, Innocent has an intensive system of audits, standards and codes its partners must sign and adhere to. Even so, it can’t know what’s going on at every single farm at which it fruit derives, thus it uses relationships with processing companies to gather information about quality and sustainability.

Stevens says, “We want to do good through the work of our supply chain. We want to do others good through the Foundation; but what we never claim to be is perfect. We see this as a journey that started 15 years ago and is going to run for as long as this business does. We are passionately committed to trying to find the ways to make everything we do more sustainable.”

That sentiment is one that can heard echoing through many of the sustainability offices of major corporations. Most people working in sustainability care deeply about ethical trade, environmental issues and sustainable practices.

Yet caring is not enough, the businesses that achieve their goals in sustainability are those who can put it at the heart of their business objectives.

Paul Crewe, head of sustainability, energy, engineering and environment at Sainsbury’s, says, “One of my many asks for every business, no matter how small or how large is for the commercial aspects of sustainability to be truly understood by the board, and particularly the CFO. With the impending increases in energy, carbon taxation, recycling and materials, waste management, these are all costs that really hit the bottom line.” Sainsbury’s puts responsibility for the five core objectives in its CSR campaign, called 20x20, in the hands of five board members, including the CFO. Crewe and his colleagues deputise the board and oversee the implementation of these goals in practice.

On 21 July, the UK woke up to news segments covering Sainsbury’s landmark Cannock store, fueled solely from the anaerobic digestion of its own food waste. A further two stores, in Weymouth and Leicester North, are the pilot programme for those with triple zero status – zero carbon, zero water, zero waste to landfill.

While that’s effective PR, and is objectively great for the environment, bottom line, for business, is always key. Crewe says, however, “Within Sainsbury’s, sustainability is absolutely there to make sure that we are commercially successful as a business and that also then brings along the opportunity for us to do the right thing.”

Others feel the same. Global procurement sustainability manager, Colin Braidwood at National Grid, a brand that has undergone a recent renaissance based on sustainability, says doing the right thing is not only good for the planet, but good for the Grid and its stakeholders.

The National Grid makes up the logistical backbone upon which Great Britain is built. Braidwood says sustainable practice, particularly around resource management and innovation is a key area for the organisation. “How can we think about it over the total cost of the ownership of those products? We’ll still try and capture the financial benefit, but actually, if we’re reducing carbon, and that carbon and cost link, then we should also be reducing cost. We should also be potentially reducing the build time of certain programmes and there should be other multiple benefits.”

It isn’t sustainability for sustainability’s sake anymore. Green values are nice, but they don’t pay the bills, and corporate sustainability managers have become savvy to that fact. Cost reduction and sustainability rely on innovation and technology. Major household names like Ecover, which is a pioneer in palm oil alternative science, Maersk, which adheres to strict sustainability standards when building and steaming its ships across the world’s oceans, and Patagonia, which communicates about its suppliers in a transparent way most sustainability professionals are in awe of.

Things like Sainsbury’s groundbreaking new store designs and Innocent’s revolutionary water management system in southern Spain to ensure a more sustainable strawberry crop, prove those landmark projects are only just a small sample. Working with its suppliers, National Grid has found carbon-efficient ways to produce concrete, it has developed an aluminium recycling pathway with one of its suppliers and has cut down on the amount of virgin resources it uses.

Barilla, one of Italy’s biggest food companies developed a programme to better farm wheat – the core ingredient to many of its products. Agricultural innovation has created a -25% water usage and -27% carbon emission. Companies like Mondelez, SABMiller and others that use a good deal of resources, have all stepped up in regards to sustainability, particularly around the issues of agriculture and water usage.

Starbucks is no different. As one of the world’s largest coffee consumers, it has to have a trick or two up its sleeve to ensure its supply remains consistent and, in the other sense of the word, sustainable. The global Coffee and Farmer Equity programme, affectionately known as C.A.F.E., has been working with farmers to change the way they grow and process coffee. EMEA internal communications manager Victoria Cornwall, recently travelled to Rwanda to visit one of the key sites within the C.A.F.E. project.

Cornwall says, “Coffee requires cooperation. To be successful, you have to be collaborative. You have to work with your neighbour. You have to be part of a community. Try to go it alone, and you’ll be significantly less successful. So, coffee has the power to bring people together and to heal broken communities.” Starbucks, she adds, has a responsibility to the environment, but it has a responsibility to its communities, to people who rely on coffee farming to survive. The innovation companies like Starbucks can provide is more than just the right thing to do, it’s the lifeforce for agricultural communities around the world.

Innovation is the name of the game for Reckitt Benckiser too. RB’s research and development teams work with its suppliers, large and small, to create new approaches to sustainability across RB’s stable of products. Dave Challis, head of sustainability, says, “With the supply chain, the opportunity for innovation is important, but that’s not the sole reason. Managing our supply chain helps us to protect and enhance our reputation. It helps to ensure supply chain continuity and helps us to be more efficient.”

The thousands of suppliers it deals with are managed through a series of checks, standards, audits and technologies – the toolkit of the modern sustainability manager. Challis anticipates that sustainability will receive more input from government, NGOs and other stakeholder groups that can both standardise it and raise its profile. He adds, “What I hope for the future is that we can move this topic from being a risk management opportunity to something that can generate a competitive advantage for our company. 

Communicating with suppliers is not easy, whatever size of business and management is the wild frontier of sustainability comms. Companies like ITC Infotech, an India-headquartered IT firm, have made headway into this space. Its systems allow companies to see beyond their firsttier suppliers. Much of the risk, Rajesh Nair, the global practice head at the Centre for Sustainability Solutions & Consulting says, derives from the murkiness of the lower levels of the chain. “The data is there,” he says. “But to get the data beyond the first level of suppliers is a challenge that companies are facing today. It plays an important role in determining what your risk is.” 

Rebecca Taylor, head of research at Responsible Trade Worldwide, an organisation that audits and suppliers’ working conditions, echoes Nair, “Ultimately, it does come down to reputational risk for the retailer. We’re trying to create that transparency throughout the chain to show a retailer, at each stage in the chain, what is going on. It’s only through that tranps that we feel change can actually happen.”

Nothing is assured, even with technology and data, but it’s one more step businesses can take to mitigate risks in the vagaries of the supply chain, “There is no perfect way of doing it, but the only thing you can do is to create more visibility into risks then you can at least police risks,” Nair adds.

On the corporate side, supply chain communications has become an intensely convoluted and time-consuming practice.

Packaging giant DS Smith’s sustainability director Mark Greenwood says, “It’s incredibly inefficient to provide [customers] with the data.” DS Smith, an efficient organisation itself, receives client requests for massive amounts of data. Not only is this task onerous and time consuming, it can effectually offload some of the inefficiency that companies are proud to remove from their supply chains onto DS Smith and other similar suppliers. Greenwood says the absence of global standards can cause some to rely too heavily on independent certifications that they might not fully understand.

He’s not the only one who thinks government, at the national or international level, will have to get more involved in the future. Crewe points to recent changes to corporate reporting – particularly the regulations calling for integrated reports and sustainability reporting – as an example of what government can do for sustainability. Greenwood likens it to accountancy and financial standards – both of which regulated by the government – in that regulations can ensure accountability in sustainability transparency. 

The ability to communicate about corporate social responsibility in a transparent manner can be a boon to reputation. Esme Gibbons, communications manager from the Ethical Trading Initiative says that companies join organisations like the ETI are those that openly express their commitments to ethical trading and CSR. That transparency may leave them open to scrutiny, but on the whole, it is the right thing to do from the corporate and social standpoint.

She says, “Because of the increasing complexity of these global supply chains, it is very difficult for one company to go out and deliver on these areas all on their own. There is a lot that they can change, but are they able to address those underpinning causes of workers’ rights abuses on their own? No, that’s not something that one company can address on their own.” Solidarity, she says, is better for the workers throughout the supply chain and for the company’s accountability regarding ethical trade. 

Things like the Rana Plaza disaster – only the latest in a series of public issues relating to ethical trade – have put customer consideration for ethical trading back into the spotlight. This has been a motivating factor, Gibbons says to encouraging companies to look at their suppliers and manage the health and safety risks. “We would expect companies to be very clear on supply chain visibility and to be aware of where there might be issues and preemptively work with suppliers on those issues. What we’re also seeing is not only companies grappling with understanding their supply chains but responding to public pressure to transparency about supply chains.”

What it all boils down to, though, is reputation. Braidwood asks, “If we look at the social impacts of low-cost sourcing over the past few years, it gets very easy to say, if you don’t do this, if you don’t work with your supply chain, if you don’t highlight your risk-geared products, then actually how do you know that you’re not going to be splashed across the newspaper in a few months time and have your CEO on TV defending the company?”

It can be easy to rely on the complexity of the chain as a crutch, that it inherently hampers transparency because of its endless complexities. But that is exactly the attitude, inadvertently in most cases, that ends up with a company’s name splashed across the tabloids in the aftermath of a supply chain crisis. By putting the time, energy and care into the development of sustainable, transparent practices, that risk is, if not eliminated, then severely limited. That’s not only good for the environment, but good for business too.

Building trust: responsible and ethical commitments must be communicated consistently, Anna McAvoy, director, Millward Brown Corporate Practice: When it comes to building advocacy among stakeholders it’s more important that a company deals fairly with its supply chain – a driver for 65% of stakeholders – than provides high quality products and services (52%), according to research from Millward Brown. Responsible behaviour encourages stakeholders to think more positively about companies, and builds trust among key influencers and consumers.

Fast remedial action supported by transparent communication following a crisis is alone not enough to develop or rebuild trust. Supermarkets implicated in the horsemeat scandal, for example, took immediate action to address supply chain issues – but for many this was ‘shutting the stable door after the horse had bolted.’To have lasting impact on perceptions, companies need to commit to sustainable business behaviour. This involves a long-term investment in being transparent and ethical in their activities, and demonstrating this to stakeholders in a consistent and cohesive way.

Organisations must take responsibility for the full length and breadth of the supply chain. Chains are often long and highly complex, but this is no excuse when something goes wrong; stakeholders do not consider ignorance a valid reason for inaction. The toughest challenge for multinational manufacturers and retailers is ensuring all parts of the chain follow the same standards, wherever sourcing, manufacturing or selling takes place.

As well as addressing any issues, plans for improvement should focus on the areas of most concern to stakeholders and the wider public – whether that’s fair wages, safety standards or even the health of workers. Opinion formers and consumers seek assurance that the brands they buy reflect their personal values, and stakeholders desire a greater level of engagement and collaboration with companies on issues of mutual interest. Consistent standard practices and safety regulations should be set.

Top level buy-in and strategic commitment to sustainability are essential. Leadership will need to model the culture, and help it permeate downwards to become part of everyday business.

Companies that make public their sustainability goals and provide regular updates on progress are most trusted, according to Millward Brown stakeholder research. Targets and timetables should be set and made public, and progress against goals measured and shared. Regular, transparent communication about practices, issues and solutions will foster trust.

Opportunities exist here for greater collaboration between retailers and manufacturers. By working together they can address broader issues, such as managing consumer expectations around pricing of sustainable products, and begin to reframe people’s perceptions of value. It could be time to begin to share responsibility for ethical supply chain management and environmental stewardship.

Increasingly, sustainability will stand alongside price, quality and convenience as a driver of consumer choice. It’s something the next generation is discussing already, and organisations have the opportunity to start informing conversations today.