Reducing Risk in Your Supply Chain with Certification

Tuesday, January 5th, 2016
liked this article
RMS (Expires December 31) – new advert
FavoriteLoadingsave article

The issue of ethics in supply chains, particularly in the fashion industry, has been brought into greater consumer awareness in recent times.

As consumers increasingly demand products that are free from slave labour and worker exploitation, businesses are seeking the best ways to keep their supply chains regulated and risk-free. It’s a sentiment that applies just as much to architectural and interior design products as it does to our clothing.

However, according to the recently released Human rights in supply chains: Promoting positive practice report, while many businesses have the aspiration and commitment to address human rights impacts in their supply chains, they lack clear strategies and processes to trace, monitor and address such risks.

Supply chain monitoring grows particularly difficult with increased complexity in those chains, involving multiple suppliers and sub-contractors, who in turn use their own network of other suppliers and sub-contractors. This multi-tiered structure inevitably means that those in charge of overseeing production are faced with the near-impossible task of keeping track of all parties involved and making sure they comply with company policies and all the relevant legislation surrounding ethics and workers’ rights.

Risk-aversion measures are particularly important in the age of social media, where consumers can very publicly call into question a company’s policies. It makes sense for companies to be as careful and transparent as possible, but how can they be absolutely sure their supply chains are being managed properly?

Third-party auditing and certification processes are perhaps the most robust routes to take towards a sustainable, ethical, and well-managed supply chain. Many retailers and manufacturers choose to adopt voluntary codes of conduct, instruct suppliers to self-audit, or sign declarations that pledge to ensure all products are ethically manufactured. While these measures may have the best of intentions, they are a far weaker option compared to third-party auditing, and therefore carry greater risk – particularly if they’re caught out violating those codes of conduct.

Third-party auditing may seem to be a more costly process, but companies can reap the benefits in the long run. While supply chain audits examine processes through an environmental and ethical lens, this approach can lead to cost reductions and improved efficiency as well, such as minimising waste production (and therefore cutting disposal costs), or maximising energy efficiency. For example, The Guardian’s Tom Seal notes that Pepsi Co undertook a carbon management and energy assessment programme in 2010 and managed to discover a potential $60 million worth of energy-savings opportunities. This kind of approach to reduce waste and reduce unnecessary energy use benefits manufacturers just as much as it benefits the environment.

Auditing and third-party certification also bolsters a company’s credibility when it comes to making environmental and ethical claims. Such a certification serves to back up claims with a reputable sign that buyers can trust. The Good Environmental Choice Australia scheme, for example, incorporates criteria for social and ethical impacts into their standards, under which many architectural and interiors products are certified.

As well as being a reputable sign of trustworthiness, a third-party certification scheme provides a level of expertise and resources that may be challenging to match through in-house methods. This is particularly valuable for new or start-up companies, who find it easier to align their new supply chains with the existing guidelines put forward by such third-party organisations right from the start. For these new companies, trust is particularly important in building a customer base, and aligning themselves with a credible third-party is a highly visible way to build trust.

Thankfully, it appears that a lot of companies have their hearts in the right place – the Human rights report also showed that the majority of Australian businesses say they are committed to human rights issues because “it is the right thing to do”, and not just to benefit their bottom line. If all companies keep this kind of thinking in mind, those bottom-line benefits will soon become apparent regardless.

FavoriteLoadingsave article


 characters available
*Please refer to our comment policy before submitting