Increased Transparency Becoming a Business-Critical Initiative

Across industries, we are witnessing a trend of increased transparency throughout the supply chain.  Consumers, public interest groups, and governments are demanding information about the safety and environmental impacts of the products being sold today, and organizations are responding in larger and larger numbers. More and more companies are disclosing greater details about their products and how they are produced.

Much of this change is consumer-driven. Millennials, who recently surpassed the boomer generation in sheer population count, favor ethically sourced goods, and they are speaking with both their money and their voices. More and more buyers are seeking out responsibly and ethically sourced food and products. People want to know where their food comes from and how it was grown. There is also a growing demand for products from companies that are addressing social and environmental issues. In fact, consumers in three of the world’s biggest markets – the U.S., the UK and China – rate “honesty and transparency” alongside price and quality when considering whether to buy a product or brand, according to a survey by Cohn & Wolfe.

Governments have responded with increasing demands for reporting and compliance. A few examples include chemical restrictions and reporting requirements such as the European Union’s Registration, Evaluation, Authorization and Restriction of Chemicals (REACH) and the United States’ Consumer Product Safety Improvement Act (CPSIA); France’s mandatory climate-reporting requirements contained in Article 48 of the French Energy Transition Law; the United States’ Dodd-Frank Wall Street Reform and Consumer Protection Act, which requires disclosure of conflict minerals in products.

Together, these calls to action have shaken the foundation of traditional supply chain management and pushed many companies to reassess and identify their sources beyond just the first-tier factories. Driven by a combination of goodwill, social pressure, market demand, finances, and regulations, many companies are working to obtain greater insight into their supply chains and improved transparency for consumers.

However, even committed companies can find it challenging to obtain the information needed to disclose and report the environmental footprint of their products, materials, and suppliers. Challenges include the lack of internal systems and tools to capture and track the details needed for the many materials and components that make up the products. In addition, many companies only work with the factories that do the final assembly and rely on those factories to select and source the materials and chemicals that go into those products. In order to assess a product, it is critical to know about suppliers and activities much further down the supply chain – in many cases, all the way down to the farms, chemical suppliers, and other producers of the raw materials. These supply chains are complex, multi-layered and constantly changing – they can vary from one production cycle to the next.

For companies just getting started, these issues may sound daunting. As the Taoist proverb states, “a journey of a thousand miles begins with a single step.” That first step in this case could take the form of a pilot with just a few high-volume products from suppliers with which the company has long-standing relationships. Keys to success for a pilot include engagement and active involvement from the product creation and sourcing teams and close partnerships with suppliers. These stakeholders should be involved from the start, and there should be clear and specific accountabilities, timelines, and goals.

Companies have a number of tools at their disposal to move toward collecting, understanding, and reporting product and supplier information. These include tools from industry working groups, non-governmental organizations (NGOs), and private companies. A few examples of tools include the Sustainable Apparel Coalition’s Higg Index, which enables a holistic assessment of supplier, product, and brand performance; the Textile Exchange’s Organic Content Standard, Recycled Content Standard, and Responsible Wool Standard, which provide integrity and verification of product claims through the supply chain; The World Resources Institute’s Greenhouse Gas Protocol tools, which track and disclose greenhouse gas emissions; the Clean Production Action’s Green Screen tool, which enables companies to identify chemicals of high concern and safer alternatives; GreenBlue’s Material IQ (MiQ), which  provides hazard evaluations of product ingredients; the Cradle to Cradle Products Innovation Institute’s certification, which addresses energy, water, and social aspects of materials and products; and Historic Futures’ systems and tools, which collect and manage data for the entire supply chain.

The increasing focus on sustainable business practices is bringing undeniable change to every step of manufacturing and sourcing, from agribusiness to retail. Improving supply chain transparency contributes an essential part of meeting the call for responsive, responsible practices.  Disclosure of environmental impacts enables companies to stand out in their industry, build trust with their consumers, track challenges, opportunities and improvements internally, and assess performance against competitors.