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Transparency in the Supply Chain: Time to Act.

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Governments and organisations are being more and more pressed with the concept of transparency. New items of legislation to promote transparency within procurement should not be treated with annoyance but should serve as a springboard for businesses to look within their own company at ways to improve the transparency of their own supply chains.

Customers have shown a complete willingness to support brands who are transparent and are socially responsible. Bringing about total transparency won’t be easy but we, the procurement industry, are uniquely positioned to have an impact that could benefit thousands of lives.

Issues such as slavery, child labour and eco-destructive practices in the supply chain have the potential to cause national outcry in a way unlike any other high-impact procurement risk. It can drag a company’s brand name through the mud and impact its financial earnings.

In May 2015, Malaysian police found 139 bodies of victims who had been smuggled over the border in order to be forced to work. The fishing industry in Thailand, worth a billion dollars, has received a spate of arrests and is under the threat of an EU-wide Boycott. Companies from 20 countries have been, and might still be, involved in the supply chain of components that end up in ISIS explosives (a preview of a feature in the May/June issue of Procurement Leaders Magazine). Modern slavery affects an estimated 29.8 million people around the world according to the Global Slavery Index. These are worldwide issues that have the potential to affect any company.

What’s being done so far? With the UK’s Modern Slavery Act 2015, the Dodd-Frank Act in the US and the California Transparency in Supply Chains Act, governments are realising the importance of transparency within supply chains and the horrific impacts that can come about.

 

However, according to Duncan Jepson (speaking with CIPS) who worked in legal and compliance departments in the finance industry for 15 years after working in purchasing and supply, in comparison to finance, purchasing and procurement environments aren’t heavily regulated. He criticises the lack of criminal charges for laws related to human trafficking. As such, there is a need for companies to take it upon themselves to self-regulate and inspect their own supply chain.

Procurement, along with many other sectors, is becoming more and more transparent in order to build trust in the company brand. Brand transparency is increasingly growing in importance within companies due to customers’, especially millennials, relationships with brands.

Millennials, those born between 1981 and 1996, are incredibly brand-sensitive according to the report Millennials and the Changing Consumer Landscape by The Boston Consulting Group. A large part of a millennials choice of brand can focus on the importance of “brand purpose” within a company, and companies which excel in their corporate social responsibility can gain lifelong customers who won’t flip-flop between brands.

Andrew Wallis, CEO of anti-slavery non-governmental organisation Unseen, told CIPS that “The brightest and best will ask you about responsible practices and if you don’t have a clear enough answer in the next 10-20 years, you’ll be toast.”

Multi-tiered supply chains make the process of transparency throughout the supply chain complicated, but avoiding issues of slavery, amongst others, in the supply chain can have both immediate and long-lasting effects on a business.

UK Home secretary Theresa May said in the foreword to UK Act "It is simply not acceptable for any organisation to say, in the 21st century, that they did not know. It is not acceptable for organisations to ignore the issue because it is difficult or complex. And, it is certainly not acceptable for organisations to put profit above the welfare and wellbeing of its employees and those working on its behalf.”

While researching this article I found quotes from members of the procurement industry asking for more time to prepare for the UK’s Modern Slavery Act or stating that the laws were impossible to meet. My response to this would be to consider this law a call to arms. Go out and look at ways to provide real-time information at every tier of your supply chain. Collaborate and learn from your peers. Engage with the issues and better educate yourself on everything you can do to improve transparency within your organisation.



This article is a piece of independent writing by a member of Procurement Leaders’ content team.

Jonathan Webb
Posted by Jonathan Webb