Ethical supply chains: more style than substance?

Many companies are eager to promote what they are doing to create ethical supply chains, such as sharing best sustainability practices with suppliers, incorporating social responsibility metrics into supplier audits, and improving "supply chain transparency," to name a few examples. A new report from The Economist Intelligence Unit, however, suggests that—for the majority of global businesses, at least—these efforts remain superficial.

According to "No more excuses: Responsible supply chains in a globalised world," sponsored by Standard Chartered Bank, four in five executives surveyed say they have a "responsible supply chain"—yet less than one-quarter of their companies have supply chain policies in place to address long-term issues such as child labor, climate change, or gender inequality. Furthermore, 30 percent of firms have actually decreased their focus on supply chain responsibility over the past five years, according to the study.

The report recognizes the difficulty of monitoring a supply chain's social and environmental impact when it may include thousands or even millions of suppliers. Even so, executives generally have "unwarranted confidence" about how responsible their supply chains really are, the report asserts.

To better support social responsibility in global supply chains, the report recommends, companies should make better use of digital technologies to map and monitor their supply chains, and they should collaborate more with other companies on setting standards. Only 27 percent of respondents are willing to cooperate with noncompetitors to raise supplier standards, and only 23 percent are willing to cooperate with competitors, the study found.

The study surveyed 100 respondents from each of the following markets: China, Germany, Hong Kong, Italy, Japan, Singapore, South Korea, and the United States. Nearly 40 percent of respondents held a C-suite or board member position, while the rest held manager-level positions. In addition, more than 50 external experts and practitioners were consulted through interviews or in roundtable discussions.

As a complement to the report, The Economist Intelligence Unit has also released a 15-minute documentary, "Sourcing Transparency: Who should clean up supply chains?" The video addresses the California Transparency in Supply Chains Act and other efforts to reduce human trafficking.