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Ethical Supply Chains –
Our tipping point: companies who lead must be bold.

| 4 min read

At GoodOps, we believe transforming global supply chains to meaningfully address environmental and social issues is the fastest way to change the world. But systemic change is complex and a range of multidimensional approaches are critical to ensure success. We bring diverse groups of supply chain leaders together for intimate salons in order to achieve this goal. Every salon explores the strategies, models and technologies they are applying to create a more sustainable future. Last week, we gathered 20 leaders from Fortune 500s, high-growth startups, international organizations and academic institutions across a range of industries and regions. Our focus was the rise of ethical supply chains.

It is critical that companies improve the lives of their workers and communities through the development of more ethical supply chains. It is estimated that 80% of world trade and 60% of production runs through multinational company supply chains. In terms of global workforce, more than 20% have jobs in a global supply chain. Drilling down into 50 of the world’s largest companies, it is estimated that they directly employ just 6% of the workers in their supply chain. The remaining 94% of their “hidden” workforce is at least 116 million people. Within those jobs, over 50% are estimated to be exploitative with poor conditions, including long hours, dangerous working conditions, forced labor, low or poverty wages and informal work.

Broadly, this group of supply chain leaders who are setting the future of business, culture and government expressed that we may have reached a potential tipping point. A tipping point is defined as a series of small changes or incidents that become significant enough to cause a larger, more important change. The leaders gathered shared perspectives that pointed to a convergence of key trends that were accelerating the rate of change. These trends included increasingly conscious and demanding consumers, shifting executive mindsets, stringent regulations with criminal prosecution of bad actors and accelerated supply chain digitization efforts.

Below is a summary of what the leaders highlighted across these key trends:

  • Companies will no longer be able to avoid responsibility for their end-to-end supply chain networks. Deflecting criticism or risk by saying abuses occurred outside their direct employee base will fall flat and fail to satisfy conscious consumers, employees and investors. Proactive companies are already going beyond 1st tier suppliers to predict and address social issues from materials sourcing through final mile delivery. Most critically, they are directly engaging workers and performing onsite audits to avoid the risks inherent in company or supplier self-reporting where there is no 3rd party verification.
  • Consumers are arguably the most powerful lever in driving adoption of ethical supply chains. They are putting their money where their mouth is by purchasing responsibly made products as well as demanding more accountability from the brands they support. Companies will thrive by reducing information friction and helping consumers make ethical purchasing choices. The leaders also predicted a rise in employee movements, with consumers no longer checking their personal beliefs at the door when they come to work.
  • Governments will establish criminal consequences for brands who allow illegal activity in their supply chain, especially when it comes to modern day slave labor. It was predicted that governments may increasingly hold not just companies but executives themselves responsible for worker wages, equality and safety. In addition, incentives must be created for ethical companies to accelerate compliance.
  • Investors must more consistently check and confirm that the brands they invest in are ethically sourcing and producing their products and services. They must make a commitment to investing in companies that are rigorously audited and disciplined in their approach. It was predicted that the next 2 years will see a rise in mass investment screening tools that will identify shareholder activism opportunities and reallocate portfolios to avoid negative impact or support specific causes they care about. There will be a rise in funds that address supply chain sustainability in particular.
  • Technology solutions are the key to giving companies end-to-end visibility and scaling ethical supply chains. Technology platforms and tools focused on worker empowerment, product traceability, ethical sourcing and risk mitigation will become a core component of any technology stack. The resulting data and insights will be especially beneficial in supporting CEO and brand activism as well as consumer movements.

Companies that wish to lead in the future must take immediate action. First, analyze your industry and extended value chain to identify the greatest risks and opportunities for impact. Next, collaborate with value chain stakeholders to create an integrated roadmap for sustainable change across your strategies, systems, processes and culture. With a clear vision for the future, you can build the necessary capabilities, teams and partnerships to ensure success.

Do you think we have reached a tipping point for ethical supply chains? Want to get involved in the work GoodOps is doing? We’d love to hear from you.

—
The GoodOps Team
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