Guest post: Sustainable monitoring in supply chains: it’s time for companies to reconnect with their stakeholders.

21 May 2014 by EcoVadis

We’re glad to welcome a guest post written by Jury Gualandris. Jury is currently Postdoctoral Research Fellow at Bergamo University (Bergamo, Italy), focusing his research on Sustainable Supply Chain Management.

When developing their sustainable monitoring practices, managers should rely on stakeholder engagement for two main reasons: it facilitates the identification of relevant environmental and social goals; it provides the right capabilities for transparently evaluating, verifying and improving sustainability in supply chains.

In the last two decades companies have been required to assure that good environmental and social performance were achieved across their supply chains (MIT, 2009). As a consequence, companies have asked suppliers to certify products, services and processes (e.g., ISO14001, OHSAS18001). Also, buying firms have invested into the development of sustainable monitoring systems, which include: (i) the setting of supplier assessment criteria; (ii) the gathering and processing of supplier information;(iii) the appraisal of environmental and social performance of incoming goods and the suppliers. Despite their efforts, however, buying companies have been often criticized for relevant environmental and social impacts of their supply chains. I believe these issues occur not because buying companies are acting in their own self-interests, but because understanding is still lacking on how to make sustainable monitoring really effective. Most companies do not choose to ignore environmental and social harm, but the complexity is such that their knowledge is often insufficient.

When embarking for the journey of supply chain sustainability, managers ideally need to balance breadth (i.e., number and kind of environmental and social issues included in sustainable monitoring) and depth (i.e., number of supplier organizations covered by sustainable monitoring). Monitoring systems, indeed, may differ in the way they use and integrate product-based and process-based indicators pertaining to different sustainability areas such as environment (e.g., biodiversity, air and water pollution, energy, recycling), decent working conditions (e.g., health and safety, training and education) and Human rights (e.g., child labor, discrimination). Furthermore, since a number of inter-connected companies exists within a firm supply chain, monitoring effort can focus on primary suppliers or, instead, can expand to 2nd or even 3rd tier suppliers. In practice, however, setting and covering the scope of sustainable monitoring is anything but easy. First, stakeholder groups such as Consumers/Customers, Shareholders, Non-Governmental Organizations (NGOs), Local Communities and Unions have different and sometimes irreconcilable sustainability understandings and demands, which makes it difficult to identify the boundaries of a company’s responsibility. Second, supplier opportunism poses a serious problem: past and recent scandals provide evidence of the questionable informations passed between multiple tiers of a supply chain and suggest that suppliers might be adept at gaming the system, turning the typical audit into a ‘ritual of compliance’ (e.g., The case of Levi Strauss and Co. or the recent catastrophe in Rana Plaza, Bangladesh, Surewiecki, 2013). To address these challenges, some famous companies (e.g., Unilever, Shell, BritishTelecom, Novo Nordisk, Chiquita, Vodafone) have started to approach sustainable monitoring in a more inclusive way, engaging broadly with a variety of stakeholders in order to:

1. Clarify the route of their journey. The engagement with a representative group of stakeholders allows to identify relevant issues and anticipate future trends in sustainability. As detailed in ISO26000 andAA1000, guidance may be obtained by means of focus groups managed by the buying firm with an independent party (usually an accounting firm, a consultant, or even an NGO) taking notes and encouraging managerial response. For example, over the last two decades, Suncor, a resource firm based in Canada, has been characterized by the rise of multiple important issues, from habitat preservation, to the exploitation of indigenous workforce in its supply chain, to greenhouse gas emissions. The company managed ambiguity characterizing stakeholders’ evolving concerns by engaging with the Pembina Institute for Appropriate Development, thereby enabling the firm to accumulate skills to deal with other more radical activist groups and their sometimes ambiguous concerns. Thus, engagement ensures the balanced and complete portrayal of all the environmental and social issues stakeholders themselves believe to be critical!

2. Leverage stakeholders’ capabilities along the journey. Because of its strategy, priorities and past decisions, companies may not have in ‘house’ the right set of capabilities needed for evaluating and improving sustainability along their supply chains. Expertise in sustainable operations is indeed accumulated during time and depends on the amount of personnel’s education, experience and professional training in initiatives related to environmental management systems, eco-design, health and safety and codes of conduct. To overcome such a barrier, buying companies collaborate with activists and similar stakeholders groups, which have pursued the mission of sustainability since their foundation. For instance, according to the last available report published by Oxfam (2013), the collaboration with Unilever has been necessary because self-assessments and site visits performed by the focal firm were not always sensitive to social issues (e.g., the vulnerability of some workers). Beyond providing guidance on the relevant issues to be addressed, thus, stakeholders might even direct or assist with the development of audits throughout the supply chain on behalf of the firm.

Along the lines of financial assessments where creditors are engaged to find out their views on the given company and suggest ways for improvement, sustainable monitoring is maturing and moving gradually from limited to broad stakeholder engagement (e.g., European Commission, 2014; Global Reporting Initiative, 2013). While a broad engagement absorbs resources and time (e.g., due to proper coordination), firms can benefit from relevant and reliable information about supply chain constituents and share the increased cost of assessment and verification activities with stakeholders.

Jury Gualandris, PhD

He is currently Postdoctoral Research Fellow at Bergamo University (Bergamo, Italy), while soon will be Lecturer in Management at UCD School of Business (Dublin, Ireland). In 2013, He has visited Ivey Business School (Ontario, Canada) for a project about ‘sustainability evaluation and verification multi-tier supply chains’. He also collaborates with the European Institute of Purchasing Management (Genève, France), leading a project on ‘purchasing and value creation’.

Jury co-authors a blog on Global Supply Chain Management: globalscmanagement.wordpress.com

Further readings:

1. European Commission, 2014. Disclosure of non-financial information by certain large companies. Available at: http://europa.eu/rapid/press-release_STATEMENT-14-29_en.htm?locale=en

2. Global Reporting Initiative, 2013. Sustainability Reporting Guidelines. Stichting Global Reporting Initiative (GRI), Amsterdam, The Netherlands. Available at: https://www.globalreporting.org/resourcelibrary/GRI-Assurance.pdf

3. MIT, 2009. The business of sustainability. Available at: www.mitsmr-ezine.com/busofsustainability/2009

4. Oxfam, 2013. Labour rights in Unilever supply chain: from compliance towards good practice. Available at: http://www.oxfam.org/sites/www.oxfam.org/files/rr-unilever-supply-chain-labor-rights-vietnam-310113-en.pdf.
5. Surawiecki, J., 2013. After Rana Plaza, The New Yorker. Available at: http://www.newyorker.com/talk/financial/2013/05/20/130520ta_talk_surowiecki?prin

6. Gualandris, Golini and Kalchschmidt (2014). Do supply management and global sourcing matter for firm sustainability performance? An international study. Available at: https://www.researchgate.net/publication/260823660_Do_supply_management_and_global_sourcing_matter_for_firm_sustainability_performance_An_international_study 7. Gualandris and Kalchschmidt (2014). Customer pressure and innovativeness: their role in sustainable supply chain management. Available at: https://www.researchgate.net/publication/260828622_Customer_pressure_and_innovativeness_their_role_in_sustainable_supply_chain_management

8. Gualandris, Klassen, Vachon and Kalchschmidt (2013). Building credibility into sustainable supply chains: towards a conceptual framework. Available at: https://www.researchgate.net/publication/239938660_Building_credibility_into_sustainable_supply_chains_towards_a_conceptual_framework?ev=prf_pub