Sustainable Supply Chains are Good for Businesses, Consumers and the World
By Jorge Zapata Barbara, MBA ‘14
Take a look at the stuff around you. Do you know where any of it comes from? What about the salad you are eating, the shoes you are wearing or the computer you are reading on? As I write this article I ask myself these questions, and the answer is probably the same as yours. I can’t say where a single thing around me came from. I don’t know the country of origin, who made it and how much he/she was paid, what materials or chemicals were used to produce it and so on. Unfortunately, not knowing where the things we buy come from has important consequences for the world and for us.
What We Eat and Wear Impacts Many People’s Lives
I have been passionate about food and sustainability for a long time, but a class on our food systems taught by Professors Michael Pollan and Raj Patel made me realize how little I know about the subject. Being ignorant regarding what we eat has a high cost that is paid by farmer workers, such as those working in the fields of Salinas, California. In one of our class lectures, Professor Brenda Eskenasi from the School of Public Health Division of Epidemiology, UC Berkeley, described her research on the relationship between the levels of Organophosphate (OP) Pesticides in the blood of pregnant woman and the mental ability of their children. She identified that higher levels of OP, a pesticide that is widely used to grow lettuce, broccoli, strawberries and other fruits and vegetables, were linked to poor working memory, reduced visual attention and lower IQ. Fortunately, the use of OPs is declining in the U.S., but this is just one of the many stories that depict poor conditions for farmer workers around the world and how the use of chemicals can affect our health.
Beyond the food industry, unfortunately, there are many other examples of poor supply chain management by some of the top brands in the world. The most tragic one is the death of over 1,000 garment workers in Bangladesh, where a building collapsed a year ago onto workers who make many of the products that we wear every day. Are companies deliberately working with suppliers that exploit their workers? The answer in most cases is no. Multinational companies often work with thousands of suppliers, which makes their supply chains complex, opaque and challenging to manage. Despite the challenges, major brands must be held accountable for their supply chains.
Encouraging Examples of Sustainable Supply Chain Initiatives
However, it is difficult for any one company to have significant influence over its supply chain. A good practice is the creation of industry-wide collaborations, where major brands work together to make positive changes to their supply chains. In the apparel industry, Patagonia has led the way to launch the Sustainable Apparel Coalition (SAC). All of the large apparel companies in the world including Inditex, Gap and Nike are now members of the coalition, which is helping members to adopt tools such as the Higg Index to measure sustainability performance. SAC is a promising initiative that could be replicated by other industries in the future to address issues such as material sustainability, working conditions and environmental performance.
If it is challenging for companies to monitor their supply chains, how can we as consumers be expected to make informed purchasing decisions? NGOs play an important role in exposing companies that have poor conditions in their supply chains, but there are also some companies working voluntarily to bring more transparency to consumers. Timberland now measures all of their products’ sustainability performance with what they call the Green Index. This allows consumers to choose among products, depending on the chemicals used, the impact to climate and the resource intensity needed to make them. Timberland has followed in the steps of companies like Patagonia to use mostly organic cotton, decreasing the impact that conventional cotton has on workers and the environment. New business models and tools that bring transparency to consumers have also emerged. For example, Harvestmark allows consumers to trace where their food comes from, and GoodGuide rates products and companies on health, environmental and social performance.
Companies with Responsible Supply Chains Perform Better Financially
Are responsible supply chains good for businesses from a financial standpoint? Multiple studies have shown a positive link between sustainable supply chains and financial performance. For example, Susan Golicic of the University of Colorado conducted a meta-analysis using over 20 years of research and concluded that there is a positive and significant relationship between environmental supply chain practices and financial performance. Companies that manage their supply chains responsibly are taking care of their employees, resources, customers and stakeholders. This long-term vision drives companies to be more efficient, metric-driven and transparent.
Steps toward a Responsible Supply Chain
Companies that want to make their supply chains more sustainable have to start by measuring where they stand. The Higg Index is a good example of a tool that allows companies in the apparel industry to measure their performance. Transparency should also be an increasing priority for businesses in a world of social media and easy access to information. In this regard, consumers can play an important role by voting with their dollars in favor of companies that are more transparent (even if they are not perfect). Tools like GoodGuide can simplify the process of having to spend hours researching each product. Finally, companies should think more in the long term. In the short run it may be tempting to lower costs by providing cheap products that damage the environment and are socially harmful. However, I believe that companies that respect their workers, consumers and communities will be more competitive over the long haul.
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