Growing Challenges in Supplier CSR Monitoring are Being Met with Powerful Digital Solutions

February 28, 2016 EcoVadis

Note: This blog was originally posted on

Avnet’s Supply Chain Navigator, February 2016.

Supply chains become ever more complex and global, while at the same time the spotlight on transparency and innovation around Corporate Social Responsibility (CSR) is shifting to the supply chain. Regulations and laws demanding supplier due-diligence are expanding, from UK Modern Slavery Act, and proposed laws like EU Conflict Minerals, to France’s Devoir de Vigilance Bill and related proposed laws like HR 3226 in the US and elsewhere. These trends are exposing even more potential risks to brand reputation, supply disruption and increased costs or volatility. This is creating a ‘triple-whammy’ of imperatives for procurement teams — and their trading partners — to monitor and manage risk, while at the same time exposing new sources of value that will be the key differentiators in the future.

But assessing and monitoring the CSR practices of suppliers worldwide poses tough challenges for procurement teams, across these dimensions:

Geographic diversity

Large multi-nationals’ supply bases often span 100 countries, each often with differing laws and regulations, in dozens of languages

Breadth

Supply bases cover 100’s of purchasing categories, each posing a different mix of CSR risks and issues.

Depth of criteria

There is a deep spectrum CSR assessment criteria to cover, including Environmental, human rights and social issues, ethics and fair business practices issues such as anti-corruption/anti-bribery, and how those business partners are monitoring their own supply chain.

Often when procurement teams implement these programs internally, they must acquire or develop new resources, tools, and expertise in CSR and supplier engagement.

This also poses challenges for suppliers, such as: Redundant surveys from each client; Questionnaires are often not adapted to their business category, size or location; The lack context for understanding their performance relative to others, or how to set expectations; An absence of feedback and guidance needed to drive improvements.

The solutions to these challenges are beginning to emerge, through a potent mix of expertise, and digital technology. Here are some areas of advancement that digitization will bring to bear:

  • Scalability: internal supplier CSR monitoring initiatives are often focused on engaging a few hundred vendors. Technology will play a key role in scaling up this mission to engage the more than 40 million companies on the planet.
  • Continuous improvements: traditional compliance approaches are often based on one-off audits. Digital technologies are enabling real-time monitoring of performance, and measure ongoing progress on key sustainability indicators.
  • Dynamicity: supply chains are highly dynamic as vendors/contracts change constantly, and this is growing exponentially if you look at Tier 2 or further levels up the supply chain; Technology solutions are emerging to help maintain/map both the commercial relationships and the sustainability impacts as these relationships shift.
  • Transparency & Traceability: new technologies, such as “Block Chain”, can track the provenance of goods throughout the supply chain from raw materials, to factories, laborers, logistics, and through branding and distribution. Additional data such as sustainability indicators, can be attached at each step in the chain.
  • Big Data: the diversity and volume of sustainability information being made available on social media, labor unions, environmental watch groups and other NGO’s is also generating mountains of data. This creates a huge opportunity to mine this data, and as well to analyze and map it against spend data to derive real-time insights to guide better business decisions.
  • Open Networks and Apps platforms and API integrations: These are connecting data (such as monitoring indicators from the supply chain) with apps to integrate into, and improve procurement functions. Examples include using sustainability scores in apps for supplier financing, sourcing and RFX functions, or having a “live sustainability KPI leaderboard” to stimulate improvements.

We are eager to see how these new trends in digitization will drive sustainable supply efforts forward and help procurement teams with real tangible benefits. Operational examples include reduced risk of supply chain disruption, protecting brand reputation and lowering costs (for example, collaboration on packaging reduction). At a strategic level, they can help build supplier relationships that give the purchasing organization a competitive advantage, by identifying the best suppliers to invest in and innovate with.

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This article was contributed by Frederic Trinel, Co-founder and co-CEO, EcoVadis.

Frederic is an international entrepreneur in the areas of Global Trade, Software and Human Resources. Prior to starting EcoVadis in 2007 he was a founder at four companies, all in activity today, operating in Asia, Eastern Europe and the UK. Frederic’s last venture was Mr. Ted Ltd, where he was COO in charge of Technology & Operations. With EcoVadis Frederic has enjoyed combining a layer of IT technology with CSR expertise and a robust assessment methodology to create a CSR rating network that is reliable, scaleable and integrates to procurement systems.

EcoVadis is the first collaborative platform providing sustainability ratings and performance improvement tools for global supply chains. EcoVadis’ easy-to-use CSR scorecards help companies to monitor suppliers’ environmental, ethical, and social practices across 150 purchasing categories and 110 countries.

Over 120 industry leaders such as Verizon, Merck, Coca Cola EnterprisesHeinekenJohnson & Johnson, Renault-Nissan, ING Bank, and Nokia use EcoVadis to reduce risk, drive innovation and foster transparency and trust among over 20,000 trading partners. www.ecovadis.com

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