A new study from UT’s Global Supply Chain Institute outlines the best practices for leveraging transparency in supply chains for financial profit.
The study describes six key practices: embracing sustainability as a major business driver, developing a culture of transparency, partnering with sustainable suppliers, ensuring traceability to enable transparency, finding your transparency sweet spot, and employing outside auditing partners.
The company must first have commitments to sustainability as a major business driver and a culture of transparency driven by executive leadership. The report defines these two elements as supply chain integrity.
“Companies don’t need to have their sustainability practices completely figured out,” said Mike Burnette, director of the Global Supply Chain Institute and a co-author of the study, Creating a Transparent Supply Chain. “In fact, many see it as a work in process. But it is important to establish and stick to a set of ideals and goals on which they communicate progress.”
While marketing incentives often provide the motivation for transparency, UT’s study notes that consumer demand for sustainability creates risk in the supply chain. Partnering with sustainable suppliers and ensuring that product materials are traceable are prerequisites to increased communications with the public.
“Consumers want to know where a product came from, all the way to the cashmere goat herd on the slopes of the Himalayas,” Burnette said. “A lack of ability to provide that kind of information in the face of safety or environmental violations can create a negative perception of the brand that may require immediate remediation and could take a brand years to recover from, if at all.”
Poor traceability opens companies up to the possibility of slave or child labor, product contamination, pollution of waterways, or the presence of conflict materials in their supply chains. Divulging supplier partnerships often involves proprietary business information, however, and the report advises finding a sweet spot in communications that brings about trust for both suppliers and consumers.
The SC Johnson Company, one of the best-practice companies interviewed and the sponsor of the report, found that sweet spot allows much greater communication than executives had expected.
“Last year we took an unprecedented step in the industry by launching the first product with 100 percent of the fragrance ingredients disclosed,” said Kelly M. Semrau, senior vice president for global corporate affairs, communication, and sustainability at SC Johnson. “We believe consumers should know a product’s ingredients so they can make educated choices about what they bring in to their homes for their families.”
SC Johnson worked with the International Fragrance Association to establish the ingredients’ safety and sustainability, exemplifying the report’s final recommendation: employ outside auditing partners.
“Companies must choose these partners carefully, but they can never hope to replicate the databases of industry information that sustainability coalitions compile,” Burnette said.
Creating a Transparent Supply Chain is the third installment in the “Innovations in Supply Chain” series from UT’s Haslam College of Business supply chain faculty.
Katie Williams (865-974-3589, firstname.lastname@example.org)
Tyra Haag (865-974-5460, email@example.com)