Transparency throughout the supply chain is likely to dominate in 2021 and beyond, as consumers look for brands that can build trust, provide authentic and credible products, and create shopper confidence in the current and post-COVID-19 climate. Some years ago, the origins of a company’s products were quite unclear, and beyond the supply chain function, nobody seemed to care. But people are becoming more informed and have greater and easier access to the internet, social media and news across the world.
The trend for more transparency can not only be seen within communications between companies and consumers, but also in workplaces. Transparency fosters a workplace culture of open communication and accountability. In return, consumers will give businesses loyalty and trust. It can drive exponential progress and promotes all-round satisfaction for employees and employers.
Obviously, transparency has many facets, and oftentimes it means a different perspective depending on context. The four most important today are reliability, ethics and the environmental impact.
Reliability
In these times of uncertainty, being forewarned is forearmed. Choosing the right way forward has become a case of risk-assessment, and supply chain transparency can help to negate some of that risk early on. One thing the pandemic taught us is that it is very hard to make a quick (and good) decision if there is a lack of information. During these times, things can also change very quickly. While the management of Covid-19 inoculations is not the kind of supply chain story you would immediately think of, it is a good example of another supply chain issue. Due to the immense scale and magnitude of the global COVID-19 crisis, tracking inoculations throughout the supply chain effectively, all the way to each immunized person, is paramount. Failing to accurately track vaccine processes could delay shipments or even lead to patients missing the vital second dose of the vaccine.
Another issue due to pandemic restrictions is when major carriers in 2020 saw a steep drop in traffic of seaborne containers – many of which cross the oceans supporting global supply chains and transporting goods due to the pandemic and global lockdowns. This has impacted economic activity in the US and Europe which are the biggest markets for Asian exports of manufactured products. By May 2020, almost 12% of the entire global fleet was idle and sailors were stranded at sea. Liner companies anchored ships and cancelled hundreds of sailings, all of which resulted in the reduction of available capacity. The most popular shipping containers such as the 40ft high cubes were especially in short supply at Chinese depots. For companies in the US or Europe which relied on the products being produced in China, it was hard to tell when those products would arrive at their destinations or if it was necessary to order from somewhere else.
Some economists have speculated that COVID-19 could spell an end to the golden era of globalization, a period in which containers have been an integral part of. Despite the industry demonstrating considerable resilience, with the rise in e-commerce giving it a boost, the likelihood of shorter (and more reliable) trips within regions on smaller vessels is an indication that globalization may be changing.
Ethics
An ethical supply chain focuses on the need for corporate social responsibility and works to produce products and services in such a way that it treats its workers and the environment in an ethical way.
However, there are companies who have been accused of unethical practices. The online UK fashion brand BooHoo came under fire again in 2020 after alligations over the company paying their staff less than minimum wage came to light. An investigation revealed garment workers were being paid as little as £3.50 an hour and a factory in Leicester forced workers to come into work even when sick with Covid-19. The ultra-fast fashion brand were also criticized for producing poor quality £5 dresses, fueling the throwaway culture where 400,000 tons of clothing end up in UK landfill.
Other unethical practices making last year’s news is the Muslims from China’s Uighur minority group working under conditions that highly suggest forced labor at factories that supply some of the world’s biggest brands. These were at least 82 well-known global brands such as Apple, BMW, Huawei, Nike and Samsung. In a report from March 2020, it was estimated that China has already detained around 1 million Uighurs at internment camps, punishing and indoctrinating them.
According to a report by the Australian Strategic Policy Institute, foreign and Chinese companies were possibly unknowingly involved in human rights abuses. ASPI has called on companies to conduct immediate and thorough human rights due diligence on their factory labor in China. Beijing has faced growing international pressure over this issue.
There is still a long way to go to move towards an ethical supply chain, but the bottom line is that an increasing number of consumers are demanding social responsibility from companies, and more companies are starting to realize they need to take things further to reach a more ethical supply chain. Ethical supply chains are good for business, as customers will give their loyalty and trust in return. Those who don’t invest are at risk of being left behind.
Environmental impact
With global supply chains growing and being more complex as consumer demand increases, this greater need for products, ingredients and raw materials puts pressure onto the environment.
Awareness of sustainability is becoming more normalized, but there is still a long way to go to achieve environmentally sustainable goals, such as carbon neutrality. According to McKinsey, supply chains create far greater environmental costs than its own operations, accounting for around 90% of the impact on air, land, water, biodiversity and geological resources. In many cases the whole environmental costs are not obvious, but with companies and consumers placing supply chains under scrutiny in the coming months and years, this type of transparency over the whole supply chain will become more important. And it is very likely that this topic will gain more momentum when the pandemic is over and consumers will again turn their eyes to the other big challenge that we and our planet are facing right now.
Introducing more sustainable supply chains is seen as good practice, it will improve regulatory compliance, enhance business branding and reputation, reduce waste and overhead, as well as reassure consumers on sustainable environmental sourcing.
Sustainability in the supply chain is a complex issue, one that is not easy to solve. But by introducing transparency, it ensures suppliers that your business is using sustainable sourcing. Managers need to see how suppliers are extracting and producing raw materials, and e.g. blockchain technology can be a useful way to capture and verify supplier sourcing practices.
Consumers will be – more than ever – searching for brands that can build trust, provide authentic and credible products and create shopper confidence. The speed of reaction and the efficacy of response will decide the outcomes for companies in 2021. Natural and human capital will continue to rise up the agenda in line with consumer and shareholder expectations. Bringing transparency into communications with consumers and shareholders will be key to meet those expectations. Companies should “act and tell” in order to be successful in the increasingly demanding global market.
