(This blog was originally published as part of the FT Moral Money Forum’s report, “So you think you know your supply chain?” co-sponsored by High Meadows Institute. The full report can be read here.)
There is no question that a global framework of strong laws and regulations would be the best way to ensure sustainable supply chain practices. In a fractured global economy, however, with few worldwide or enforced sustainable supply chain standards, progress on better practices will continue to require corporate leadership backed by consumers and the public.
In the past few decades – in response to pressure from investors, consumers and, in some jurisdictions, regulators – most large firms have started to report on supply-chain sustainability. Challenges arise because the issues can be complex and interrelated.
Take, for instance, rare earth minerals. On the environmental side, concern centers on how mining can contaminate the environment and disrupt ecosystems. Wastewater ponds can fill with acids, heavy metals and radioactive material, which may pollute groundwater or poison workers. On the ethical labor front, such resources are often mined in conflict zones or in regions where there are significant human rights abuses and poor environmental protections for workers, such as the Democratic Republic of the Congo and China.
Another example is the fashion industry, where the production of commodities such as cotton, as well as the manufacturing process and its use of chemicals, are just a few of the environmental supply chain issues. Ethical labor practices are also of great concern, ranging from the use of child and forced labor to sweatshops and unsafe working conditions that kill thousands of people a year.
To effectively attend to the environmental issues in both examples, one has to consider how change will affect those who are currently employed. The target must be a just transition for all.
Addressing these issues comprehensively is beyond the capabilities of most individual companies. In the absence of effective regulation, businesses must work with their peers and other stakeholders to create “soft law” and self-regulatory standards and guidelines so that complex issues can be managed in an integrated way.
A good example in the rare earth minerals industry is the Responsible Minerals Initiative. Founded in 2008, its participants include more than 400 companies from 10 industries. RMI sets standards and offers reporting templates that cover a range of environmental and labour practices within supply chains, while also providing independent third-party assessment of smelter/refinery systems and sourcing practices.
In the footwear and textile industry, the Sustainable Apparel Coalition is the leading alliance for sustainable production. Its goal is to empower fashion companies to make improvements that defend the welfare of factory workers, communities and the environment. The coalition has developed the Higg Index, a suite of tools that industry participants use to assess their environmental and social impacts.
These types of industry and civil society collaborations and “soft law” initiatives will play an increasingly important role in advancing sustainable supply chain management.