Supply chain transparency

Why is it important to be transparent about your supply chain?  

Researchers at the MIT Sloan School of Management found that consumers may be willing to pay 2% to 10% more for products from companies that provide greater supply chain transparency. In this study, consumers valued information about the treatment of workers in a product supply chain and the seller’s efforts to improve working conditions.  

Across industries, consumers seek information on product ingredients and materials, where products come from, and the conditions in which they were produced.  

There are new laws pertaining to transparency in Australia regarding forced labour, and a lack of supply chain transparency can now stop businesses cold. 

Steps to supply chain transparency 

1. Engage with your suppliers to get on the same page with your initiatives.  
2. Make the process as easy as possible for the suppliers to provide you with the needed product and data. 
3. Share information with customers around the product, sourcing, and safety. 
4. Organise your products, materials, and supply chain data in a clear, workable way. 
5. Understand the business values of risk assessments and alternatives assessments.  
6. Know what your customers and end users want.  
7. Maintain your data to stay proactive and future-proof your products.  
8. Share your achievements. Consumers want to know that companies understand what goes into the products they make and have responded favourably to sustainability initiatives. 

Benefits of supply chain transparency 

Transparent supply chains reduce reputational risk and enhance your standing as a trustworthy business.  

Responsible companies attract and retain employees. Patagonia and Nike have high rates of job applications and low employee turnover, partly a result of their reputation as responsible companies.  

Customer trust and satisfaction will also increase by being transparent. 

Supply chain transparency case study 

Patagonia’s Footprint Chronicles highlights their environmental and materials programs, social responsibility and where and how their products are made. They also showcase their progress and action towards tackling climate change and fair trade.  

Code of Conduct 

Incorporate a Code of Conduct into your business which includes requirements about supplier practices, including labour practices in place to respect for the environment.  

An example is IKEA’s IWAY Code of Conduct. It sets clear expectations and ways of working for environmental, social and working conditions, as well as animal welfare, and is mandatory for all suppliers and service providers that work with IKEA. 

As transparency becomes more important, companies are requiring suppliers deeper in their supply chain to comply with Codes of Conduct. 

More examples of companies with excellent Code of Conduct practices:  

• Starbucks 
• Sourcemap, a supply-chain-transparency platform that helps manufacturers and brands trace products from raw materials to end consumers and in the process save money, reduce risk, and improve social and environmental compliance. 

Source: Harvard Business Review: What supply chain transparency really mean?