21 Oct 14

How well do you understand the risks in your supply chain?

supply_chain_risksIn the past few years the sustainability landscape has shifted. Previously, organisations were primarily focused on getting their own house in order, so looking at their own emissions, their own impacts and what their employees were doing. As organisations have matured, they're definitely starting to look  further into their supply chain. Now, they're looking beyond their front doorstep to the wider boundaries of reporting and evaluating what their suppliers are doing.

What are the risks in your supply chain that you need to understand?

This means looking at a variety of the risks that suppliers can present, including environmental and social. For companies that are reporting to various CSR frameworks, they have to consider environmental impacts and supply chain risks. As part of CDP, for example, you report on the climate change risks for your organisation. Within GRI, you report on environmental impacts, including supplier environmental impacts and environmental assessments in the supply chain.

Therefore, if your suppliers are working in countries where there are climate change risks around, say flooding, or if you're working with raw materials, and those raw materials are in threat of depletion, then that's obviously a business risk to the organisation. But there's also an environmental impact there that needs to be considered in terms of how your suppliers interact with nature, natural capital and ecosystem services to then provide their supplier services to you.

There is also a social pressure to consider. There are a lot of instances where companies have been in the media because of their supply chain issues, particularly in areas such as textiles and clothing. You've got organisations that have been thrown into the media spotlight around this, which has put a social pressure on them to get a better handle on where their supply chain impacts are. Better than a reactionary approach to negative incidents is a process of proactive engagement with suppliers,

How can you ensure you get relevant information from all your suppliers?

In a lot of instances, organisations will already be asking the right questions or have most of the right questions. But because so much time is spent on gathering the information using an offline process, time to focus on the analysis of supply chain impacts is compromised. The traditional time constraints that are associated with collecting supplier information mean that organisations will tend to focus on their top-tier suppliers - the top 10 or maybe top 20 that they have a good relationship with.

But actually there needs to be a fundamental shift, so the process of gathering all of this information can expand to cover the whole supplier base.

A key part of this succeeding is having really good relationships and contacts with your suppliers. It's no good trying to send questionnaires to info@companyX because you're likely to be ignored. Nurturing contacts and engaging all suppliers means you can get down to those smaller suppliers that you might not have necessarily considered before and ensure that you are investigating potential risk in all parts of your supply chain.

This isn’t necessarily the suppliers you're spending the most money with because sometimes the organisations you are spending less with can incur more operational risk involved when you’re dealing with them. In particular those smaller ones that you might be spending less money on, particularly SMEs, in some ways, are more likely to need help with these areas of risk. The larger players that you're spending a lot of money with, are often large buyers themselves and therefore more likely to have the internal processes in place to understand and mitigate the risk in their own supply chain.

SupplierPortal contact

Subscribe to the Greenstone blog

[image credit: The Fayj]

Supplier Management

Sign up to Greenstone's blog updates