Globalization has evolved the way supply chains work: large companies have complex supply chain networks scattered across the globe. Due to this, transparency has become a real problem: top level executives are having trouble with visibility, unsure of what is going on in their production processes.
Recently, we have seen a shift towards sustainability in global supply chains. This is in line with today’s consumers, who may opt for companies they perceive as more ethical and sustainable. Alongside consumers, a study by Massachusetts Institute of Technology found that corporations and governmental authorities are also placing increased pressure on more sustainable and ethical business practices. When asked about their firm’s commitment to sustainability, 30% of employees said that commitment had increased while 47% said it remained the same, regardless of the pandemic. Additionally, in 2021, the German government ratified The German Supply Chain Act, which required companies conducting business in Germany to meet the standards set by the United Nations and the OECD.
This information showcases the desire for more sustainable business activities, but has this shift in priorities really resulted in better practices?
Many corporations have established their own sustainability initiatives that their first-tier suppliers must follow. However, the same does not apply to second-tier suppliers or smaller suppliers. A global study regarding second-tier suppliers of “green” multinational corporations conducted by the Harvard Business Review found that many suppliers lacked proper environmental management systems. Social problems were also apparent such as supervisor misconduct, sexual harassment, and poor working conditions.
To resolve these issues and move towards a positive change, real-time transparency across the supply chain is a necessity. To achieve this, the integration of technology into the supply chain is important, whether it be AI, machine learning, or data analytics. New technologies are being developed every day to help businesses solve issues and improve processes via real time visibility. Suppliers must also be integrated into this system for a truly holistic approach to take effect. Digitization will allow for more resiliency and efficiency across the supply chain, as well as quicker decision making, and the ability to find patterns that previously could not be perceived. Through this new system, sustainability practices can also be monitored, and enforced.
The trends of sustainability and transparency in supply chains are here to stay. In one study conducted by McKinsey Consulting , 90% of respondents believed that within the next five years they would overhaul supply chain planning, with more technological integration across touchpoints. Firms that adapt will likely rise to the top of their respective industries. Others, that choose to go against the grain, will face problems similar to those at the start of the pandemic.
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