The term ‘supply chain sustainability’ refers to the management of environmental, social, and economic impacts, and the encouragement of ethical governance practices in the supply chain. Managing supply chain sustainability is not only the right thing to do in terms of ethical business practice; it also makes good business sense. Regulatory and consumer demand for transparency in the supply chain increases. Businesses of all sizes need to look at the sustainability impacts of their business operations through the value chain. Below we outline how UNGC and GRI can help organizations get a better understanding of, and report on, the impacts of their supply chain.
The UN Global Compact
The UN Global Compact (UNGC) is a United Nations initiative to encourage responsible business. Supply chain sustainability can be applied through its 10 principles, covering human rights, labor, the environment, and anti-corruption. Companies who are signatories to the UNGC are required to communicate annually with stakeholders on their progress towards implementing the UNGC principles. This is carried out through a Communication on Progress (COP) report.
The UNGC recommends embedding the 10 principles into a supplier code of conduct. Sample policy areas for a UNGC-aligned supplier code of conduct are given below. The list is not exhaustive and companies may need to consider additional impact areas depending on their situation.
Organizations should identify relevant impact areas based on their sector, and tailor supplier codes of conduct accordingly.
The UNGC website contains a number of documents. The aim is to guide organizations through the process of establishing a supplier code of conduct that aligns with UNGC principles.
Companies need to establish a supplier code of conduct to reflect areas material to CSR and business risk. Then, the Global Reporting Initiative (GRI) provides a framework to allow organizations to measure and report on key impact or risk areas.
GRI G4 Guidelines
The GRI G4 guidelines enable organizations to report on direct business impacts. In addition, they provide a platform for reporting on supplier-specific aspects of procurement practices, and supplier environmental impact. As well as supplier labor practices, supplier human rights, and supplier impact on society.
Each area requires reporting on the percentage of suppliers screened, assessment of actual and potential impacts, and remedial actions taken. GRI is improving awareness and transparency in each of these key areas. In doing this GRI is enabling businesses to achieve a level of supply chain governance that helps prevent reputational and regulatory risks. This ethical and sustainable approach may also drive additional business benefits. These may include increased efficiency and productivity, as well as improving the quality and reliability of value chain partners.
In Summary
Both the UNGC and GRI provide a set of guiding principles for considering supply chain sustainability. Organizations must have a clear procedure in place for measuring and tracking performance. This will enable them to report on their supply chain. Companies need to establish exactly what data needs collecting, how that data will be collected, and finally how the data will be used.
Reporting through frameworks like the UNGC or GRI provides a source of best practices for analyzing sustainability performance, enables benchmarking with respect to performance standards or initiatives, and by going through the steps required to report, encourages self-evaluation and improvement.
For advice on what you need to consider when moving your supplier data collection process online, please read our previous blog article on the subject.
