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Channeling Influence: Supply Chain's Evolutionary Role in Corporate Social Responsibility

May 9, 2016
Going beyond the Triple Bottom Line in CSR can lead to substantial benefits to a company.

As corporate social responsibility (CSR) continues to gain global attention, it's clear there are many voices influencing the conversation. Investors and stakeholders, legislators, regulators, and consumers all have a vested interest in corporate consciousness initiatives, but it's the supply chain that continues to play a major role in influencing the evolution of CSR. For many supply chain leaders, CSR requires a deeper and more purposeful integration into their operations, but it's not been an easy journey.

At first glance, the focus on the supply chain as the key driver of corporate consciousness comes across as scrutiny. In reality, supply chain leaders have the most influential voice in the CSR conversation, and can be the gatekeeper of getting sustainability and corporate consciousness initiatives off the white board and into action. The scope of the supply chain's role in CSR is not limited to regulation and implementation. There are significant benefits inherent in these initiatives that have direct benefits for the supply chain while positively impacting people and the planet.

CSR's greatest influence in the supply chain requires a deeper, more purposeful commitment from the entire organization—one that that goes beyond the Triple Bottom Line philosophy of accounting for people, planet and profits to having greater transparency while ensuring sustainability. Global enterprises, with their expansive geographic footprint, appear to be the pioneers of CSR. However, as demands increase for transparency and sustainability in the supply chain, companies of all sizes must keep pace.

The demand is clear: Establish a fully traceable, transparent and sustainable supply chain. What is not so clear is how this mandate can actually help supply chain operations innovate and influence more impact and purpose from CSR programs.

The fact is, going beyond the Triple Bottom Line in CSR actually helps influence and drive innovation in the supply chain and holds opportunities for substantial benefits to the business.

Here are five benefits to CSR that supply chain leaders should consider:

1. Protect the Supply Chain—So much of a business's profitability lies in the efficiency of its supply chain processes. While a flat economy model of "use to produce" would call for keeping operational costs as low as possible, the Triple Bottom Line is built around a completely different equation. Working conditions, wages, licensing and permits, ecological impact from production and transportation—these are the factors that should be evaluated at every stage and within every link in the supply chain for resilience, resistance and ability to recover should an interruption occur.

A recent survey of supply chain leaders by PWC Global shows that 60% of respondents say that key performance indicators (KPI) had dropped by 3% year over year as a result of supply chain disruptions. This is a KPI that businesses can't afford to allow to trend negatively.

Going beyond the Triple Bottom Line brings greater responsibility, but it also brings greater visibility to all aspects and implications of sustainability in the supply chain. Having full transparency into supply chain operations including partners is not just about conforming to regulatory standards; it is a means to protect the supply chain itself. If your supply chain is to be effective in meeting CSR standards, it must be operating at the highest of ethics. Furthermore, if there are risks that can be avoided or prepared for, it is in the best interest of every link in that chain to take immediate action.

2. Boost Collaboration with Suppliers—The regulatory aspects of CSR call for businesses to initiate on-going conversations with suppliers and to work in cooperation towards greater transparency. While these conversations are absolutely essential to achieving effective CSR, they also have a highly-beneficial by-product: better collaboration and greater opportunity for innovation, efficiency and cost savings.

Of course, this is dependent on the proper approach. True collaboration, bi-directional exchanges, and defining shared goals and expectations should be the guiding standards for partner relationships. Stronger supplier relationships can also uncover potential improvements in product quality in addition to processes that will in turn propel KPIs in the supply chain.

3. Establish Brand Authenticity—Consumers and investors are too savvy to accept isolated acts of charity as bona fide corporate responsibility. A paper goods company that plants 100 trees in Detroit while across the globe destroys 100 acres of trees in a rain forest is certain to be accused of nothing more than a publicity stunt. If Leonardo DiCaprio can't make a plea from the Academy Awards' stage for a cleaner planet without having his own carbon footprint publicly scrutinized, no corporation will get away with it either.

When CSR initiatives are mission-driven and business critical, authenticity is established. Authenticity is enduring and builds trust, which begets loyalty. While the paper company in the example was on the right track to invest in much-needed reforestation, it reads as disingenuous because the deed occurs outside of its actual supply chain processes.

Negative public relations, though damaging, is only one casualty of duplicitous, one-sided CSR. Such actions can open up legal liabilities and human rights violations which are costly and will a have lasting, harmful impact.

What's more, an opportunity is missed to reinforce and reinvest in the supply chain through corporate social responsibility. How could the paper company have acted instead? Replanting in the rain forest would be a step in the right direction.

However, investing in research for how production may be improved to minimize impact on those regions and implementing those changes would produce an opportunity to reinforce and reinvest in the supply chain while making principled contributions to CSR.

4. Attract and Retain Loyal, Happy Employees—As the job market becomes more competitive, the need to attract and retain qualified employees will depend on more than salary and benefits. According to recent research published in the Harvard Business Review, a business's contributions to its community made the list of five intangible factors employees look for in an employer, alongside trustworthiness, fairness, a sense of belonging and a good work/life balance. Just as consumers are expecting businesses to operate responsibly and sustainably, employees are placing great importance on these factors when seeking employment.

This is particularly important among the Millennial generation which currently comprises roughly half of the American workforce and will continue to grow. A study by Cone Communications indicates that 70% of Millennials would be willing to work for less pay for a company that best aligns with their ethical and social beliefs.

Furthermore, CSR has an internal element that directly relates to employees. The need to deliver on health and safety, work/life balance, diversity, and opportunities for training and development for employees are all factors in delivering on CSR. In this digital economy, where virtually everyone has a platform through social media, employees have a very public, prominent voice to proclaim how they feel about their company.

In short, when businesses demonstrate dedication to investing in employees and truly caring for the people and places that make its business possible, they will be more successful in attracting and retaining engaged, high-performing employees.

5. Secure New Market Opportunities—Much of the drive behind regulatory compliance for CSR comes from investors and stakeholders who are seeking greater protection of their investments. Investors are rightfully becoming more scrutinizing of operations and particularly how the supply chain is managed.

Consumers are driving market opportunity as well. According to the 2015 Cone Communications Millennial CSR Study, 91% of Millennials would switch brands to one associated with a cause. If a company can leverage its CSR initiatives to open new markets, there is a potential to widen audience and market share. As such, transparency and traceability gained through CSR could mean a competitive advantage when it comes to navigating new market opportunities.

The Purpose-Driven Supply Chain

The biggest challenge, especially for small and mid-market businesses, is in funding these initiatives. Being good stewards of profits demonstrates a values-based business that when coupled with CSR, employee engagement and sustainability truly changes the game in responsible supply chain operations. Companies like Whole Foods, The Container Store, Toms, Zappos, Nike and many others have changed the game in CSR by using the supply chain as a catalyst for influence, innovation and sustainability.

Evolving the supply chain to achieve greater and more purposeful impact is possible with proper focus and evaluation of operations and expenses to grow and sustain CSR initiatives. Often, a business already has the capital required to achieve this. Funds can be unearthed by evaluating corporate waste through better spend management, improving operational efficiencies, and involving key stakeholders in defining what matters most to create a positive impact.  

With over 20 years of supply chain experience, Gina Manis-Anderson is passionate about empowering companies to create higher profits and positive change in the world through their organization, their people and their culture. As founder of Savii Group, she provides value-driven programs that marry expense management and conscious capitalism.

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