Brands can be forgiven for wanting to bolt for the exit when issues are exposed in complex supply chains, regardless of the problems left behind. Yet in the era of strict environmental and social governance (ESG), companies need to wrestle with this instinct.
Abandoning suppliers can devastate vulnerable communities, and a knee-jerk response to a short-term media management problem can quickly lead to protracted reputational risk.
New expectations around corporate responsibility mean brands shoulder a much greater burden now. The government has just completed its consultation on Extended Producer Responsibility (EPR) and we are inexorably moving towards total accountability for products, from the sourcing of raw materials to the litter people drop in the street.
But there’s still a conceptual ‘responsibility gap’ when poor working conditions in the supply chain get exposed. This needs to be plugged, or reputational goodwill will quickly drain away.
The irony is people are supposed to come first in a crisis. But when the NGOs lift the lid on oft-hidden problems, brands panic. The allegations are always serious – human trafficking, modern slavery, child labour, deforestation. The list is uncomfortably familiar.
Brands know, quite rightly, consumers will recoil at the news. These issues have public relevance because they affect everything from the clothes we wear and the gadgets we carry in our pockets to the food we eat.
In the heat of the moment, though, when the press office is going mad and Twitter’s turning red, the urge to cut and run is a powerful one, but it should be resisted. Dropping a partner at the first sign of trouble won’t fix the problem. The suffering won’t stop. Trees won’t get planted and workers in far-off places won’t get better workplace protections or more opportunities.
The much harder thing to do is stick it out and help fix the problems that, occasionally, could be of a brand’s own making. When there’s relentless downward pressure on costs, something has to give. That’s where ESG investors can have a real impact. This is still a reputational blind spot for lots of companies, but if responsible businesses want to build a reputation for doing the right thing, then working more constructively with their supply chain partners is yet another element they need to take proper accountability for.
In fairness, some of the biggest companies are now holding their suppliers to account and forcing through important changes. After the horsemeat scandal derailed Tesco in 2013, it has built a reputation for stringent sustainability-linked supply chain controls. The public might not see that yet, but they will do in time.
So too with Nestlé, which has spent the last decade working with palm oil producers to improve supply chain sustainability and ethics. Back in 2010, Nestlé dropped one of its major palm oil suppliers following a Greenpeace campaign, but later reinstated them after it took speedy steps to improve things.
When it comes to sustainability and corporate responsibility, it doesn’t stop at turning out the lights or having a more diverse workforce. It means buyers should stick with their industry partners to help them resolve their issues. Brands will build supplier loyalty and, ultimately, a better, more sustainable, business.
It can seem like a daunting task until brands realise the brainpower, resources and expertise they need is usually in place already. Sometimes it just takes the will to battle through today’s negative headlines in pursuit of positive long-term change that will have a meaningful and measurable impact for all stakeholders.
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