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Supply chain and social responsibility

Supply chain and social responsibility

on November 27, 2021

Sustainability is one of the defining issues of our age. Companies are overhauling the way they source, create and distribute products to achieve and promote supply chain and social responsibility.

Sustainability affects everything a company does, including how it works with its suppliers. But too many supply chain managers employ a “take-make-waste” mentality. As a result, supply chains around the globe remain fraught with inefficiencies due to wasteful use of assets.

But there’s a solution at our fingertips: blockchain.

According to the Global Brand Counterfeiting Report 2018, the value of counterfeit products worldwide has reached 1.2 Trillion USD in 2017. It is expected to reach 1.82 Trillion USD by 2020, which consists of counterfeiting of different products or types of equipment from counterfeiting of watches and defense equipment. 

Blockchain can transition supply chain management to a sharing economy where people and companies reduce waste and decouple growth from the consumption of finite resources — thus becoming more sustainable and profitable at the same time.

What is Corporate Social Responsibility?

CSR is a voluntary, self-regulating business model that entails incorporating environmental and social concerns into a company’s policies and practices. Across the world, CSR has become increasingly common.

There are four main types of corporate responsibility: environmental initiatives, philanthropy, volunteerism and ethical labor practices. 

Why does Supply Chain Need to be Responsible?

On a global scale, the clothing supply chain consists of millions of people along with tonnes of water, crops, chemicals, and oil. This makes it difficult for manufacturers to find where the different parts of their products come from. The demand for increased speed, high volume, and cheaper consumption is increasing with each passing day. Due to this, when blind consumerism has valued the transparency of an ethical supply chain is compromised.

Any supply chain progresses by initially delivering the raw materials from a supplier to a manufacturer and eventually ends by delivering the final product to the consumer. Proper implementation of supply chain management can result in benefits like increased sales and revenues, decreased frauds and overhead costs, quality improvisation. Moreover, this will also lead to accelerating production and distribution.

What are Good Suppliers?

Over the past decade, expectations for corporations to apply responsible sourcing practices to their supplier network have been expanding in scope and detail. More and more companies are expecting that the foundational requirements for their suppliers must mature to meet certain expectations. In addition, The UN Global Compact from 2014 has presented a set of expectations for our suppliers that aligns with the UN Global Compact 10 principles.

The Supplier Responsibility Code consists of 5 main sections that cover:

  • Labor – includes more specific requirements and controls for the elimination of forced labor and more details on appropriate working hours and time off.
  • Health & Safety – includes specific requirements for emergency exits, fire protection, and worker housing (when provided).
  • Environment – includes expectations on reducing environmental impacts, and protecting air, water, and land resources.
  • Ethics – includes positions on anti-bribery, conflicts of interest, protection of intellectual property, and related Business Conduct issues.
  • Management Systems – another new section, requiring strong policies and systems to control the aspects in the previous sections, and propagate the requirements up the supply chain.

For supply chain processes, a Blockchain ledger can handle various activities from automated contract compliance among entities through smart contacts to track goods from manufacturing to distribution.

As companies prioritize supply chain and social responsibility, the benefits extend beyond sustainability itself. For example, companies that prioritized supply chain sustainability and sub-tier visibility experienced less disruption during the pandemic.

In the past year, the links between supplier visibility, sustainability, and resilience have become extraordinarily clear. If your organization wants to better understand its business risks and opportunities, one of the best places you can look is in your multi-tier supply chain and how smart contracts can help you transform it!

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