Supply Chain Mapping: Imperative for Sustainability

Amid tightening regulations around the world, brands and retailers find themselves under increasing pressure to ensure the sustainability of their supply chains. To address mounting concerns about the social and environmental impact of the products they source, businesses need a granular understanding of every link in their supply chain, but ERIC LINXWILER reports that most have fallen far short of that objective.

Two years ago, a survey revealed that a staggering 98% of senior supply chain professionals couldn’t identify their suppliers – along with the risk associated with those suppliers – beyond the second tier. This incomplete view of their supply chains not only puts companies at odds with global environmental, social, and governance (ESG) laws but also out of touch with today’s consumers. Shoppers across almost all demographics are increasingly concerned about issues such as child labour, dangerous working conditions, deforestation, and environmental contamination – and for good reason. There are an estimated 16 million victims of forced labour in the private sector, while supply chains account for more than 90% of many organisations’ greenhouse gas emissions.

In order to ensure social and environmental sustainability, companies must have the ability to map their supply chains to what is referred to as the N^th tier: down to the raw material-level suppliers that form the backbone of the supply chain. Given the complex and fragmented nature of supply chains, mapping these N^th-tier suppliers is a demanding task, but is essential for responsible sourcing, since these lowest rungs of the supply chain are often where the greatest ethical and environmental abuses occur.

Brands and retailers that haven’t started putting deep traceability measures in place are running out of time. The European Union is rapidly nearing passage of arguably the world’s most consequential supply chain law: the Corporate Sustainability Due Diligence Directive (CSDDD). This will require companies to implement due diligence policies to mitigate environmental and human rights abuses in their supply chains. It follows a series of more narrowly targeted EU laws aimed at weeding out from the supply chain any products linked to forced labour, deforestation, and conflict minerals.

As EU authorities move the CSDDD past its final procedural hurdles, countries around Europe and North America are adopting their own sweeping due diligence laws. Germany began the year by enacting its new German Supply Chain Act, which obligates companies operating in the country to prevent child labour, poor working conditions, and environmental abuses from all levels of their supply chain. Canada has passed S-211, a strict supply chain reporting law which holds companies’ business directors personally liable for abuses in their supply chain, while the US is widely enforcing its new Uyghur Forced Labor Prevention Act, which forbids the importation of any goods produced or manufactured wholly or in part in the Xinjiang region of China on the presumption that they were made using forced labour. In the first year of the law alone, US Customs detained $1.4 billion worth of shipments.

Fostering Resiliency

Regulations surrounding sourcing will only continue to tighten. But for brands and retailers facing ongoing pressure to bring products to market as fast as possible, the benefits of supply chain mapping go well beyond mitigating regulatory and reputational risks. Businesses that haven’t mapped their suppliers to at least the fourth tier aren’t agile enough to deal with the kinds of challenges that have become pervasive in the wake of the Covid-19 pandemic.

Among these are supply shortages, congested ports, transport delays, and surging prices due to unpredictable inflation. They’re also leaving themselves vulnerable to disruptions and supply shortages created by climate change. That should be a particular cause for alarm, given that a recent Harvard Business Review study found that just 11% of suppliers are fully prepared for disruptions due to weather and climate change.

Businesses must gear themselves to navigate these disruptions while minimising their impact.  They must be agile enough to adjust their procurement and delivery strategies, but that agility hinges on how much visibility they have into their supply lines. When a business encounters a disruption or a problem with production – for instance, a supplier that fails a quality inspection – it needs to have the ability to either address these issues in real time with the supplier or rapidly orchestrate a new value chain. Any fallback strategy must allow the company to maintain its cost structure without compromising its sustainability standards.

This can’t be achieved without a real-time, multi-factor supply chain mapping strategy. Supply chain mapping gives businesses the confidence to know whether they’ll be able to meet their quality and compliance targets. Crucially, it also helps them address production problems earlier in the process; it’s always easier to stop production earlier as opposed to discovering problems at the end of a run.

Gaining crucial insights

Supply chain mapping is an involved process, especially for large enterprises that rely on hundreds or even thousands of suppliers; only the best multi-enterprise platform can provide supply chain mapping capabilities with the depth and accuracy to ensure total transparency, visibility, and traceability. An intelligence platform like TradeBeyond also extracts actionable insights from the data it collects and can identify gaps in supply chains and even recommend opportunities to consolidate or scale. The platform’s supply chain maps illustrate the relationships between vendors and factories, as well as visualise key performance and scorecard metrics such as audit results, certifications, and risk levels, so you can see at a glance any vulnerabilities in your supplier base.

In response to retail’s surging demand for deeper transparency and traceability solutions, TradeBeyond has recently acquired Pivot88, a leader in quality and compliance management solutions. Pivot88’s innovative risk assessment and remediation tools further deepen TradeBeyond’s vast ESG functionalities, introducing unparalleled visibility at a time when brands and retailers require it more than ever. In an age of heightened consumer consciousness and rigorous regulations, businesses can no longer afford to be in the dark about their supply chains.