Responsible Supply Chain Management 101

Responsible supply chain management is how companies ensure that the responsibility to respect human rights, the environment and anti-corruption standards extends to their entire supply chains.

Is there a global authoritative standard?

Since the 1990s, companies have been facing increasing stakeholder pressure to address issues like, in the shipping sector, unsafe working conditions for seafarers, piracy, pollution of water supplies and bribery, as these were posing high operational, financial and reputational risks. In response, companies developed individual codes of conduct and began reporting on CSR. With issues this complex being transposed in thousands of different codes of conduct, ad hockery inevitably resulted.

In early 2000s, the first universal call-for-action came  from the United Nations with the introduction of a  non-binding UN pact (the UN Global Compact) that offered corporations everywhere the first principle-based framework that stated ten principles in the areas of human rights, labour, environment and anti-corruption. These four areas of fundamental responsibility represent what should be the backbone of all business’ social practices.

Later on, the civil society, organisations such as the UN and companies themselves put a great amount of effort in developing the first real global authoritative standard for business and human rights. This is how the United Nations Guiding Principles (UNGPs) came to life in 2011.

The UNGPs are a set of principles that applies to all States and business enterprises, regardless of their sector, location or size. It recognises the States’ obligation and corporations’ responsibility to protect human rights, as well as their responsibility to provide access to remedy when human rights abuses do occur.

It is the UNGPs, together with the ten principles of the UN Global Compact, that represent the root of the IMPA ACT initiative and its industry-wide model Supplier Code of Conduct.

What constitutes the supply chain in the shipping sector?

The shipping industry operates internationally and companies build relationships both with the upstream value chain (suppliers) and the downstream value chain (distributors, customers and clients). 

While a company’s supply chain is usually understood to only be limited to the upstream value chain, the UNGPs extended the responsibility to respect human rights to all business relationships established by a company. Thus, a business’ duty to respect human rights covers suppliers, distributors, customers and clients.

However, in the process of managing a company’s supply chain responsibly, suppliers demand the most resources, so they require prioritisation in this process. IMPA ACT, as a result, focuses on a company’s suppliers. If you are a ship owner or operator, your base of suppliers will primarily form your value chain. If you are a supplier who is manufacturing a spare part or reselling it, you are factored into the upstream value chain of your customer, while the sub-suppliers who sold you the raw materials or finished product will form your supply chain.

What does responsible supply chain management mean?

Whenever you buy a product from your suppliers, your operations or those of your suppliers might potentially impact human and labour rights, the environment and anti-corruption principles in an adverse way. Imagine, for instance, that you a purchase a turnbuckle for a vessel; what if it was produced by an employee working in  unsafe conditions?

Responsible supply chain management prevents this as it means that you have established internal processes, such as a policy commitment, due diligence and remediation systems, that prevent and mitigate these adverse impacts. It also means that you cooperate with your suppliers actively to ensure that they have the same processes in place.

Why is responsible supply chain management important?

If there is one thing that we can all agree on is that companies exist primarily to make money. As a purchaser, for instance, you are mainly concerned with getting good products, high in quality, for the best price out there. Even as a supplier who is mostly reselling products, half of your role is getting high-quality products for low prices. But have you ever wondered what goes into the making of the product or service that you are acquiring? 

We have all heard stories in the news on the shipping industry and companies’ often gross infringements on human rights. We heard about the use of child labour 

in ship-breaking yards, about seafarers being denied adequate standards of living, about consistent depletion of the earth’s natural resources and about products that have been manufactured dangerously. And we shouldn’t even talk about those companies that have been known to negotiate unfair deals with small businesses or to relocate their operations where plants have to be shut down and communities, as a result, crumble. Would you really want to have such a company within your chain of supplies, providing you with low-quality raw materials, products or services? Of course not.

This is the main driver for the establishment of a socially-responsible business practice; something that does not just involve doing the right thing, but that also makes good business sense. Through supply chain sustainability that is thoughtful of social, environmental and economical standards, companies can produce higher-quality products with fewer materials and less energy, to a larger base of customers and, in the process, avoid cumbersome environmental regulators. And if you are a committed company that, in today’s world of really complex supply chains, motivates its suppliers to redesign successful products and services and, in the process, respect human and labour rights, environmental regulations and anti-corruption principles, then you will be reaping the many advantages of doing good.

What is more, we also live in a highly volatile time where trust really affects corporate reputation. It wasn’t long ago since the Edelman Trust Barometer revealed a desperate search for truth and stability from 24 to 64-year olds around the world. With trust in governments plummeting and people refusing to buy products from distrusted companies, two thirds of the population are now expecting CEOs to take the lead in policy change. 

By being a company that values sustainability, you can also use your righteousness as a competitive weapon, not only to be a favourite among potential customers, but also to lobby governments to enact regulations that might force your competitors to either produce similar results by investing in the technology that your company might have created or pay fines for not doing so. 

Through investing in sustainable growth, not only will you contribute to attain goals of ending poverty, protecting the planet and ensuring prosperity for all, thus supporting the UN’s sustainable development goals, but you will also:

  • reduce your reputational risks by not exposing irresponsible practices in the supply chain and your legal risks by working with high quality standards and relatively risk-free suppliers;
  • increase your competitive advantage by being your suppliers’ first port of call at all times;
  • attract new business by showing excellent management of human and labour standards, diversity and environmental regulations, and full alignment with internationally-endorsed standards for sustainable conduct;
  • save costs by working to an industry standard, reduce your supply chain’s energy use and increase your audits’ efficiency;
  • attract talent; the majority of employees now prefer working for a sustainable business.

So whether you love money, nature, people or just great products, responsible supply chain management really is the way to a better future for everyone.

Keen to find out more about responsible supply chain management? Want to start doing this for your company? Visit www.impa-act.orgto find out what the easiest way to manage your supply chain responsibly is or build capacity with the latest available training.

Please note this article is an extract of IMPA ACT: The Marine Procurement Professional’s Guide to Responsible Supply Chain Management.