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Broken? The ethical dilemma of the modern supply chain

4 August 2015

A steel chain with links showing

Modern supply chains are long, complex and global, making it harder for businesses to know who they’re really dealing with, and for consumers to feel confident they’re buying ethically. The negative consequences of that complexity can be as devastating as the deadly Rana Plaza collapse in Bangladesh in 2013, which galvanised public opinion about the conditions under which our clothing is produced. Revelations about Australia's food industry in a recent ABC Four Corners report show there are issues to be addressed at home too.

So, the conversation has turned to the need to build responsible supply networks and the challenges in doing that. That’s the focus of the Sustainable Supply Network Initiative at UTS Business School and  this #think public lecture…

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Is it possible to have a 100 per cent sustainable supply chain? Even the experts aren’t sure that can be achieved, as supply networks become increasingly global and multilayered.

Professor Emmanuel Josserand, a Director of the Centre for Management and Organisation Studies (CMOS), which recently launched the Sustainable Supply Network Initiative, looked at examples at two ends of the spectrum at the UTS Business School #think public lecture on responsible supply chains.The first was a farm-based restaurant serving its own chicken.

“The supply chain is so short you can see these beautiful, grain-fed chickens running in the fields,” he says. But, even with such a simple, short, local supply chain, could this small business really be 100 per cent sustainable? “I’m not sure at all,” he says. What about the computer they use to maintain their website? Does a sustainable tractor exist?”

If the supply chain is complex for a local restaurant, how much more complex must it be for a multinational corporation producing, say, jeans? Here, there are potential negative impacts – such as poor use of resources, exploited labour, pollution – associated with each task from the production of cotton through to the sale of the jeans and their eventual disposal. “The matter is complicated by the fact that if you want to be competitive in such an industry, you will have subcontracted most of these tasks internationally,” he says.

“And most of your suppliers will have themselves subcontracted a significant proportion of their activities to others.” It’s not just a complex story, he says, “it’s a never-ending story.”

There are not sufficient incentives for companies to fix the problem, Prof Josserand believes. In fact there are strong incentives not to fix it, he says. “Containing costs and improving sustainability are not always ‘friends’,” he says.

It’s not just a complex story
it’s a never-ending story

Lawyer, researcher and consultant to business Brynn O’Brien sees three key areas for progress, to make responsible supply chains more reality than dream. The first is global regulation: a networked global system of governance to match our networked global economy. “Global supply chains show us the limits, if not the end, of the nation-state model of regulation,” says O’Brien, who is a PhD candidate with the UTS Faculty of Law. “They also show us the limits of law.”

The United States and Europe are ahead of Australia with human rights disclosure and due diligence laws, she says. “But I left a meeting yesterday of the Attorney-General’s working group on slavery in supply chains very encouraged that we might see movement on this in the next 12 months.”

Second, is a move towards greater transparency. “By this I do not mean just a procedural kind of transparency ... I mean more even than publication of supplier lists, which I think most Australian companies today would find quite terrifying,” she says. “The type of transparency I’m talking about is even more terrifying than this – it is a universal, real-time public mapping not only of supply chains but of all of the relationships that constitute the global economy.”

This is not too far away, she says. “I tell clients and colleagues often that they should expect full procedural transparency in two years, but after that to prepare for radical, substantive transparency of the whole of their value chain within 10 years.”

Lastly, she sees a future where “deep internal corporate responsibility” for human rights replaces a certification or compliance mindset. For now, according to a recent survey by the Economist Intelligence Unit, 83 per cent of corporate leaders say business has a responsibility for its impact on human rights – but only 54 per cent of companies have any sort of policy referencing human rights.

There seems to be a disconnect between
what we actually do and what we want to do

Dr Paul Burke, Research Fellow in Marketing at UTS Business School and Deputy Director of its Centre for the Study of Choice, has been investigating the gap between ethical purchasing intentions and consumer practice. Consumers say they are willing to pay more for ethical goods, and fair trade brands have grown from seven to over 900 brands in the past decade, he says, but even so these products remain just a small proportion of overall sales. 

“There seems to be a disconnect between what we actually do and what we want to do,” he says. This is the attitude-behaviour gap, “and we want to know how to overcome it”.

“We can’t be that ‘hero’ that buys ethically and sustainably on every occasion … the reality is [that as a consumer] I've got to make tradeoffs … yes, it’s ethical but I’ve got to trade that off with functionality”, for example. By understanding and “embracing” those tradeoffs, ethical products can be better targeted to different consumer segments, he argues.

Alongside that, tools such as labelling, social media and smartphone apps can help put transparency and relevant information in consumers’ hands.

Associate Professor Sarah Kaine, who has been looking at labour standards in supply chains, says that, while consumer pressure has an important role, “I don’t know that’s enough without some firm regulatory base”. “We have to be careful to mount a defence of that regulation, because that is our last port of call – if that goes we really are fighting an even harder battle,” she says.

Moral responsibility must sit alongside that, argues Martijn Boersma, a researcher at the Centre for Corporate Governance at UTS and a member of the Attorney-General’s working group on human rights abuses in supply chains. “Especially in supply chains there are so many domestic contexts for regulation … it depends on the company itself to make the difference.”


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