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13

Sustainable supply chain


management
Lynn Oxborrow and Peter Lund-Thomsen

In this chapter, you will be given an overview of some of


the key challenges related to the theory and practice of
sustainable supply chain management. After having read
the chapter you should be able to:
• Understand the concept of sustainable supply chain
management
• Recognise the importance of sustainable supply chain
management in the study and practice of sustainability
management
• Discuss some of the main dilemmas related to the prac-
tice of sustainable supply chain management, including
both social and environmental sustainability
• Relate the concept of sustainable supply chain manage-
ment to the six principles of PRME, the ten principles
of the Global Compact and the 17 United Nations (UN)
Sustainable Development Goals (SDGs)

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Supply chain management and the


principles of PRME
Because of its influence on all aspects of materials, production, trans-
port and contracted services—from extraction, agriculture or service
conception to consumption and beyond—supply chain management
education is integral to achieving the PRME principle of Purpose—
developing sustainability capabilities of the future. This chapter also
supports the principles of Value and Method by relating supply chain
management to the ten principles of the Global Compact, and provid-
ing examples, tools and techniques that can be used by students and
professionals. Finally, provoking debate regarding the challenges and
the many trade-offs faced when managing the supply chain sustain-
ably, supports the principle of Dialogue.
The potential for sustainable supply chain management to contrib-
ute to the SDGs is reflected in the specialist Advisory Group on Supply
Chain Sustainability established by the UN Global Compact. This draws
together practical guidance materials to support existing and future
managers in the field. Information and resources can be found at
www.unglobalcompact.org/what-is-gc/our-work/supply-chain/supply​
-chain-advisory-group.
As well as approaches to social and environmental sustainability, the
advisory group is beginning to address aspects of traceability and cor-
ruption. This broader approach is reflected in this chapter.

The concept of supply chain


management
In general terms, supply chain management can be defined as ‘the man-
agement of upstream and downstream relationships with suppliers and
customers to deliver superior customer value at less cost to the supply
chain as a whole’ (Christopher 2011: 3). In this context, upstream to
downstream represents the predominant flow of materials from their
source to finished goods or services at the point of distribution, while
information flows in both directions. The discipline of supply chain

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management therefore incorporates numerous business functions rang-


ing from product design to procurement, facilities management, produc-
tion, logistics, marketing, finance and distribution. Trends in supply
chain management have seen a rapid growth in outsourcing, where
organisations commission a third-party supplier to carry out a specific
activity; off-shoring, where such activities are undertaken in a differ-
ent country from the sourcing organisation; and consequently global
sourcing, where the supply chain spans different countries (Slack et al.
2013). Together with the growth in consumerism across the globe, these
developments have resulted in more supply chain activity, made more
complex by its global nature, and consequently with greater opportunity
to impact on social, environmental and economic sustainability issues.
This emphasises the opportunity for supply chains to impact on SDG
12 ‘Responsible Consumption and Production’ by ensuring sustainable
consumption and production patterns through resource efficiency, waste
reduction and effective procurement.
Companies that work closely with their suppliers and impose con-
trols throughout the whole supply chain and at suppliers’ facilities can
help to prevent human rights and environmental violations and improve
environmental and social conditions. They can avoid the risk of bad
publicity, enhance their brand, reduce costs, ensure product quality and
innovation and attract new markets. Strategic supplier development
contributes to global social responsibility (Danish Business Authority,
n.d.). This chapter deals with two broad aspects—social and environ-
mental sustainability within the supply chain. Social sustainability
relates to international labour standards such as securing workers the
minimum wage, reasonable working hours and overtime payment, the
right to collective bargaining, freedom of association, and health and
safety at supplier factories. Environmental codes include managing
product stewardship, production and logistics throughout the supply
chain to minimise the negative impacts of using energy, materials, water
and harmful substances, while reducing emissions and waste.
The emergence of sustainable supply chain management is a response
to rapid globalisation of supply chains in the 1980s and 1990s, aided by
various technological and socio­economic developments. These include
the liberalisation of international trade facilitated by the World Trade
Organization, privatisation of many state companies and deregulation

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13  Sustainable supply chain management 381

of the national economies of some developing countries (Haufler 2001).


In turn, this helped multinational companies not only sell their products
in developing countries, but also to set up their own factories or source
from local supplier firms that could meet their production, price, tim-
ing and delivery requirements (Gereffi 1999). Rising labour costs in the
developed world and tighter environmental regulation in the 1970s and
1980s encouraged many retailers and supermarkets to look for alterna-
tive and cheaper sources of supply in developing countries or countries
in transition. Meanwhile, lower air fares and the emergence of the inter-
net facilitated the rapid growth of global supply chains linking dispersed
consumers and importers in the developed world with suppliers, con-
tractors and workers in developing countries (Haufler 2001). The extent
to which organisations leading and participating in complex supply
chains do (or should) involve themselves in sustainable supply chain
management varies according to a set of risk factors. The highest risk
is afforded to those organisations that own a brand recognised by the
end-consumer, source high-risk products or those from high-risk sectors,
and whose suppliers are located in high-risk countries. The absence of
brand, product/sector risk or high-risk locations can substantially reduce
organisational vulnerability to sustainability violations throughout the
supply chain (UN Global Compact Network Spain 2009).

Social sustainability in the supply chain


Our focus in this section will be on the social aspects of sustainable sup-
ply chain management—i.e. the question of how the working conditions
of those labouring in supplier factories in developing countries may
be improved over time. The concern with the social aspects of supply
chain management can be traced back to the early 1990s when a series of
media exposés highlighted issues of child labour, forced labour, poverty
wages, excessive overtime and general exploitation of workers in the
supply chains of some of the world’s most famous brands such as Nike
and Levi’s (Greenberg and Knight 2004). These companies mostly spe-
cialised in the branding, marketing and distribution of consumer goods
through outlet stores in Europe and the USA, but sourced from complex
networks of suppliers in developing countries (Bair and Palpacuer 2012).

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With the growth of global supply chains in the 1990s and early parts
of the new millennium, fears were also increasing that an international
social and environmental race to the bottom might be occurring. In rela-
tion to the social aspects of sustainability, the nightmare scenario was
that well-paid, well-regulated jobs with high levels of social security in
Europe and North America were now outsourced to countries in Latin
America, Asia and Africa whose governments might not care about
the well­being, health and safety of their workforce (Khara and Lund-
Thomsen 2012).
These developments sparked concerted campaigns by trade unions,
student organisations, media outlets and NGOs (non-governmental
organisations) against the exploitation of workers in developing coun-
tries in order to produce cheap goods for Western consumers (Bair and
Palpacuer 2012). To respond to these allegations—and protect their
brand value—many high-profile Western importers started developing
so-called corporate codes of conduct, ethical guidelines which specify
the social and environmental conditions under which goods and services
are to be produced at supplier factories in developing countries. Corpo-
rate codes of conduct will typically state that suppliers must employ
workers on a regular contract, that workers must be paid the minimum
wage and for any overtime work, that no child labour is employed, and
a host of other similar criteria. Western importers often ‘borrow’ these
criteria from international labour standards as specified in the conven-
tions of the ILO (International Labour Organization), an agency of the
United Nations entrusted with protecting the rights of workers world-
wide (Lund-Thomsen 2008).
By 2006, different scientific and policy-oriented studies highlighted
that the outcomes of implementing corporate codes of conduct—at best—
brought about mixed results when it came to ensuring that a social race
to the bottom did not take place in developing country export industries
(Barrientos and Smith 2007). On the one hand, the implementation of
corporate codes of conduct appeared to help factory-based workers by
ensuring that they were paid the minimum wage, received overtime pay-
ment, and that fewer occupational health and safety accidents took place
within supplier factories. On the other hand, codes of conduct appeared
to make little or no difference when it came to guaranteeing that work-
ers were free to join trade unions or that they could collectively bargain

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with their employers in order to improve their work conditions. Mean-


while a survey in 2007 concluded that many of the organisations that set
standards through codes of conduct admitted to inadequacies in their
implementation (UN Global Compact and BSR 2015). At the same time,
many workers were not really covered by codes as they tended to work
further upstream in the supply chain. For example, women and child
workers would often be employed in semi-formal workshops or labour
at home outside the purview of Western multinational companies that
mainly sought to keep track of work conditions at the level of their first
tier suppliers (ETI 2006).
While some progress has since been made (UN Global Compact and
BSR 2015) more needs to be done to support relevant SDGs, such as
SDG 1 ‘No Poverty’, and to support economic growth (SDG 8 ‘Decent
Work and Economic Growth’) and Global Compact Principle 4 elim-
inating Forced Labour and Principle 5 abolishing Child Labour. This
involves promoting sustainable economic growth by eliminating modern
slavery; protecting workers’ rights and the working environment; sup-
porting equality and diversity in work, such as for women, the disabled,
migrants and youths; and promoting value-adding, labour-intensive and
job-creating activity, supported by diversification, innovation, technol-
ogy, resource efficiency and entrepreneurship. Accordingly, both legisla-
tive and voluntary steps are being taken. For example the UK Modern
Slavery Act (2015) forces large companies to publicly state the measures
they are taking to reduce extreme labour exploitation (see box).
The aforementioned academic and policy studies also highlighted that
Western multinational companies tended to use purchasing practices
and corporate codes of conduct that contradicted one another (Barrien-
tos and Smith 2007). For example, a Western retailer’s procurement staff
might ask a supplier to reduce its prices or face the risk of losing an order.
At the same time, the retailer’s sustainability department might ask the
same supplier to increase worker’s wages or at least ensure that workers
were not cheated of the wages that they had rightfully earned (ETI 2006).
Moreover, some Western importers were only able to place orders at cer-
tain periods of the year in response to changing seasonal demand in the
West. This would often result in employment insecurity in developing
country export industries where first-tier suppliers tended to hire and
fire workers in response to the level of orders that they received from

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Modern slavery in the supply chain


Modern slavery is defined as ‘the exploitation of a person who is
deprived of individual liberty anywhere along the supply chain, from
raw materials extraction to the final customer, for the purpose of
service provision or production’ (Gold et al. 2015: 5).
In the supply chain, modern slavery includes child trafficking and
child labour, debt bondage (where individuals are forced to work to pay
off debt), and forced labour.
In the UK, under the Modern Slavery Act (2015), large organisa-
tions must now produce an annual statement of the steps they have
taken during the financial year to ensure that slavery and human traf-
ficking is not taking place, whether in their own operations or in any
of their supply chains. The Act requires businesses to show that they
are undertaking due diligence and steps to avoid modern slavery, as
well as training for their own staff to identify and mitigate against such
problems.
Some organisations are identifying high-risk supply chains such as
those in information technologies and food production. For example,
the production of computers and mobile phones sometimes involves
mineral extraction or assembly in regions identified by the Global Slav-
ery Index (www.globalslaveryindex.org) as associated with conflict or
labour exploitation.
The 2016 Electronics Industry Trends report ranks the worker rights
management systems of 56 electronics companies at the extrac-
tion, smelting and manufacturing stages of their supply chain. Some
improvement has been noted since an earlier report. Access the
report at www.ituc-csi.org/IMG/pdf/electronics-industry-trends-report​
-australia.pdf (BWAA 2016)

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13  Sustainable supply chain management 385

their buyers. Alternatively, suppliers might subcontract work to smaller


suppliers whenever orders were available to avoid national labour laws
stipulating that workers had to be offered more permanent contracts
if they laboured in factory settings (Khara and Lund-Thomsen 2012).
Finally, international retailers were criticised for placing orders at the
last minute, thus compelling their suppliers in developing countries to
force their employees into doing excessive overtime work. As a result,
the outcome was often that suppliers had to devise innovative, but per-
haps also counter-productive, strategies if they were to stay in business.
For example, suppliers might instruct their workers in what to tell the
social auditors that were employed by Western importers to check work
conditions in these factories. For instance, workers might be instructed
to say that they received the minimum wage and were paid for their
overtime work if they wanted to retain their jobs (Responsible Purchas-
ing 2006).
Examples such as these highlight the difficulties and complexities
inherent in sustainable supply chain management and the challenges
that must be addressed. Often there are trade-offs between commer-
cial and social considerations which are not easily reconciled. At the
same time, even well-intended corporate codes of conduct might do
more harm than good to workers in instances where they are imple-
mented without due consideration for local social and environmental
circumstances (Lund-Thomsen 2008). For instance, Western retailers
may stipulate that their suppliers are not allowed to employ children
as part of the workforce. However, if strictly enforced, suppliers may
feel compelled to fire children working in their factories (e.g. garment
and shoe factories), leaving these child labourers and their families with
even less income than before. This could possibly force children into
even worse types of occupation such as prostitution or bonded labour.
Such examples illustrate that implementing ‘global’ ethical guidelines
of companies in ‘local contexts’ often requires considerable know­ledge
of the context in which the supplier is operating, the ability to handle
dilemmas, and the ability to devise concrete, practical solutions to real-
life challenges faced upstream in the global supply chain in developing
countries (Lund-Thomsen and Lindgreen 2014). We suggest that you as
a student try to explore how to handle such dilemmas in Seminars 1–3
below.

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Environmentally sustainable supply


chain management
Srivastava (2007: 54-55) defines environmental or green supply chain
management (GSCM) as ‘Integrating environmental thinking into
supply-chain management’. In practice, this means saving energy and
reducing carbon emissions in production, service delivery and logistics;
achieving economies of scale; using alternative energy sources and effi-
cient equipment; and adopting waste reduction strategies in line with
the Global Compact Principles 7, 8 and 9 relating to the environment.
In the long term, GSCM supports the SDGs relating to economy and
infrastructure, as well as water and energy security, through produc-
tivity improvements, resource efficiency and waste reduction. GSCM
also involves reducing embedded energy in products, their use and after
use, thereby working towards those SDGs reducing impact on marine
and land ecosystems by sourcing alternative materials and packaging;
retaining the value of materials through reuse, recycling or sensitive dis-
posal; utilising local production or making environmentally sustainable
transport choices. Some generic supply chain concepts such as network
design, logistics management, waste minimisation and order fulfilment
strategies can, therefore, help to achieve sustainable supply chain man-
agement (Liu et al. 2012; Sharma et al. 2010).
There is a lack of consensus regarding the key drivers to instituting a
sustainable supply chain, whether legislative, commercial or environ-
mental. At the same time there are also counter-arguments against the
benefits, such as the potential link between green products and services
and market failure due to the perception of their being too expensive and
functionally or aesthetically inferior (Ginsberg and Bloom 2004).
Sustainable supply chain initiatives can be implemented in two broad
ways. Often they are imposed on suppliers, perhaps as a result of legis-
lation, strategic objectives or codes of conduct of powerful brands and
retailers. Alternatively, introducing new and innovative sustainability
solutions into the supply chain depends on relationships, sharing of
information and working to common goals (Vachon and Klassen 2006),
and suppliers are more likely to adopt improvements if they have good
relationships with the customers who request those improvements.
Implementing a successful sustainable supply chain therefore requires

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marketing and purchasing functions working together (Sharma et al.


2010), senior management buy-in, a supportive organisational culture
and inter-functional cooperation (Krause et al. 2009), with a wider set of
performance objectives beyond economic measures (Seuring and Mul-
ler 2008). Achieving a sustainable supply chain has therefore become a
multidisciplinary task, encompassing relationships, networks, channels
and partnerships (Srivastava 2007) throughout the sourcing and process-
ing stages and delivery of goods and services to the final consumer.
Network design determines location choices for key facilities and
the way that goods are moved between them, hence impacting on sup-
ply chain sustainability in a number of ways. One of the key arguments
regarding the location of manufacture, warehousing and distribution
facilities is the local–global argument. Using more local supply as an
alternative to offshore outsourcing is controversial, as there are also
social costs to changing sourcing decisions; costs are often considered
to be prohibitive; and in some developed economies the local infrastruc-
ture has declined in traditional industries. In the automotive industry,
suppliers are often clustered close to the final assembly plant which
reduces the transportation impact of just-in-time delivery, an important
factor as deliveries can be required every few hours. Meanwhile, in the
food industry, build-to-order based on information sharing with local
suppliers reduces unsustainable surplus production and food miles—
the distance travelled by components and goods within global supply
chains. However, Soler et al. (2010) suggest that adding value by using
local suppliers is often in conflict with prevailing procurement legisla-
tion which hampers the local supply agenda (Preuss 2009) in favour of
impartiality. For an alternative discussion about the value of local and
more distant supply see Brindley and Oxborrow (2014), and to explore
supplier selection see Seminar 3 below.
Distance and network design in turn impact on logistics—the plan-
ning, control and implementation of moving goods and exchanging
information throughout the supply chain, or getting the right product, to
the right place, at the right time (SBC 2003). The consensus is that trans-
porting goods less often, in larger volume, is more cost-effective as well
as being less environmentally damaging, but may not complement con-
temporary supply chain models such as just-in-time and the fulfilment
of online orders. The trend for consolidation is increasingly evident in

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global shipping, with a growing number of superships that can carry


more freight, use more sustainable power sources and reduce the cost per
item shipped (Mangan et al. 2012). However, these huge ships can only
operate in the world’s largest ports and so consolidation also involves
developing hub and spoke models of storage, transport and distribution
along the supply chain, to feed the major shipping routes and offload
and redistribute goods into local distribution systems. In integrated sup-
ply chains, this role is often outsourced to specialist 3PL (third-party
logistics) providers able to introduce the latest technology for warehouse
and distribution management, as well as helping to identify opportuni-
ties for the sharing of resources between compatible clients. A 3PL pro-
vider might enable a Christmas gift company and a garden centre chain
with different seasonal peaks to share their warehouse facilities, or sup-
pliers to an automotive plant to share transport for just-in-time delivery.
Another example would be filling the base of a truck with heavy bottles
and cans of beverage to supply the catering trade, and then using space
above to ‘top stow’ light items such as crisps (SBC 2003).
Choice of mode of transport (road, rail, air or sea-freight, etc.), fuel-
efficient vehicle designs, reducing vehicle emissions and switching to
alternative fuels can also help to reduce the environmental impact of
logistics—see the IKEA case study (Ocicka 2009) In spite of all of these
efforts, there are still occasions when goods are flown to their destina-
tion in order to enhance responsiveness and reduce lead-time for fash-
ion or perishable items, or to compensate for delays that have occurred
elsewhere in the supply chain and meet delivery deadlines.
Waste reduction, which includes over-ordering of materials, or over-
production of components and finished goods, requires input from
marketing to produce consistent, stable demand (Chan et al. 2012). How-
ever, where there is uncertainty—for example because of seasonality or
fashion—solutions, such as close proximity supplier hubs, exchange
of personnel with suppliers and shared plans for new product imple-
mentation, help keep suppliers abreast of market trends, react more
responsively and avoid oversupply. However, as is the case with social
sustainability, there are often trade-offs or conflicting outcomes between
commercial and sustainability objectives or between the various partici-
pants. Indeed, sustainability may be an order qualifier, enabling suppli-
ers to compete for business in a given context, but the prevailing order

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Reverse supply chain initiatives


An increasing array of organisations are reclaiming, recycling and
reusing materials within their supply chains:

• Adidas has teamed up with the campaign platform ‘Parley for the
Oceans’ to launch a range of training shoes made from plastic
debris reclaimed from the sea, with soles made from 3D-printed
fibre recycled from fishing nets (Howarth 2016)
• Rubber tyres and worn-out trainers are crumbed and used to
construct 3G and 4G all-weather sports pitches
• McDonald’s collects used cooking oil and converts it to bio-
diesel, capable of powering a fleet of local delivery vans

winner, or decisive selection criterion, is often cost (Cousins et al. 2008).


Chan et al. (2012) suggest that the cost imperative in a sustainable sup-
ply chain should be reflected through lean thinking or waste minimisa-
tion, rather than exploitative cost reduction.
The reverse supply chain is a growing phenomenon in sustainable
supply, as legislation, cost pressure and shortage of materials make it
more viable for all kinds of recycled item to find their way back into the
supply chain—sometimes as completely different products—in a phe-
nomenon known as cradle-to-cradle design (Lovins 2008). The reverse
supply chain can be defined as collecting and moving goods from their
normal end-of-life for the purpose of capturing value from waste, reuse
or refurbishment, or managing their disposal (see Mehrmann 2007). The
reverse supply chain can encompass the collection of packaging mate-
rials for reuse, of materials for integration into new products, or obso-
lete or surplus products to be disassembled into constituent parts. It can
also include reclaiming fuel, water or waste to be recycled or used in
energy generation. Some recycled goods, particularly valuable metals,
are exported to global manufacturing locations for sorting, reprocess-
ing and reintegration into new products; others, such as clothing, find
a second-hand market in developing economies. However, the supply
chain for these processes has to be designed, just like any other, and
exposes a further trade-off between environmental and social benefits.

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For example, the export of second-hand clothing potentially competes


with job-creating local production.

Supply chain traceability and


transparency
In the context of supply chain sustainability, traceability is defined as
‘The ability to identify and trace the history, distribution, location and
application of products, parts and materials, to ensure the reliability
of sustainability claims, in the areas of human rights, labour (includ-
ing health and safety), the environment and anti-corruption’ (UN Global
Compact and BSR 2014: 6).
Various approaches to traceability are in use, depending on product
and supply chain context, but in common they all use data systems to
enable businesses to maintain know­ledge of each step of the supply chain
in order to underpin claims of sustainability, quality and authenticity.
The benefits include efficiency savings through risk reduction, process
improvements and securing supply; appeasing stakeholder pressure to
achieve sustainability goals; demonstrating adherence to regulations and
standards; and helping preserve natural resources. Well-known exam-
ples include:
• Fairtrade Labelling Organization (such as for coffee, tea, cocoa)
• Forest Stewardship Council (FSC) for timber
• Organic produce labels (such as cotton, fruit and vegetables)
• Marine Stewardship Council (MSC) for fish and seafood
Implementation of traceability schemes involves high levels of collab-
oration and engagement with senior managers to establish the business
case; stakeholder organisations to access existing systems and know­
ledge; and internal teams and suppliers to identify issues, collect data
and implement improvements.
Whether or not organisations subscribe to formal traceability stand-
ards, consumers, customers and stakeholders increasingly expect to
know more about the origins of products and services to address concerns

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Transparency and traceability in the


IT supply chain
Hewlett-Packard (HP) has published an interactive online map showing
where its final assembly suppliers are located, the number of workers,
products made and links to the suppliers’ own sustainability policies.
HP also lists a range of component suppliers and smelters on its web-
site. An increasing number of leading companies are making some of
their supply chain details transparent in this way.
In the USA, the Dodd–Frank Act (2010) obliges companies to ensure
they avoid sourcing tin, tungsten, tantalum and gold extracted from
conflict zones around the Democratic Republic of Congo (DRC) where
child labour and other forms of modern slavery are common and finan-
cial proceeds support the militia. Intel has traced 100% of the smelters
in its supply chain and is one of the first companies to achieve this
level of traceability. Intel has audited many suppliers to improve con-
ditions, supported a multi-stakeholder initiative and, since 2014, begun
to manufacture microprocessors that are free of DRC conflict minerals
(BWAA 2016).

‘Horsegate’
In 2013, when horse-meat was substituted for beef in processed
meat products, consumers in Ireland, the UK and across Europe were
shocked by the vulnerability of the supply chain to malpractice. As well
as reputational damage, tonnes of meat products were destroyed and
demand for some products fell. Companies such as McDonald’s and
the supermarket chain Morrisons suggested that closer relationships
with suppliers, using local producers and reducing the number of steps
in the supply chain could mitigate against these risks (Levitt 2016).

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about quality, safety, ethics and the environment. Transparency in the


supply chain involves making details about the provenance of products
and materials available to customers and stakeholders, and is enabled
by tracking technologies such as RFID (Radio Frequency Identification
Devices) and the internet. Analysts predict that revealing product ori-
gins will become an important part of building trust and reputation, and
can help to protect businesses against substitution and counterfeiting
(New 2010). Some examples are illustrated in the boxes on p. 391.

Tackling corruption in the supply chain


Another area of increasing concern in sustainable supply chain manage-
ment—corruption—can take a number of forms. These include financial
incentives or gifts to buyers to influence supplier selection decisions;
selecting suppliers because of personal relationships; incentivising
buyers, officials or verifiers to overlook poor quality or substitutes; or
to falsely accept non-compliance when checking health and safety,
environmental or ethical standards or providing customs clearance.
Addressing corruption enables businesses to improve quality, avoid
compensation and litigation costs, develop a sustainable business envi-
ronment and enhance reputation (UN Global Compact 2010). However,
the complexities of the global supply chain, spanning diverse cultural
norms and different legal frameworks, exacerbate the challenge. Some
experts advocate greater simplicity, transparency and shortening of the
supply chain, as well as adoption of codes of conduct and re-education
for suppliers and employees.

Supply chain sustainability and the ten


principles of the Global Compact
The chapter has introduced aspects of sustainable supply chain manage-
ment, particularly linking to social and environmental concerns. It went
on to discuss some of the practicalities and trade-offs experienced by

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supply chain managers in adopting the principles of the Global Compact


and supporting the SDGs.
In summary, Table 1 links the ten principles to aspects of sustainable
supply chain management.

Table 1

Principles of the Global Compact Supply chain response

Human rights

Principle 1 Businesses should support Adopt effective supplier selection


and respect the protection of policies
internationally proclaimed human
Ensure even distribution of
rights
value-adding activity and reward
throughout the supply chain

Principle 2 Make sure that they are not Establish supplier codes of conduct
complicit in human rights abuses and monitoring beyond tier 1
suppliers
Implement supplier development
programmes

Labour

Principle 3 Businesses should uphold the Incorporate freedom of association


freedom of association and the into supplier selection criteria and
effective recognition of the right to code of conduct
collective bargaining

Principle 4 The elimination of all forms of forced Adhere to the Modern Slavery
and compulsory labour Act in the UK and voluntary codes
elsewhere
Principle 5 The effective abolition of child
labour Implement monitoring beyond tier 1
suppliers

Principle 6 The elimination of discrimination Incorporate equal opportunities into


in respect of employment and supplier selection criteria and code
occupation of conduct

Environment

Principle 7 Businesses should support Map all stages of the supply chain
a precautionary approach to and identify areas of highest risk or
environmental challenges impact
Work with suppliers and customers
to address high-risk areas

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Principles of the Global Compact Supply chain response

Principle 8 Undertake initiatives to promote Adopt recognised traceability


greater environmental responsibility standards for materials and upstream
processes
Manage waste, resource utilisation
and emissions

Principle 9 Encourage the development and Collaborate with suppliers to invest


diffusion of environmentally friendly in, develop and adopt new processes
technologies and technologies

Anti-corruption

Principle 10 Businesses should work against Ensure that procurement processes


corruption in all its forms, including are fair and transparent
extortion and bribery
Establish codes of conduct and
educate suppliers and staff to
implement high standards
Simplify supply chains to aid
traceability

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Suggested seminars

Seminar 1: Nike and the dilemmas of social


sustainability in Sialkot, Pakistan1
Nike is one of the world’s most famous sports brands and, in the early
1990s, started sourcing football (soccer) products. From the mid-1990s
and onwards, Nike sourced all of its footballs from one supplier, Saga
Sports, in Pakistan. Football stitching, the most labour-intensive aspect
of football manufacturing, was carried out exclusively by hand, and 75%
of all hand-stitched footballs were manufactured by the 390 small and
medium-sized manufacturers in the Pakistani town of Sialkot.
However, machine stitching of footballs was invented in China in
the late 1990s, and Chinese football manufacturers could produce large
volumes of medium-quality training footballs and lower quality pro-
motional footballs, and do it more quickly than their Pakistani coun-
terparts. Nike began to source footballs from China in the early 2000s.
Nike was also concerned about the potential risk of having child labour
employed in its football supply chain in Pakistan. Whereas footballs in
China tended to be stitched inside factories, in Pakistan manufacturers
used large networks of subcontractors to outsource the football-stitching
process to designated stitching centres in the villages around Sialkot.
Workers from nearby homes would gather in the stitching centres, for
males or females, where they could stitch footballs within a designated
building or controlled space, and where it was possible to monitor the
production process for child labour and workers’ rights.
In 2006, Nike decided to cut its ties with Saga Sports because of labour
rights transgressions and the unauthorised outsourcing of football stitch-
ing from stitching centres to home workers. Immediately after Saga lost
the Nike contract, around 7,000 male and female stitchers lost their
source of income as Nike tried to switch its entire sourcing of footballs to

1 This seminar is mostly based on the findings presented in Lund-Thomsen and


Coe (2015).

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396  The Business Student’s Guide to Sustainable Management

China. However, Nike soon realised that the Chinese manufacturers were
not willing or able to meet Nike’s entire demand for hand-stitched balls
as they did not possess the technological capability to stitch high-quality,
hand-stitched match balls and because higher wages in China made the
production of hand-stitched footballs in China financially unviable.
Instead Nike re-entered Sialkot, with a new supplier called Silverstar.
Under Nike’s new production and CSR (corporate social responsibil-
ity) philosophy it was decided that all football stitching had to take part
inside the Silverstar factory so that children could not become involved
in football stitching. All football stitchers were to be paid the minimum
wage, they had to be paid for overtime work, and they would receive a
higher wage if they managed to stitch more than four footballs per day, the
daily quota required by workers within Nike’s production regime. Stitch-
ers were also to be provided with health and social insurance (including
pension benefits and compensation in case they were laid off). In addi-
tion, the football stitchers inside Silverstar were to receive training in
workers’ rights and to arrange elections inside the factory where workers
could freely elect their own representatives. Finally, monitoring of pro-
duction and work conditions would be undertaken on a weekly basis by
Nike’s agent in Pakistan—a sourcing company, Matrix Sourcing.
You are now part of a consultancy team that has been asked to undertake
an impact assessment of Nike’s new production and CSR approach in the
Silverstar factory, identifying how aims are being met and whether there
are any unintended consequences of Nike’s new policies. As part of the
impact assessment you interview Nike’s sourcing and CSR personnel, the
Silverstar management team, Matrix Sourcing, PILER (Pakistan Institute
of Labor and Education Research) and the UK-based labour rights consul-
tancy Just Solutions, and conduct 60 interviews with Silverstar football
stitchers, divided equally between those working in factories, stitching
centres and at home. These interviews are undertaken in the village homes
of individual stitchers with the help of local (Punjabi-speaking) interpret-
ers. Undertaking these interviews outside the factory premises enables
workers to speak freely without being influenced by their managers.
Your interviews with Nike, Silverstar, Matrix, PILER and Just Solu-
tions indicate that Nike’s new production and CSR policy is working as
intended. However, your own observations at the Silverstar factory and
the worker interviews tell a different story:

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13  Sustainable supply chain management 397

• You observe 400–500 all-male football workers—and your worker


interviews indicate that male relatives do not allow female foot-
ball stitchers to commute to and work in the factory in case they
are sexually harassed. Instead female household members are
expected by their male family members to undertake childcare and
household chores at home.
• Workers do not appear to be paid the full minimum wage, are
not receiving any extra payments for exceeding the target of four
footballs per day and they have not all received the full compen-
sation owed to them because the factory is in financial trouble.
Some 50–60% of the original 1,200 male stitchers employed at the
factory have been laid off, and since the financial crisis Nike is
only sourcing 20–25% of the target 300,000 footballs per month. In
order to stay financially afloat, the Silverstar management has no
other option but to cut workers’ wages.
• Workers report that their representatives have been elected in a free
and fair way, but they lack the authority to help workers if their
wages have not been paid in full. The representatives are mostly
poor and easily intimidated by Silverstar management. However,
as the football stitchers have attended the PILER training on work-
ers’ rights under Pakistani labour law and Nike’s code of conduct,
they are now able to calculate their own wages and have started
striking whenever anyone’s wages are not paid in full. This causes
the Silverstar management to lose thousands of dollars every time
production is stopped and workers have now been paid at least
some of the money owed to them.
Now answer the following questions:
1. How do Nike’s CSR requirements affect workers and households in
the football manufacturing industry of Sialkot?
2. What trade-offs are evident in the football manufacturing supply
chain?
3. What could companies like Nike do better to balance their commer-
cial needs with the needs of the workers and communities involved
in football manufacture?

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Seminar 2: Ten questions to ask footwear


and garment companies
In this seminar, you are asked to make an initial, desk-based assessment
of whether an importing company in a developed country is using sus-
tainable supply chain management practices. The toolkit includes ten
questions that allow you as a student or learner to find out whether a
given importing company, for example, a retailer or a supermarket, is in
compliance with ethical procurement policy. Select a company and try to
find out whether they live up to Oxfam Australia’s ethical procurement
policy. The ten questions are summarised below and can be downloaded
in full from http://resources.oxfam.org.au/pages/view.php?ref=637&k=.
1. Does the company have a supplier code of conduct to guide suppli-
ers through the implementation of human rights for their workers?
2. If the company has a code of conduct, is it publicly available? Is
the implementation of the code of conduct being audited by a third
party? Is the audit process transparent and reports available?
3. Does the company publish a list of its suppliers and their locations?
Oxfam sees this as a way to achieve supply chain transparency so
that other groups can check working conditions. Would the company
consider doing this?
4. Are core ILO conventions ratified in the countries where the com-
pany’s suppliers are based? This should give workers the right to
freedom of association.
5. Does the company have a good system to audit factory conditions?
Some commercial auditing causes concerns, so instead Oxfam Aus-
tralia recommends that local unions and NGOs are involved in any ver-
ification process of factory conditions. Workers should be interviewed
away from their place of work, so that they can speak more freely and
anonymously, and discuss whether they are being treated fairly.
6. Are production workers paid a living wage, rather than a legal mini-
mum wage? NGOs and trade unions can help companies to deter-
mine a living wage standard.

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13  Sustainable supply chain management 399

7. Do the suppliers’ workers enjoy freedom of association and the right


to collective bargaining? Can workers join a trade union? Workers
should be interviewed away from their place of work, so that they
can speak more freely and anonymously.
8. Does the company know how many workers have joined a workplace
union? How well do workers know their rights? Local unions can
often send in representatives to inform workers of their rights.
9. Can workers register a confidential workplace complaint? Are any
complaints followed up and resolved in a timely fashion?
10. Do production workers have permanent contracts and job security?

Seminar 3: Supplier selection for


sustainable supply chains
Objective: To develop a simple framework for selecting suppliers able to
meet social and environmental requirements

Activity 1
Search online for brands and retailers, such as Hewlett-Packard, that
publish lists of suppliers. What can you find out about the capabilities
of these suppliers, their location and approach to sustainability?

Activity 2
Develop a framework or scorecard that can be used to objectively assess
whether a potential or existing supplier is able to meet the needs of a
sustainable supply chain.
1. Study the supplier selection framework overleaf and watch the AT&T
video: Sustainable Supply Chain Management: A Big Deal for Big Busi-
ness, www.mnn.com/green-tech/gadgets-electronics/sponsorvideo/
sustainable-supply-chain-management-a-big-deal​-for-big.
2. With a specific case company in mind (such as Ikea, Nike, Hewlett-
Packard) make a list of the sustainability factors that buyers might

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400  The Business Student’s Guide to Sustainable Management

Supplier selection draft framework

A B C D
Selection Category Supplier score Weighted
criteria weighting 1 low, 5 high score (BxC)

Management capability

Management capability

Worker relationships

Financial security

Return on investment

Indebtedness

Cost structure

Costs relative to industry norm

Cost transparency

Cost reduction

Quality assurance systems

Quality system certification

Continuous improvement

Delivery performance

Delivery accuracy and on-time

Flexibility/JIT

Product/process innovation

Product–service mix

Technological innovations

Product development/R&D

IT and communications

EDI/EPOS/RFID capability

Computer-aided design/3D

Sustainability

Total 100%

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13  Sustainable supply chain management 401

add to the framework so that it can be used to shortlist suppliers


for the sustainable supply chain of a chosen product. These might
include a traceability standard, approaches to workers’ rights or
modern slavery, approaches to manage upstream suppliers, etc.
3. For your chosen company, rank all of the main selection criteria
from most important to least, and assign each category a weighting
to ensure that important criteria are most influential in your deci-
sion. Weightings should total 100% when all categories are added
together. What weighting will you give to sustainability factors?
4. You can now apply scores for potential suppliers against your grid
based on their performance, capabilities or tendering information.
To obtain a weighted ranking multiply each score by the weighting
percentage. Which supplier should you choose?
5. Now try changing the weightings based on different priorities. How
does this affect your decision?

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Additional teaching material and ideas


‘Where from?’ ice-breaker
This is a way to encourage students to get to know each other and learn
more about sustainable supply chains. In pairs or threes, examine labels
in the clothes you are wearing, the snacks in your cafeteria or the con-
tents of your bag. Map where each of your items has come from, and then
identify any aspects of sustainability that might relate to the items and
their supply chains, such as transport, packaging, materials, production
processes, waste or recycling, skills, working conditions, etc. The groups
can compare notes by presenting their most interesting and surprising
‘finds’.

The Buying Game


The Buying Game is an online game developed by the UK charity Traid-
craft and the Chartered Institute of Purchase and Supply. The game helps
interested learners to improve their know­ledge of the everyday reali-
ties faced by farmers, workers and communities in developing countries
and the social aspects of sustainable supply chain management, ena-
bling practitioners to improve the way they purchase so that low-income
producers and workers can improve their livelihoods and conditions of
work. The game asks learners to answer a series of questions about how
they would buy an imaginary product called a ‘dimble’ that is produced
in the developing world and sold to consumers in the West. There are
six scenarios in which the buyer must make purchasing decisions and
identify the consequences—whether positive or negative—further up
the supply chain for local producers, workers and communities in devel-
oping countries.
The Buying Game is most usefully played in groups of two, each with
a laptop. Their experience of having played the game can then be dis-
cussed in a plenary setting at the end of the session. The Buying Game
can be accessed and played free of charge at www.thebuyinggame.org.

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13  Sustainable supply chain management 403

Multimedia resources
If you prefer to watch video material, the following provide a short intro-
duction to environmental and ethical sustainability in the supply chain,
respectively:
• Sodexo (2010), Sustainable Supply Chain: Covers local sourcing
and traceability in food supply through the UK Red Tractor and
MSC standards: www.youtube.com/watch?v=nZ-_M_rFOVM.
• Walk Free (2015), Slavery in Supply Chains—A Closer Look at the
Cotton Industry: Illustrates the breadth of modern slavery issues
found in the supply chain for cotton products: www.youtube.com/
watch?v=yvVlFJvHB-k.
As an alternative, this BBC radio feature, recorded on board a Maersk
Line supership, discusses aspects of global trade, logistics networks, sus-
tainability in shipping technologies and supply chain security: www.
bbc.co.uk/iplayer/episode/p00r3qlt/One_Planet_Sustainability_on_the_​
High_Seas/.
The Global Slavery Index (2016) provides a comprehensive range of
resources, interactive maps and research findings related to the inci-
dence of modern slavery across the globe: www.globalslaveryindex.org/
index/.

Case study resources


The European Platform for Supply Chain Management Best Practice was
established by the European Logistics Association to promote supply
chain efficiency and sustainability. The website www.elabestlog.org
provides numerous case studies covering all aspects of logistics and sup-
ply chain improvements in many different industries.

Topics for debate


The trade-off choices between commercial and sustainable pressures
in the supply chain provide fertile territory for class debate. Topics to
explore could include:
• Is it possible to have sustainable fast fashion?

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404  The Business Student’s Guide to Sustainable Management

• Local or global: evaluate the social and environmental impact of


importing fresh food to the EU from Kenya.
• Reverse logistics in the clothing industry: who benefits from export-
ing second hand clothes from the West to developing economies?
• Does monitoring modern slavery improve working conditions in
labour intensive industries?

Further reading
For an easy-to-read introduction to sustainable supply chain manage-
ment, we suggest that you read the Danish Business Authority (n.d.)
guidelines, which provide comprehensive guidelines about dealing with
suppliers and setting standards.
Alternatively, a practical guide to help you understand the environ-
mental challenges that businesses face in the supply chain is available
from the New Zealand Sustainable Business Council (SBC). This identi-
fies a range of environmental issues at all stages of the supply chain and
gives examples of business initiatives. The Green Supply Chain (www.
thegreensupplychain.com) provides links to business case studies of
environmental supply chains.
If you are interested in getting an overview of some more recent devel-
opments in the field of sustainable supply chain management from an
academic and policy-oriented perspective, the article by Lund-Thomsen
and Lindgreen (2014) might be of help to you.
If you are interested in knowing more about how to work practically
with solutions to ethical dilemmas that arise in the context of sustain-
able supply chain management, you should have a look at the document
Buying Matters, produced by the UK-based NGO Traidcraft (Traidcraft
2006).
For a case study in alignment between sustainable supply chain man-
agement and the marketing function, read Brindley and Oxborrow 2014.
The case shows how a university catering department addressed a mar-
keting challenge by improving traceability and redesigning the supply
chain.

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13  Sustainable supply chain management 405

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