Dive Brief:
- The purchase of ethically-sourced products is more challenging than it might seem, Stanford researchers said in a paper published Monday. The researchers, members of Stanford’s School of Earth, Energy & Environmental Sciences Department, undertook the first large-scale analysis of sustainable sourcing practices for the study.
- Though half of the global companies surveyed enact sustainability practices within their supply chain, the efforts made are of far more limited reach than implied by the media, and by product labeling.
- Further findings reveal that roughly 70% of sustainable sourcing practices apply to a single product within company offerings, meaning that a company may use Fair Trade certification for only one type of chocolate bar among many that it sells. Just 15% of sustainable sourcing practices focus on health, energy, infrastructure, climate change, education, gender or poverty.
Dive Insight:
Sustainability remains an elusive goal for most companies.
Although the gap between sustainable and low cost procurement is narrowing, the area remains problematic as rooting out bribery and corruption in supply chains takes significant effort. Even when a company as large as Target undertakes climate initiatives, details are bound to be missed, particularly in Tier 2 and 3 segments of production.
"Many sustainable sourcing practices companies used only applied to a subset of the product’s inputs," Tannis Ruth Thorlakson, PhD Candidate at Stanford University, told Supply Chain Dive. "For example, a company might talk about their sustainable palm oil commitment, but palm oil is only one of many ingredients that goes into their products. So, much of a product’s total impacts might not covered by a company’s sustainability commitments."
Clearing out corruption in anything but Tier 1 is rarely successful, because a company doesn't usually have direct oversight over Tier 2 and other tiers farther along the supply chain. Lack of oversight translates to lack of responsibility.
"We did find that companies were much more likely to work with their first tier suppliers to address sustainability challenges," Thorlakson said. "We can’t speak to why this is directly, but if you imagine being a company, it is likely much easier to collaborate on sustainability issues with suppliers you work directly with. Companies, by definition, do not have direct contractual relationships with Tier 2 and beyond suppliers."
Direct contact with sources is uncommon, which then contributes to the ethical and sustainable sourcing problems. Companies can't really know what's going on in their supply chains, because they don't have the infrastructure in place to collect data and interact with transparency.
"One thing we found was that companies tend to use external standards to address issues farther up in the supply chain," Thorlakson said. "These include standards like Organic or Fair Trade. Other companies were choosing to work more directly with upstream suppliers through direct sourcing (e.g. the company skips intermediate tiers of the supply chain to work directly with farmer groups). The use of external standards was much more common than the use of direct sourcing."
