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CSR: Business Benefits of Transparency in Supply Chains

Supply Chains - Cotton Industry

According to the International Labour Organisation, about 24.9 million people are victims of forced labour. Of them, 16 million are employed by the private sector. The large scale of exploitation has prompted governments across the world to introduce legislation that will bring more transparency in the supply chains of big companies.

Greater public disclosure of the human rights conditions in global supply chains is rapidly becoming the norm for multinational companies, that manage complex sourcing relationships around the world. Many companies considered bringing transparency in their supply chain, a part of their social responsibility. But for other companies, external pressure from the civil society and governments are bringing about the change that is required in the industry.

Increasing corporate transparency is a key step towards corporate accountability and corporate social responsibility. Leading companies across sectors have adopted this and demonstrated meaningful transparency in their supply chains. For example, The Japanese apparel and footwear company Asics and the US technology hardware company HP disclosed a list with the names and addresses of their suppliers. Tata Global Beverages of India is creating a partnership with its tea producers to ensure that human rights are not violated at the grassroots level. The Singaporean agribusiness Wilmar and the German sportswear company Adidas disclosed publicly available grievance mechanisms and a list of grievances raised and outcomes thereof.

Following are some clear business benefits that come with such supply chain transparency:

  • It builds trust with workers, communities, and their representatives.
  • It demonstrates to investors and other stakeholders that a company has a strong understanding of its supply chains and related risks. Especially when the number of workers in the workforce is large and there is unionisation in the workforce at various levels.
  • It demonstrates to the customers that a company is able to identify negative human rights impacts and address them promptly.
  • It provides an early-warning system. The transparent and effective grievance mechanisms can pick up concerns in real time before they aggravate and escalate. This way, the company can manage to find a solution to the problem before the media comes into the picture to give them bad publicity.
  • It enables a company to evaluate trends and patterns of grievances which in turn allow the company to identify systemic issues, understand the effectiveness of its due diligence systems, and ultimately futureproof its supply chains.

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The CSR Journal Team