Words Eric Linxwiler
The last half decade has seen a seismic shift in consumer preferences. Amid heightened awareness of social and environmental issues, shoppers now overwhelmingly say they care more about sustainability than they did before the pandemic. The trend is particularly pronounced among younger consumers: 73% of millennials say they would spend more for sustainable products, and three quarters of Gen Z consumers cite sustainability as more important to them than brand name.
Despite the clear demand for more sustainable goods, most brands and retailers are struggling to mitigate the greatest contributor to their social and environmental footprint: their supply chains. Supply chains account for up to 90% of a company’s environmental impact, yet brands and retailers are too often in the dark about the origins of the very products they sell. To guarantee sustainability, companies must start by being able to map their supply chains to what is known as the Nth tier, down to the raw material-level suppliers that form the backbone of the supply chain.
Given the complex and fragmented nature of supply chains, mapping material suppliers can be a challenge, but it’s essential for responsible sourcing, since these lowest rungs of the supply chain are where the greatest ethical and environmental abuses are most likely to occur. These blind spots are where the concept of a “digital passport,” or a chain of custody for materials, becomes invaluable.
By creating a comprehensive digital record that traces each step in the manufacturing process, retailers can ensure that every component of a product meets the highest standards of sustainability and compliance. To achieve this, however, retailers need not only greater visibility but also better data management.
The data challenges that retail businesses face are multifaceted. Brands and retailers are caught in a dichotomy of either drowning in data without effective tools for analysis or grappling with a scarcity of critical information, especially regarding the origins of raw materials. This predicament not only complicates compliance efforts but also stifles the pursuit of transparent and sustainable operations.
On one side, businesses are inundated with data at the Tier 1 and Tier 2 supplier levels, and that overabundance can lead to a sort of paralysis, where having ample data does not necessarily equate to having actionable insights. On the other, the industry faces significant gaps in early-stage data — insights into the origins of materials like cotton or wood remain elusive, impeding retail’s ability to assure the ethical integrity of products.
Precisely documenting the intricate mosaic of farmers, mills, factories, warehouses, and shipping facilities involved in product creation demands a level of data management and visibility far beyond the current capabilities of many organizations. Digitalization dramatically simplifies the process and reduces the work involved.
Through artificial intelligence (AI), the right multi-enterprise supply chain platform allows businesses to sift through this data, identifying risks, drawing connections, and enabling more strategic sourcing. These tools are now indispensable for managing the vast amount of information that comes with the territory of global supply chains.
Navigating Mounting ESG Laws
Digitalization has long presented a strategic advantage for global retailers and brands – a means for them to create cost savings by automating processes, creating efficiencies, and reducing lead times. In the wake of new global supply chain regulations rapidly passing across the world, however, digitalization is now an indisputable necessity. From the European Union’s new Corporate Sustainability Reporting Directive to the United States’ Uyghur Forced Labor Prevention Act and the German Supply Chain Act, these laws demand meticulous scrutiny of supply chains to ensure ethical practices and environmental stewardship.
Complying with this ever-growing web of laws is becoming more difficult by the month, as new laws continue to get introduced and enacted. While many of these laws broadly overlap, each has its own subtleties and particular reporting requirements. For instance, New York’s proposed Fashion Sustainability and Social Accountability Act shares a similar purview as California’s Transparency in Supply Chains Act, but it includes greater requirements around environmental sustainability, such as carbon emissions and resource usage, which go beyond the anti-slavery and anti-trafficking focus of California’s law.
Navigating the complexities created by this fragmented regulatory landscape is increasingly only possible with a multi-enterprise platform’s sophisticated data management tools. This technology simplifies reporting while enabling supply chain departments to manage by exception, thanks to the strategic application of AI to sift through vast datasets and highlight potential ethical or environmental concerns, allowing brands to sidestep high-risk suppliers. AI-driven analysis can pinpoint anomalies and draw connections to areas of risk, providing an early warning system to protect brand reputation and ensure ethical operations.
A multi-enterprise platform can serve as an intelligent connector of data from ERP systems, supply chain partners, NGOs, and sustainability databases, offering brands and retailers a unified view of their supply chain while tying external data to specific SKUs and purchase orders. This integration is key to addressing the nuanced risks related to social and environmental issues. These platforms allow businesses to draw intelligent insights from the vast mountains of data they collect, create, and manage.
They also extend accurate data to all stakeholders throughout the entire organization, ensuring that all stakeholders are operating from accurate, real-time information. By centralizing key supplier data, this technology is also instrumental in helping businesses meet their Scope 3 carbon reduction goals, allowing them to collect and assess emissions data, efficiently implement improvement plans, and track and measure their progress.
The journey toward sustainable supply chains in the retail sector is complex and fraught with challenges. However, with the right approach to data management and the adoption of advanced technological solutions, retailers can navigate these waters successfully. By harnessing the power of digitalization, the industry can move closer to achieving its sustainability goals, ensuring compliance with global laws, and ultimately, meeting the demands of an increasingly conscientious consumer base.
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About the Author
Eric Linxwiler is Senior Vice President of TradeBeyond. He has over 30 years of experience in enterprise software and cloud-based platform companies with a specialty in supply chain optimization and workflow management.
(Copyright@IndiaCSR)
