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Slowly but Surely, Retail Supply Chains Are Becoming More Transparent

Boosting the transparency of your company’s supply chain isn’t just a form of virtue signaling, it can actually make businesses better.

That’s the conclusion of a recent report by the Sustainability Consortium, a network of 100 companies, including boldface names like Amazon, Hanesbrands, Marks & Spencer and Walmart, that represents more than $20 billion in annual retail sales.

But revealing how the proverbial sausage is made isn’t an easy thing to do. Most social and environmental “hotspots” exist upstream or down from a brand or retailer. To achieve full transparency, companies must understand not only a product’s genesis but also its end of life, TSC said.

As onerous as this discovery process may be, transparency is the “first necessary step” toward improving supply-chain performance. “Without transparency, consumer and investor trust is challenged, and opportunities for collective action are lost,” the group said.

To measure the pulse of the industry, TSC collaborated with its stakeholders to develop Key Performance Indicators (KPIs) suppliers could use to measure the performance and progress of their supply-chain hotspots. Since most of the KPIs are tied with levels of transparency, they can also serve as a proxy for the amount of openness present in a supply chain, TSC said.

This year, the 1,683 suppliers TSC surveyed scored an average of 36 out of 100 points, which corresponds to a scenario where the supplier might score “100 percent on one-third of the KPIs and 0 percent on two-thirds of the KPIs,” it said. “This means that on some of the hotspots (likely within their own manufacturing operations), they have full transparency, but on the majority of them (likely within their supply chain), they do not.”

At the same time, progress toward transparency has by and large been positive. From 2015 to 2017, the number of KPI scores between 0 and 10 percent dropped from 50 percent to 48 percent while the number of KPI scores between 90 and 100 percent rose from 22 percent to 26 percent.

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For the most part, companies are trying to improve their scores. Of the suppliers who participated in TSC training, 88 percent said they took “specific actions” to increase their survey scores. Among the companies who were spurred to action, 50 percent said they worked with suppliers to promote transparency in the supply chain, and nearly 40 percent said they worked internally to increase transparency. Another 25 percent said they made changes to their processes, 15 percent said they made new public disclosures regarding sustainability performance and 15 percent said they tweaked products or packaging to make them more eco-friendly.

Though TSC has seen a drop in “unable to determine at this time” responses, it said the number it fielded this year remains “too high” for its liking.

Because the companies that scored the highest KPIs and made the biggest improvements were also those who had worked with sustainability the longest, however, TSC said it’s hopeful that lagging businesses only need a firmer guiding hand.

“It is our hypothesis that after learning what is needed to respond to the KPIs in their first year of implementation, suppliers put in systems that give them the increased transparency to score higher in subsequent years,” TSC said.