Why companies' top struggles lie in sustainable supply chains

Editor's Note: To learn more about smart supply chains and hear from Elizabeth Fretheim, director of business strategy & sustainability with Walmart, don't miss VERGE@Greenbuild Nov. 12-13.

Despite a number of recent government-led and industry-specific initiatives to simplify the process, companies are still struggling to get a grip on their supply chains, according to a recent report by Business for Social Responsibility (BSR), a non-profit that promotes sustainability in business. The report, called the BSR/Globescan State of Sustainable Business Poll 2012, found that the top sustainability challenge for companies was achieving solutions throughout the supply chain.

Nearly 42 percent of the more than 550 professionals polled said ensuring their suppliers followed sustainable practices was the greatest obstacle to achieving their climate sustainability goals.

The results point toward the challenge faced by companies to boost their supplier engagement and bridge the gap between suppliers simply filling out disclosure forms to actively reducing their carbon footprint.

But companies often face a number of obstacles getting to that point. Many companies don’t have visibility beyond the first or second tier of their value chains, largely due to the so-called confidentiality of the supply chain. A big retailer like Walmart will buy product from a company, which in turn buys product from another company, which buys from a third or fourth company, and the entire sequence is seen as proprietary, said Jess Kraus, CEO of Source 44, a company that helps businesses improve the transparency of their suppliers.

“That nature and sense of confidentiality flows down the supply chain, and that’s the primary roadblock or challenge,” he said.

Sub-contracting is another big issue. In the apparel industry, for example, sub-contracting is standard practice, and many clothing companies therefore can’t see beyond the first tier of their value chains. One stitching factory, for instance, may use anywhere from 10 to 15 sub-contractors, without disclosing their identities.

“Getting visibility all the way out to the cotton fields is something that quite few companies actually have,” said BSR Vice-President Peder Pruzan-Jorgensen.

Photo of tug of war provided by Wayne0216 via Shutterstock

Next page: Developing initiatives to combat challenges