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There's room for progress on tackling sustainability through the supply chain

Many consumer-facing companies with recognizable brands are taking action, but companies lower down in the supply chain are not, a new study finds.

Companies that want to take action on climate change or other environmental or social issues realize that their suppliers — and their suppliers' suppliers — are key to addressing many of the big problems.

So how many are actually acting on that? A new Stanford University study of big, global suppliers found that more than half the companies reviewed had adopted some type of sustainable sourcing practices, and among those, large, well-known, consumer-facing companies with valuable brands were the most likely to have sustainable sourcing practices.

That's the good news. The not-so-good news from the study: Non-consumer-facing companies, often lower down in the supply chain, where the most socially and environmentally pressing practices are needed, are less likely to adopt sustainable sourcing practices. They may be adopting some sustainable business practices to appease some of their own customers, but those actions might not be rippling across the entire organization.

Non-consumer-facing companies are less likely to adopt sustainable sourcing practices.
"We can't say why companies are, or are not, doing this," said Tannis Thorlakson, the study’s lead author and a Ph.D. candidate at Stanford.

The research looked at 449 publicly traded companies in the food, textile and wood-products sectors, and the extent to which their sustainability efforts make a dent in the United Nations' Sustainable Development Goals (SDGs). There are definite signs of progress.

In one example, France-based cosmetics giant L'Oreal trains many of its first-tier suppliers to address sustainable production, such as reducing or reusing plastic packaging. But the company also provides training to suppliers further down the chain, including those that produce raw materials such as shea nuts, patchouli and quinoa, to address climate change, land use and promote sustainable production, according to the study.

In another illustration of what's possible, Atlanta-based Coca-Cola Co. provides training to farmers who grow mangos, coffee, corn and other goods, to promote sustainable agriculture, gender equity, zero hunger and other goals. The company also works with first-tier suppliers to boost recycling, ensure fair working conditions and promote sustainable production.

The power of certifications looms large

Many big companies at the top of the chain are using third-party certifiers to ensure that raw materials they use or sell meet certain requirements and standards, the Stanford study suggests. Certifiers include Fair Trade USA, Roundtable on Sustainable Palm Oil and the U.S. Department of Agriculture Organic standard, as just a few examples.

In a recent example, grocery giant Kroger announced last month that it plans to expand the number of Fair Trade Certified products that it sells under its in-house Simple Truth brand. The grocer said it currently sells more than 300 Fair Trade Certified products under 60 brands, and that its partnership with Fair Trade USA will help the company meet its zero-hunger and zero-waste goals.

An area for improvement: producers often focus on ensuring that one product ingredient, such as palm oil, is sustainably sourced, but they don’t pay the same attention to other ingredients in the product, according to the study. Or, a company will ensure that the packaging of a product is made from recycled materials, but the product in the packaging is not necessarily sustainably sourced.

To be sure, the study looks at a snapshot in time: corporate policies that were in place as of Dec. 31, 2015.

If the study were done this year, it might find that more companies have adopted sustainable sourcing practices, Thorlakson said.

Even so, while some leading companies are making real headway in finding sustainably sourced products, the study concludes that supply-chain interventions are less likely to drive change at a global scale until many more companies adopt sustainable sourcing practices that are strong, verifiable, address a broad set of sustainability issues and reach all tiers of global supply chains.

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