{"id":10264,"date":"2022-06-28T10:18:13","date_gmt":"2022-06-28T17:18:13","guid":{"rendered":"https:\/\/www.qad.com\/blog\/?p=10264"},"modified":"2022-12-02T10:17:57","modified_gmt":"2022-12-02T18:17:57","slug":"unethical-supply-chains-cost-more-than-dollars-and-cents","status":"publish","type":"post","link":"https:\/\/www.qad.com\/blog\/2022\/06\/unethical-supply-chains-cost-more-than-dollars-and-cents","title":{"rendered":"Unethical Supply Chains Cost More Than Dollars and Cents"},"content":{"rendered":"

[vc_row][vc_column][vc_single_image image=”10265″ img_size=”full”][vc_column_text]Companies are increasingly encouraged or propelled to include human rights, environmental and social considerations within global supply chains. While consumer products companies may have taken the lead on these considerations in the past, all industries are facing the challenge to place more emphasis on environmental and social responsibilities. Supply chains are increasingly complex and rely on numerous partners, making it difficult to control the impact supply chains have on people and the environment.<\/span><\/p>\n

The <\/span>collapse of the Rana Plaza garment factory in 2013<\/span><\/a> serves as an extreme example of the human toll and other costs<\/a> resulting from a supply chain failure. The incident claimed over 1,100 lives and injured over 2,500 people. And, also served as a wake up call across the manufacturing and other industries, not just the textile and garment segment.<\/span><\/p>\n

Companies were reminded that cutting corners in competitive production cycles and reaching for cost savings can result in human costs, corruption, environmental risks and a loss of brand loyalty. More recently, Cadbury\u2019s supply chain in Ghana was found to include children as young as 10 working on cocoa farms while missing school.<\/span><\/p>\n

Consumers now demand transparency about the way a business operates and how the organization is contributing to a more sustainable future. As a friend of mine states often, \u201cConsumers previously just wanted to know if their food is organic. Now they want to know what acre of land it was grown on, the source of the water and the living conditions of the workers.\u201d This growing consumer interest in responsible and sustainable production places more burden on organizations and their suppliers to communicate and collaborate on a regular basis.<\/span><\/p>\n

Child Labor Costs in the Supply Chain<\/span><\/h2>\n

According to the <\/span>United Nations<\/span><\/a>, an estimated 160 million children between the ages of 5 and 17 are in child labor across the globe. With a constant quest for lower product costs, companies unknowingly and, sometimes knowingly, rely on child labor to keep cheaper products on store shelves. We highlighted this earlier in the example of the cocoa supply chain. It\u2019s also seen in other industries where child labor might be relied upon to perform repetitive agriculture, mining, garment production or other tasks.<\/span><\/p>\n

The costs fall on the children in the form of lost education and increased health risks. Many child laborers are not simply working an after school job. In 2014, it was estimated that over half of the global child laborers were working over 9 hours per day.<\/span><\/p>\n

The working conditions also place children\u2019s health, safety and education at risk. In harvesting sugar cane and cocoa, machetes are often used resulting in unnecessary injuries. If working in mining or agriculture, toxic gasses, pesticides and fungicides are often inhaled resulting in health problems.<\/span><\/p>\n

Reputational Costs of Unethical Supply Chains<\/span><\/h2>\n

It is not uncommon for companies to face reputational risks from poor working conditions within the supply chain. Apple has not been able to avoid this situation. In the early 2000s, Apple faced massive criticism based on a number of suicides at their Foxconn outsourced manufacturing sites, primarily thought to be driven by poor woking conditions. Or, consider the recent 2021 case where fast fashion maker and retailer, <\/span>Boohoo<\/span><\/a>, lost over a \u00a31 billion in company value when it was uncovered that suppliers were paying less than minimum wage.<\/span><\/p>\n

Automakers are increasingly instituting objectives to boost the number of suppliers that meet defined social and environment standards. Taking Ford as an example, the company is working with key suppliers in China, India, Thailand and South Africa to eliminate over 4,900 metric tons of CO2 and 24 million gallons of water usage over the next three years. And, with the move to electric vehicles, OEMs and automotive suppliers are seeing heightened concerns on the topic of sustainable<\/span> sourcing<\/span><\/a> as electric batteries require cobalt. Unfortunately, most cobalt comes from mines located in the Democratic Republic of Congo where a lack of laws introduces the potential for worker exploitation and requires further supply chain traceability and visibility.<\/span><\/p>\n

Ultimately, supply chain performance is where company and brand promises are either met or broken \u2014 and where negative consequences to an organization\u2019s reputation can be avoided. Organizations that are able to operate their supply chain in an ethical, efficient and transparent fashion that meet customer\u2019s expectations will be rewarded with greater customer loyalty and revenue growth.<\/span><\/p>\n

Environmental Supply Chain Costs<\/span><\/h2>\n

In January 2021, the <\/span>World Economic Forum<\/span><\/a> reported that \u201ceight supply chains account for more than 50 percent of all carbon emissions.\u201d The supply chains were identified as food, construction, fashion, fast-moving consumer goods, electronics, automotive, professional services and freight. The environmental issues include deforestation, excessive energy use, hazardous emissions, e-waste and water pollution.<\/span><\/p>\n

In the case of the food supply chain, consider that one third of all food produced worldwide is lost or wasted annually and that 80 percent of that waste is caused by factors such as supply chain inefficiencies, late deliveries and inaccurate planning.<\/span> According to the<\/span> United Nations Environment Programme<\/span><\/a>, the resources required to produce the wasted levels of food have a carbon footprint of about 3.3 billion tons of CO2. This places food waste as the world\u2019s third-biggest carbon emitter behind China and the United States.<\/span><\/p>\n

Are You Prepared?<\/span><\/h2>\n

Companies are going to be forced to confront ethical supply chain standards, if they have not to-date, as a requirement of doing business.<\/span><\/p>\n

Leading companies like Patagonia have already embraced this effort. <\/span>Patagonia, a California-based clothing brand, highlights their commitment to full visibility and transparency into ethical standards by publishing a list of farms, factories and mills they work with. <\/span>While upcoming <\/span>legislation<\/span><\/a> will change organizational behavior through mandates, many companies already realize that streamlining supply chain processes and engaging in a more ethical perspective will deliver <\/span>greater efficiency, improved sustainability, better working conditions and less environmental impact <\/span>\u2014<\/span> along with great customer loyalty.\u00a0<\/span><\/p>\n

Additionally, <\/span>recent studies show that companies with a high degree of focus on environmental and social factors experience lower debt and capital costs. In Mc<\/span>Kinsey\u2019s 2020 Sustainability Survey, 83 percent of C-suite leaders say they expect that ESG programs will contribute more shareholder value in five years than today. <\/span>In addition, 98 percent of respondents indicated that having a sustainable procurement approach is key for a company\u2019s future success, according to BearingPoint\u2019s 2021 Sustainable Challenge report.\u00a0<\/span><\/p>\n

Where do supply chain ethics and sustainability rank on your organization\u2019s priority list? <\/span>How well are you leveraging technology to manage and monitor supplier\u2019s ESG standards? Has your organization started down the path of monitoring the supply chain for ethical and sustainable performance? <\/span>How are you preparing for ethical supply chain legislation and the ability to avoid associated costs?<\/span><\/p>\n

How QAD Can Help<\/span><\/h2>\n

Are you running into questions about ways to enhance your organization\u2019s approach to ethical and sustainable supply chains? If so,<\/span> QAD SRM<\/span><\/a> (Supplier Relationship Management) can help, providing the ability to improve supplier collaboration and ensure optimal sourcing. Additionally, it delivers a standard interface with EcoVadis, a sustainability assessment provider, to progress your environmental, social and ethical efforts with suppliers. If you would like to speak to QAD to discuss how our solutions can support your ethical supply chain objectives, please<\/span> contact us<\/span><\/a>.<\/span>[\/vc_column_text][\/vc_column][\/vc_row]<\/p>\n","protected":false},"excerpt":{"rendered":"

[vc_row][vc_column][vc_single_image image=”10265″ img_size=”full”][vc_column_text]Companies are increasingly encouraged or propelled to include human rights, environmental and social considerations within global supply chains. While consumer products companies may have taken the lead on these considerations in the past, all industries are facing the challenge to place more emphasis on environmental and social responsibilities. Supply chains are increasingly complex […]<\/p>\n","protected":false},"author":53,"featured_media":10265,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[182,2045],"tags":[2220,1313,2222,2218,1333,2221,809,1696,92,2217,118,396,2223,2219],"class_list":["post-10264","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-featured","category-supply-chain-trends","tag-child-labor-costs","tag-connected-supply-chain","tag-environmental-costs","tag-ethical-supply-chains","tag-integrated-supplier-management","tag-reputational-costs","tag-supplier-collaboration","tag-supplier-relationship-management","tag-supply-chain","tag-supply-chain-compliance","tag-supply-chain-management","tag-sustainability","tag-sustainability-legislation","tag-unethical-supply-chains"],"yoast_head":"\nUnethical Supply Chains Cost More Than Dollars and Cents | QAD Blog<\/title>\n<meta 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