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Michele Roberts

Associate Dean Post-Experience

How ethical is your supply chain?

Podcasts | 19 February 2023

Michele Roberts

Associate Dean Post-Experience

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The Business of Supply (episode 1): Advances in regulation, law reform, and technology have greatly enhanced our capacity to create ethical and sustainable business practices.

So why are some organisations still struggling to embed this in their supply chains?

Guests:

Frances Atkins, Co-Founder and Director of technology platform Givvable, AGSM MBA alumna
Tracy Wilcox, Associate Professor at UNSW Business School
Michele Roberts, Associate Professor, AGSM Academic Director and Associate Dean Post-Experience at UNSW Business School

Find out more about Associate Professor Tracy Wilcox’s and UNSW research below:

https://www.unsw.edu.au/staff/tracy-wilcox
https://www.linkedin.com/in/tracy-wilcox-2b4b654
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Transcript:

Narration: Over the past 50 years, increasing levels of globalisation have created a bewildering and complex system of supply chains that manage the production and distribution of everything from seedless apples to Apple iPhones.

And while this has given us access to products, we didn’t even know we needed, this vast system makes poor ethical practices hard to track and address. But things are changing fast.

For organisations the list of reasons not to meaningfully track suppliers and prove commitment to ethical practices is rapidly dwindling, with fresh regulations and incentives being introduced every year.

Today on AGSM’s Business of Leadership podcast, we are looking at ethical supply chains. What role do new modern slavery laws, ESG reporting, and regulatory systems have to play in them? How can businesses leaders work together to raise the bar collectively on high supplier standards? And what is at risk if they fail to do so?

AGSM podcast host Associate Professor Michele Roberts speaks with Frances Atkins. An AGSM MBA alumna, entrepreneur and Co-Founder and Director of technology platform Givvable, Frances gives unique insight into the role technology has to play in making it easier to create more ethical supply chains, while retaining profitability.

Frances and Michele are also joined by Associate Professor Tracy Wilcox of UNSW Business School, whose research focuses on socially responsible management practice that equips managers to create opportunities for ethical agency amid complexity.

Michele Roberts: Thank you for joining us for this episode of the AGSM Business of Leadership Podcast where we’re taking a deep dive into the business of supply chains. My name is Dr. Michele Roberts. I’m an associate professor and the academic director of AGSM, and Associate Dean of Post Experience Programmes at UNSW Business School. I’ll be taking the reins from Nick Wales for a few episodes of The AGSM Business of Leadership Podcast.

In this episode, we’ll be discussing ethical issues in supply chains. We’ll talk about what ethical issues there are hidden within our supply chains, look at green-washing and why it’s such a problem and how we can eliminate it. We’ll look at the rise of the conscious consumer and the steps that you can take as a leader to ensure that your supply chains are ethical.

I’m joined by two experts. Firstly, I’m thrilled to have with us associate professor Tracy Wilcox from UNSW Business School.

Tracy’s one of the absolute trailblazers of business ethics in Australia, and she’s been our academic director of post-graduate programmes at the business school. And her research in teaching focuses on socially responsible management practices as well as how managers can create opportunities for ethical agency in often difficult contexts.

I’m also joined by Frances Atkins. We’re delighted to have Frances with us. She is a graduate from our AGSM MBA class of 2019, and co-founder and director of Givvable, a leading platform for tracking supplier sustainability and ESG credentials.

Frances Atkins: Thanks for that intro, Michele. So as Michele mentioned, I’m one of the co-founders of Givvable and we are a supplier sustainability tracking platform. And the background to this is back in 2019, I think it was, we actually participated in an entrepreneurship programme, UNSW Founders, at the University of New South Wales.

Myself and my co-founder had spent a number of years in corporate and government and we wanted to see how this concept of corporate social responsibility could be transformed into a more sort of operational application of it. And we thought that there was a big opportunity for businesses to activate their spend for better outcomes.

So that was really the seed of the idea and we spent quite a bit of time working with large companies to understand the complexities of the problem, both from a practical perspective, but also from an outcome and impact perspective as well. That led us ultimately to develop what is known as Givvable today.

Tracy Wilcox: Thanks very much Michele. I initially trained as a chemist and I worked in the manufacturing industry as a quality manager where I was involved in all aspects of the value chain. So from getting the raw materials to producing products, to actually selling that to the consumers.

And that really piqued my interest in both ethics and sustainability, coming to it from first that science side, but also looking at the human factor and really starting to see issues around workplace conditions for workers in the industry, environmental impacts of the work that’s done.

So that really kindled this passion that I have. And I went on to do a master’s and a PhD in that area and have been working in ethics and sustainability, both teaching and research for 20 years now.

Michele Roberts: So what are the problems in supply chains and how significant are these?

Tracy Wilcox: I think the whole question of supply chains is so important nowadays because value chains nowadays are really global in scale. We’ve become so much more globalised and they’re highly complex with many, many tiers and layers. And this has really been an outcome of increasing globalisation over the last 50 years. And unfortunately, what that’s meant is that now the social side, the human side of supply chains and the environmental side are largely invisible to consumers.

So consumers, the people that buy the products really don’t have visibility over what’s going on. And yet we have seen some really important issues and some bad things happen in recent times. I guess the ones that probably the listeners are most familiar with would be the Rana Plaza factory and the thousands of people that died there. And that really cast a light on the fast fashion industry.

We’ve seen slave labour in the Thai seafood industry. We’ve seen deforestation and the issue around sustainable palm oil in Malaysia and Indonesia. And more recently, we are looking at sort of bonded labour with the Uighurs. So there are a whole lot of issues that continue to emerge and come to the public attention.

And I think that really does put the spotlight on these issues. And what we are seeing is that activist groups and civil society organisations are now putting pressure both on companies and on governments to do something about these issues. So, in Australia we’ve had the Modern Slavery Act. In the UK, something similar. There is the 2017 Duty of Vigilance Act in France that’s emerged, which would be really best practice in terms of their regulatory situation there.

So we are looking to governments to, I guess, take more steps to do something to really require businesses to start thinking about their supply chains from a human rights perspective. Whether you’re talking about safe workplaces, whether you’re talking about a fair wage or a living wage, whether you’re talking about energy footprint, whether you’re talking about the environmental impact with pollution and whether you’re talking about the downstream waste of an organisation as well.

So yeah, I think it’s really in the public’s mind nowadays because we’re seeing these complex interrelationships between the various elements of the value chain.

Michele Roberts: And Frances, anything you would add about the extent and nature of the ethical challenges in our supply chains?

Frances Atkins: Yeah, I mean Tracy raises some very great points there around the visibility of supply chain, which is something that we seek to assist our clients with as best we can. But it is a very complex and difficult issue. I think mean we take a lens of looking at it from a corporate or government buyer perspective and the interaction of those large purchasing entities with their suppliers. And they do struggle with visibility of clearly they know who their tier one supplier is, but throughout the chain it is more difficult to get that visibility.

And often even getting that information coming up back up through to the ultimate end buyer is difficult because a lot of the suppliers don’t want to disclose who their suppliers are for competitive reasons.

So visibility is a challenge. Layer on top of that, the complexity of sustainability and ESG as a concept. And Tracy mentioned a number of different aspects of ESG and that creates, again, challenges. You may have a strong performer in one area but not so strong in other areas. And how do you deal with those challenges?

I think a lot of companies are still trying to figure out how to solve this. For companies that are taking steps to do this. A lot of them have been issuing what are known as supplier SAQs or supplier assessment questionnaires.

In sustainability in ESG this is a challenge because of the issues we mentioned before, but also, we’re starting to see low response rates, low quality of responses. We’re starting to see affirmation in the responses, and you’ve got an inherent conflict as well in the supplier-buyer relationship, which is lending itself to that affirmation.

And so it’s just causing a distrust in those responses, but also it’s a very time-consuming process to go through for both the supplier and the buyer, to undertake those surveys and questionnaires. So, we’re sort of entering into this new phase of, “Well, how do we deal with these challenges in a really efficient way?” Because the way that we’ve tried to get this visibility on our suppliers in the past hasn’t really shown to be working in the context of supply chains at scale.

Michele Roberts: What are the key steps that businesses should be taking in terms of the priorities for boards and leadership teams to investigate and safeguard the ethics of their supply chains?

Frances Atkins: I think the very first thing is that we need a mandate from the board and the C-suite on this. Because it just will not work throughout an organisation unless you’ve got that strong mandate. And more than that, we need targets. We need specific metrics that the organisation, the people that tasks we’re actually executing on this, that they’ve got metrics that they can track against.

And this is incredibly important because if you don’t have those things, if people aren’t accountable, you just won’t get things done. You won’t get the budget allocated and will just end up not making progress. So that is the very first thing from at least my perspective, that I think organisations need to do.

The next part of that is the actual how do you actually implement that? But I’ll let Tracy comment on that because I’m sure from a high-level perspective there, she’s got some comments there.

Tracy Wilcox: I couldn’t agree more, Frances, about that need for accountability and the fact that there has to be measurable targets and KPIs because it’s a culture change as well as a change of mindset as well as a change of priorities. So if you’ve always been thinking of supply chains in terms of a race to the bottom to try and get the best price and maybe the best technology and you’re not thinking about the people on the planet side of things, then it is a mindset change and it is a change in culture.

So I think that, that’s really important. And the way to change cultures and mindsets, of course, as you say Frances, is to have those targets and metrics and KPIs and accountabilities. That’s really key.

I think if we leave it to individual organisations to do the hard work, I think we’re going to end up with a kind of imbalance. And that’s where I think we need regulatory systems to raise the bar collectively.

And so I would say that that regulations that are about expecting large organisations, and we’re talking large organisations here, so the French Act only applies to large organisations. The Australian Modern Slavery Act only applies to large organisations.

So these large organisations have the power and actually have the bottom line to be able to be working a little bit more in this area than they may have in the past. And I guess if you get down to the operational level, and you touched on this, Frances, about getting those procurement offices, those buyers onboard. There’s some research that was done out of Harvard that showed that whilst there was a lot of senior leadership discussion and commitment to more sustainable and ethical supply chain practices, that hadn’t filtered down to the procurement officers. And it hadn’t filtered down to even the tier one procurement officers.

So let’s, at the operational level, start getting our procurement officers onboard and start getting our suppliers’ procurement officers on board. Because in these complex supply chains, as Frances mentioned earlier, we have several tiers. So they should be at least getting, offering training and incentives for their first tier suppliers for their own procurement offices. So metrics and targets really trickle down to where things are done. So I would say that, that’s a really important thing.

I think using technology a bit better to better understand your supply chain. It’s really interesting how few organisations have a really good handle on the complexity of their own supply chains when you go down to those lower tiers. So having that visibility and some of the large companies are doing that really well, Patagonia map it out quite well.

And then getting data on how things are going. So I think that’s information technology has a lot of capabilities in, but it needs to have that culture, that mindset behind it, otherwise it may just become sort of green-washing and not something that’s actually working in practice.

Michele Roberts: You’ve both talked about the importance of hard targets and commitments and that tone from the top, but even in the case of the Modern Slavery Act, we just saw that report from the Australian Human Rights Institute based at UNSW suggesting that even where there is excellent legislation, we’re still not seeing the outcomes that we need. Can you talk to us a bit more about that, Tracy?

Tracy Wilcox: That report you’re talking about, Michele, that was undertaken by UNSW’s Australian Human Rights Institute and Justine Nolan and her team. They found that 68 per cent of companies are still failing to comply with the basic reporting requirements of this Act. Now these are large companies. These are companies with a hundred million plus turnover. So we’re not talking about requiring unsustainable reporting from small businesses. So let’s just get that point now. And there’s no action, but that’s probably because there is no consequence.

So if you want regulation to have teeth, then there has to be some kind of sanctioning. And we saw this with gender equity legislation for years and years and years. If you want something to change, there has to be consequences for not complying with it. And I think that’s really where we need to go if we are serious in Australia about the modern slavery issue and trying to eliminate that in our supply chains.

Michele Roberts: To what extent is this now a technology and a data problem? Frances, this is an area of your expertise. Is it really just going to come down to that transparency and visibility driven by technology and data?

Frances Atkins: Supply chains is one of those areas where it lends itself to leveraging the technology that’s available to us, whether it be artificial intelligence, statistical analysis, big data, advanced analytics, all that kind of thing to be able to enhance their understanding of their own supply chain.

I often say that sustainability is critically linked to an organisation. They can’t be making sustainability claims about their performance unless they have an understanding of how their suppliers are performing.

When you start to look at the supply chain given the complexity, the breadth of ESG issues, and then typically large organisations have thousands of suppliers, that lends itself to a technology solution. To get that sort of data, to get that insight at that scale requires organisations to take advantage of what’s out there today.

Michele Roberts: And Tracy, in terms of solutions for tech and data, what are you seeing?

Tracy Wilcox: Look, I mean, I think what Frances is saying is absolutely right. It is these newer forms of organisations like Givvable that actually enable that kind of transparency to be more easily attained by companies. I think technology is always going to be part of the solution. And we’ve seen some really interesting examples of how blockchain’s used to gather data. But the data is the other question. And I think the people is really, having that mindset is going to be always important because it doesn’t matter if... You can talk about technology and hand the responsibility over to technology when really it’s the leadership team that needs to take responsibility and technology’s the tool to get you there.

Frances was talking about the fact that organisations have thousands of suppliers, and I mean, for example, Unilever have 58,000 suppliers. So that complexity’s there, but there was some interesting work done by WWF that showed that in the supply chain around three to 500 companies control 70 per cent of the choices that organisations can make.

So there really is a leverage point there where, if you look at those companies and then look at who’s funding those companies. So look at those financial services organisations that are funding the companies. And we’ve seen how civil society groups have put pressure on financial services institutions, whether it’s about coal mines or whether it’s about sustainable palm oil financing or unsustainable palm oil and deforestation financing. We’ve seen how using those financial services companies as a lever for change has been a really interesting development, I think in the last 15 years or so.

Michele Roberts: Are we seeing new, interesting collaborations emerge and companies becoming more thoughtful about the ecosystems they build to achieve sustainable supply chains?

Tracy Wilcox: You’ve got the standout companies that everybody knows, like Patagonia, who have been a real leader in sustainable supply chain in terms of the environmental impact, in terms of their energy footprint, in terms of their work practices. And they were rated very highly. There’s a report that’s put out every year called the Sustainable Fashion Guide and the Ethical Fashion Guide, and they’re always rated up the top in that.

So I mean, they know exactly what their suppliers are doing, they can drill down into details, they can have a look at what’s happening in terms of paying a living wage to the workforce of their suppliers. So I think that’s a standout organisation. Even big organisations like Intel, which is the world’s largest manufacturer of semiconductors, they’ve been looking at conflict minerals and particularly in the Congo and making sure that they’re not using conflict minerals in their manufacturing.

So I think that’s really interesting to see how they have really taken those steps to look at that complexity of the supply chain and to use the information that they have available to try and work with that.

And then you’ve got information technology companies like IBM and SAP that are also working in this space and working with companies as well.

Michele Roberts: Yep. There’s some great work being done by the digital sustainability research hub at UNSW on this.

Tracy Wilcox: Absolutely, yes, yes.

Michele Roberts: I guess one area that we should just touch on is the role of government and policy. We are seeing new policy instruments being introduced around the world. And Tracy, you referred to policy that we’re seeing in new regulation in Europe. What are you seeing emerge and how is it going to impact Australian leaders if they haven’t built the right supply chains that they need?

Tracy Wilcox: I actually think that this is something that is inevitable is that we’ll start to get more regulations around this, as we start to learn more about what actually is going on in supply chains. And this will be demanded by people and that the French Bureau is a really good example of how people power brought about a change in regulations.

So I think that, that will continue, and I think that’s very important. We can’t just leave it to companies because the playing field is not level. So having regulations levels the playing field and really asks everything as companies to really think about things, I would be interested to see what’s happening if we look at the whole value chain both upstream and downstream, and we’re starting to see some pressure put on organisations, on fast moving consumer goods organisations, for example, to think about downstream waste and their contributions to downstream waste.

And we’re having regulations here in New South Wales. We’ve just had some regulations kick in around plastic waste. So I think that’s happening already and will continue to happen. And what’s really interesting is when you look at the organisations that are doing a lot already, a lot of those leaders are based in Europe, and Europe has the strongest regulations around sustainable and ethical supply chains and around those ethical and sustainable business practices.

So I think it’s kind of more of a virtuous circle that’s happening there. And here in Australia, we’re following that lead as are other big countries. But yeah, it will take time because it is turning around a supertanker.

Michele Roberts: Absolutely.

Tracy Wilcox: But you need all parts of the economy and society playing their part. So yes, consumers can play a part and that it’s great that they are starting to play a part. And research is showing that 50 per cent of consumers will take sustainability into account when they’re making a decision.

So we’ve got this research that’s showing consumers can play a part and producers can play a part too, but governments and societies really need to be playing a part. So I think everybody needs to be on board with this particular issue.

Michele Roberts: And Frances, what is your perspective from the market? Are you seeing some of the European and US legislation starting to have impacts here in Australia? Do you imagine that there will be more policy introduced within Australia that’s going to impact supply chains?

Frances Atkins: Yeah, absolutely. I mean, my personal view is that at some point we’re going to have mandatory reporting on a number of these issues in Australia, I think there’s a period to go through where there needs to be a more standardised approach, essentially offshore before they’re going to start accommodating some of those things locally. But it is going to happen, that’s my personal view.

But even aside from that, you’ve got stock exchanges all in the region basically saying that, “You’ve got to provide some form of sustainability reporting or a please explain,” and no one wants to have to explain why they’re not issuing a sustainability report.

Obviously, the quality of some of these, they vary. So that’s sort of the regulatory landscape, but then you have third parties that are reviewing the quality of these things. There are indexes out there that create certain pressures on organisations to up their game.

And as Tracy says, I mean ultimately this is an ecosystem. This requires an ecosystem solution. And I think we are starting to get there. So we’ve talked about the regulatory environment, we’ve talked about customer expectations, and Tracy’s mentioned the consumer, but also think about it from a large corporate buyer being a customer.

We have corporate clients that have set certain targets, Net Zero 2040 targets and interrogating their suppliers to see which ones align to those Net Zero 2040 targets. And what we’re identifying is not only the suppliers that haven’t set a target and are not demonstrating any third-party action towards any form of target, but we’re also identifying the suppliers that have a mismatch in their target.

So you got a client with a 2040 target that includes the supply chain, and then you’ve got a major supplier that has a 2050 target that includes their supply chain.

So we’ve got these mismatches happening and ultimately we’re going to have to figure out how we deal with those. I like the comment about incentives and the role of finance. So this is something I’m an advocate of. I think ultimately, we need to put in place the right incentives to drive supplier action. They need to see a return on investment for taking action on sustainability. And that can come in a number of different ways. So we’ve seen corporate issuance on sustainability-linked facilities where they get a discount or benefit on that lending.

My view is that needs to trickle down faster to the suppliers that actually hold the credentials on sustainability and let them see a tangible financial benefit for that. Ultimately, the challenge with sustainability and across ESG issues, which includes obviously modern slavery and true human rights, is these things that we are asking our suppliers to do take time and they require an investment.

And so in order to accelerate the action, we really need there to be, for the suppliers to, I guess accrue a return on investment for taking those actions. And at the moment, I think that’s a little bit hard for them to see. So I think if we take all these things together, customer requirements, both consumers and the corporate buyer, the regulatory environment, the role of finance, and then if you’ve got corporates and organisations setting targets, indeed governments. So state government setting targets, all of these combined should help accelerate and drive us to a higher quality in terms of addressing these issues.

Michele Roberts: Right. And you talked about the financial burden on suppliers, I think it’s a really interesting area. I was having a presentation in one of our MBA classes from a global expert on chocolate sustainability, Giselle Weybrecht. And Giselle was telling us that most chocolate, most cocoa farmers are smallholders. Sort of families working a plot of land, three generations involved and they cannot get the accreditation, the certification for fair trade chocolate because it costs a huge amount to go through this accreditation.

And so farms that really are fair trade and really have got very few impacts on the land are missing out. So is there any way that we cannot disadvantage small farmers and small producers throughout our supply chains as we increase our sort of reporting burden?

Tracy Wilcox: Yeah, look, I mean, fair trade’s an interesting one because it’s been around for a very long time and it has developed its own kind of infrastructure. And originally, if you look at the early fair trade work that was done by the Fair Trade trademark, the costs were not passed onto the producers. They were borne by the purchases. But I think really for a lot of those organisations, we need to be focusing on the purchasers. So what is it that the Cadbury and the Nestle’s are paying? Because that’s where those costs should be built in.

They shouldn’t be borne by the small growers and producers. And I think most of the work that you’ll see in ethical supply chains would support that. It’s not about punishing those small growers and small producers. It’s about asking these large organisations and that we’re talking about organisations with multibillion-dollar profits. Let’s not forget that.

Frances Atkins: I think there are things that the larger companies can do to start to demonstrate the value of that sort of certification to their business. There are things like preferred supplier status, giving them longer contract cycles, paying them faster. There’s a whole range of different things that they can do here, potentially in addition to subsidising the cost of those certifications to make them accessible to smaller producers.

And these are the sorts of things that we are actively communicating to at least our clients, to help them understand the full range of the different types of incentives that they can start to make available to suppliers to drive the behaviour that they wish to see in their supply chain.

Michele Roberts: We’ve talked about someone needing to pay a price, and I know when I sort go shopping, I always think, “Well, if you buy a dress and it only costs $50, well someone’s paid.” If you buy a tee-shirt and it costs $20, there’s a price being paid somewhere. And is that the price on the worker, the planet?

So what are you seeing in that gap? In marketing, we call it an attitude behaviour gap, the gap between consumers saying they would pay more and actually paying more, Tracy?

Tracy Wilcox: Look, I think there’s a huge role for education of consumers in this, Michele. If you look at your example of fast fashion, I don’t think that most consumers would know that 10 per cent of global carbon emissions are caused by the fast fashion industry. They wouldn’t know that Australians just throw away 10 kilos on average of clothing waste every year, and that the number of times a tee-shirt or a garment’s been worn has declined by around 36 per cent in 15 years.

Tracy Wilcox: So this throw-away fast fashion is incredibly damaging to the environment. It’s incredibly damaging to the livelihoods of the people that are working at below a living wage to actually make these clothes. And I think we need to educate consumers, and we’ve seen some great things in Australia. We saw the war on waste, which our students of course all love looking at showing consumers the impact of these decisions that they make.

So it’s not that people have to necessarily spend a bigger part of their budget on clothes, it’s about buying fewer clothes. We’re seeing that right to repair idea coming back into vogue. And the survey that was done by Monash showed that 80 per cent of consumers want to have items that are durable and repairable.

So let’s buy fewer things and let’s make them last longer and be repairable. And I think we’ll start to see big changes being made. And I think that’s where the consumer side can really make a difference is again, by really encouraging those kinds of practices.

Michele Roberts: And any thoughts that you’d like to add, Frances, or anything on how consumers can identify clothing, coffee, chocolate, that’s ethical?

Frances Atkins: Well, I mean certainly there are indicators out there. I mean there’s a whole range of certifications and accreditations and things like that that try to mark out for a consumer whether or not this is a business that has the sorts of practices in place that they hope to see. So there’s certainly things like that.

I think what’s becoming challenging though is just the sheer number of these types of certifications and accreditations. It can be difficult to understand their scope, the level of audit or verification and what they actually mean. And that’s definitely a role that Givvable plays in terms of doing that translation piece. Predominantly, we do that for our corporate and government buyers, but it applies to consumers as well, really understanding what all these things mean.

I do believe that organisations should be considering the lifespan of any product. They should be considering what the cost of discarding that product is at end of life. When you think of, for example, just in the property and construction space, the cost of sending construction waste to landfill can tally very quickly up into the millions.

And then also if an organisation is starting to use waste as an input, and that creates a cost-saving, offsetting the upfront cost for that or contemplating that in the process. And from what I can see and the observation of organisations, these sorts of things aren’t being considered in the ordinary workflow and they should be.

There are challenges around this though. It’s not easy to do this, to quantify all of these costs. And, so one of the things that we say to suppliers is, “Unfortunately, I think at the moment, the burden’s on you. You really need to demonstrate the value proposition around these other items that isn’t built into the unit price upfront.”

So I think there’s definitely things that we can do to start to contemplate these things and know what the real cost is of the things that we consume and buy, both from a consumer’s perspective and from the corporate or organisational perspective as well.

Michele Roberts: Any advice for organisations on how to identify and eliminate green-washing about your supply chain? I read a report that it is absolutely rampant that one study found that 50 per cent of all fashion garments made a claim about sustainability that was in no way substantiated. Some of these claims are indeed extremely vague as to what they’re referring to.

As a leader, how do you identify, safeguard and prevent elaborate claims that overstate what’s actually being achieved by your organisation at this point?

Frances Atkins: Well, I can answer from at least a corporate and government perspective. What we’re seeing now is that very little, if any weight is being placed on self-reported claims of suppliers on sustainability and ESG. It really needs to be backed by evidence. Because of a procurement and sourcing workflow, so that the time at which decisions are made, ultimately businesses need to be able to run their business. So how do they get this into a workflow?

We are seeing organisations increasingly look to third-party validated credentials around these sorts of things to avoid the risk of green-washing. Again, not all credentials are created equal. It can be a very complex space and does require translation, but there are tools out there that do that. And obviously Giveable is one of those.

But ultimately, I think there’s a lot of learning that needs to happen. For a procurement and sourcing person that’s sustainability is not really in their tool kit. It just hasn’t been a part of the skill set that they’ve had over time, but now it is. And so we do really need to skill up and make that function aware of what all of these things mean so that they can go through a procurement workflow in a timely fashion and be confident that they’re making the right decisions.

Michele Roberts: Tell us what you want to see organisations doing right now.

Frances Atkins: For me, there are two things, really. There really are no excuses for organisations not to take some action on sustainability and the supply chain. There are tools available to them now to get the visibility, to get the data, to get the insights that they need to start making better decisions. So that’s the first thing. And I mention that because the number of times I’ve heard a corporate say, “Oh look, we’re still early on our journey.” We’re running out of time. We need to start somewhere. And the longer it takes for organisations to take that first step and to take action, we’re just not going to meet the targets that have been set for us.

The second one is I’d like to see companies implement more incentives to drive action, because I think ultimately that’s what’s going to accelerate this. We mentioned through this podcast a number of different incentives that organisations can put in place. Some of them are very easy to implement. Things like a preferred supplier status, preferential supplier terms, things like that, that are really easy to start recognising the actions that suppliers are taking. And then hopefully we’ll start to see down the track more financial benefits accrue to SME suppliers for taking this sort of action and getting that recognition through the financial system.

So it’s two things: it’s, there’s no excuses, so you’ve got to take action; and secondly, let’s accelerate that action through incentives.

Michele Roberts: And Tracy, what are the actions that you recommend leaders take now?

Tracy Wilcox: So the actions that businesses and government organisations can take now include the sorts of things that Frances was talking about. I think that accountability piece is really important and setting those metrics and targets is important. I think understanding the complexity of your own value chain and having taking the time to map that out, including mapping out the kind of data that you have available. I think that’s really important.

And I absolutely agree with what Frances was saying earlier about third-party certification and third-party auditing. I think that’s an area that we’re going to see a lot of growth in. And I’m actually really optimistic when I see organisations like Frances’ and the kinds of the ways that they’re harnessing technology and harnessing people and actors in this whole value chain to try and make those differences. I think I am optimistic that we’ll see less and less of the sort of green-washing and shirking and more of actual action.

Michele Roberts: Fantastic. Thank you, Tracy. We are out of time for today’s episode, but a huge thank you to both Tracy and Frances for a really insightful and engaging discussion of these complex issues.

Tracy Wilcox: Thank you.

Frances Atkins: Thank you for having us, Michele. It’s been a delight.

OUTRO NARRATION

Thank you for joining us for AGSM’s The Business of Supply: How ethical is your supply chain?

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<h1>How ethical is your supply chain?</h1>

<figure><img src="?w=1320" /><figcaption></figcaption></figure>
 So why are some organisations still struggling to embed this in their supply chains?
Guests:
<ul>
 <li>Frances Atkins, Co-Founder and Director of technology platform Givvable, AGSM MBA alumna</li>
 <li><a href="http://* https://www.unsw.edu.au/staff/tracy-wilcox" data-new-window="true" target="_blank" rel="noopener noreferrer">Tracy Wilcox</a>, Associate Professor at UNSW Business School</li>
 <li><a href="https://www.unsw.edu.au/staff/michele-roberts" data-new-window="true" target="_blank" rel="noopener noreferrer">Michele Roberts</a>, Associate Professor, AGSM Academic Director and Associate Dean Post-Experience at UNSW Business School</li>
</ul>
Find out more about Associate Professor Tracy Wilcox’s and UNSW research below:
<ul>
 <li><a href="https://www.unsw.edu.au/staff/tracy-wilcox">https://www.unsw.edu.au/staff/tracy-wilcox</a></li>
 <li><a href="https://www.linkedin.com/in/tracy-wilcox-2b4b654/?originalSubdomain=au">https://www.linkedin.com/in/tracy-wilcox-2b4b654</a></li>
 <li>Read now: <a href="https://www.businessthink.unsw.edu.au/articles/business-government-responsible-australia-vaccination" data-new-window="true" target="_blank" rel="noopener noreferrer">Is business or government responsible for getting Australia to 80% vaccination?</a></li>
 <li>Read now: <a href="https://link.springer.com/article/10.1007/s10551-021-04815-2" data-new-window="true" target="_blank" rel="noopener noreferrer">Virtue and Risk Culture in Finance</a></li>
 <li>Discover now: <a href="https://www.dsknowledgehub.com/" data-new-window="true" target="_blank" rel="noopener noreferrer">Digital Sustainability Knowledge Hub</a></li>
 <li>Read now: <a href="https://link.springer.com/article/10.1007/s10551-017-3545-z" data-new-window="true" target="_blank" rel="noopener noreferrer">Not Walking the Walk: How Dual Attitudes Influence Behavioral Outcomes in Ethical Consumption</a> </li>
</ul>
Transcript:
Narration: Over the past 50 years, increasing levels of globalisation have created a bewildering and complex system of supply chains that manage the production and distribution of everything from seedless apples to Apple iPhones.
And while this has given us access to products, we didn’t even know we needed, this vast system makes poor ethical practices hard to track and address. But things are changing fast.
For organisations the list of reasons not to meaningfully track suppliers and prove commitment to ethical practices is rapidly dwindling, with fresh regulations and incentives being introduced every year.
Today on AGSM’s Business of Leadership podcast, we are looking at ethical supply chains. What role do new modern slavery laws, ESG reporting, and regulatory systems have to play in them? How can businesses leaders work together to raise the bar collectively on high supplier standards? And what is at risk if they fail to do so?
AGSM podcast host Associate Professor Michele Roberts speaks with Frances Atkins. An AGSM MBA alumna, entrepreneur and Co-Founder and Director of technology platform Givvable, Frances gives unique insight into the role technology has to play in making it easier to create more ethical supply chains, while retaining profitability.
Frances and Michele are also joined by Associate Professor Tracy Wilcox of UNSW Business School, whose research focuses on socially responsible management practice that equips managers to create opportunities for ethical agency amid complexity.
Michele Roberts: Thank you for joining us for this episode of the AGSM Business of Leadership Podcast where we’re taking a deep dive into the business of supply chains. My name is Dr. Michele Roberts. I’m an associate professor and the academic director of AGSM, and Associate Dean of Post Experience Programmes at UNSW Business School. I’ll be taking the reins from Nick Wales for a few episodes of The AGSM Business of Leadership Podcast.
In this episode, we’ll be discussing ethical issues in supply chains. We’ll talk about what ethical issues there are hidden within our supply chains, look at green-washing and why it’s such a problem and how we can eliminate it. We’ll look at the rise of the conscious consumer and the steps that you can take as a leader to ensure that your supply chains are ethical.
I’m joined by two experts. Firstly, I’m thrilled to have with us associate professor Tracy Wilcox from UNSW Business School.
Tracy’s one of the absolute trailblazers of business ethics in Australia, and she’s been our academic director of post-graduate programmes at the business school. And her research in teaching focuses on socially responsible management practices as well as how managers can create opportunities for ethical agency in often difficult contexts.
I’m also joined by Frances Atkins. We’re delighted to have Frances with us. She is a graduate from our AGSM MBA class of 2019, and co-founder and director of Givvable, a leading platform for tracking supplier sustainability and ESG credentials.
Frances Atkins: Thanks for that intro, Michele. So as Michele mentioned, I’m one of the co-founders of Givvable and we are a supplier sustainability tracking platform. And the background to this is back in 2019, I think it was, we actually participated in an entrepreneurship programme, UNSW Founders, at the University of New South Wales.
Myself and my co-founder had spent a number of years in corporate and government and we wanted to see how this concept of corporate social responsibility could be transformed into a more sort of operational application of it. And we thought that there was a big opportunity for businesses to activate their spend for better outcomes.
So that was really the seed of the idea and we spent quite a bit of time working with large companies to understand the complexities of the problem, both from a practical perspective, but also from an outcome and impact perspective as well. That led us ultimately to develop what is known as Givvable today.
Tracy Wilcox: Thanks very much Michele. I initially trained as a chemist and I worked in the manufacturing industry as a quality manager where I was involved in all aspects of the value chain. So from getting the raw materials to producing products, to actually selling that to the consumers.
And that really piqued my interest in both ethics and sustainability, coming to it from first that science side, but also looking at the human factor and really starting to see issues around workplace conditions for workers in the industry, environmental impacts of the work that’s done.
So that really kindled this passion that I have. And I went on to do a master’s and a PhD in that area and have been working in ethics and sustainability, both teaching and research for 20 years now.
Michele Roberts: So what are the problems in supply chains and how significant are these?
Tracy Wilcox: I think the whole question of supply chains is so important nowadays because value chains nowadays are really global in scale. We’ve become so much more globalised and they’re highly complex with many, many tiers and layers. And this has really been an outcome of increasing globalisation over the last 50 years. And unfortunately, what that’s meant is that now the social side, the human side of supply chains and the environmental side are largely invisible to consumers.
So consumers, the people that buy the products really don’t have visibility over what’s going on. And yet we have seen some really important issues and some bad things happen in recent times. I guess the ones that probably the listeners are most familiar with would be the Rana Plaza factory and the thousands of people that died there. And that really cast a light on the fast fashion industry.
We’ve seen slave labour in the Thai seafood industry. We’ve seen deforestation and the issue around sustainable palm oil in Malaysia and Indonesia. And more recently, we are looking at sort of bonded labour with the Uighurs. So there are a whole lot of issues that continue to emerge and come to the public attention.
And I think that really does put the spotlight on these issues. And what we are seeing is that activist groups and civil society organisations are now putting pressure both on companies and on governments to do something about these issues. So, in Australia we’ve had the Modern Slavery Act. In the UK, something similar. There is the 2017 Duty of Vigilance Act in France that’s emerged, which would be really best practice in terms of their regulatory situation there.
So we are looking to governments to, I guess, take more steps to do something to really require businesses to start thinking about their supply chains from a human rights perspective. Whether you’re talking about safe workplaces, whether you’re talking about a fair wage or a living wage, whether you’re talking about energy footprint, whether you’re talking about the environmental impact with pollution and whether you’re talking about the downstream waste of an organisation as well.
So yeah, I think it’s really in the public’s mind nowadays because we’re seeing these complex interrelationships between the various elements of the value chain.
Michele Roberts: And Frances, anything you would add about the extent and nature of the ethical challenges in our supply chains?
Frances Atkins: Yeah, I mean Tracy raises some very great points there around the visibility of supply chain, which is something that we seek to assist our clients with as best we can. But it is a very complex and difficult issue. I think mean we take a lens of looking at it from a corporate or government buyer perspective and the interaction of those large purchasing entities with their suppliers. And they do struggle with visibility of clearly they know who their tier one supplier is, but throughout the chain it is more difficult to get that visibility.
And often even getting that information coming up back up through to the ultimate end buyer is difficult because a lot of the suppliers don’t want to disclose who their suppliers are for competitive reasons.
So visibility is a challenge. Layer on top of that, the complexity of sustainability and ESG as a concept. And Tracy mentioned a number of different aspects of ESG and that creates, again, challenges. You may have a strong performer in one area but not so strong in other areas. And how do you deal with those challenges?
I think a lot of companies are still trying to figure out how to solve this. For companies that are taking steps to do this. A lot of them have been issuing what are known as supplier SAQs or supplier assessment questionnaires.
In sustainability in ESG this is a challenge because of the issues we mentioned before, but also, we’re starting to see low response rates, low quality of responses. We’re starting to see affirmation in the responses, and you’ve got an inherent conflict as well in the supplier-buyer relationship, which is lending itself to that affirmation.
And so it’s just causing a distrust in those responses, but also it’s a very time-consuming process to go through for both the supplier and the buyer, to undertake those surveys and questionnaires. So, we’re sort of entering into this new phase of, “Well, how do we deal with these challenges in a really efficient way?” Because the way that we’ve tried to get this visibility on our suppliers in the past hasn’t really shown to be working in the context of supply chains at scale.
Michele Roberts: What are the key steps that businesses should be taking in terms of the priorities for boards and leadership teams to investigate and safeguard the ethics of their supply chains?
Frances Atkins: I think the very first thing is that we need a mandate from the board and the C-suite on this. Because it just will not work throughout an organisation unless you’ve got that strong mandate. And more than that, we need targets. We need specific metrics that the organisation, the people that tasks we’re actually executing on this, that they’ve got metrics that they can track against.
And this is incredibly important because if you don’t have those things, if people aren’t accountable, you just won’t get things done. You won’t get the budget allocated and will just end up not making progress. So that is the very first thing from at least my perspective, that I think organisations need to do.
The next part of that is the actual how do you actually implement that? But I’ll let Tracy comment on that because I’m sure from a high-level perspective there, she’s got some comments there.
Tracy Wilcox: I couldn’t agree more, Frances, about that need for accountability and the fact that there has to be measurable targets and KPIs because it’s a culture change as well as a change of mindset as well as a change of priorities. So if you’ve always been thinking of supply chains in terms of a race to the bottom to try and get the best price and maybe the best technology and you’re not thinking about the people on the planet side of things, then it is a mindset change and it is a change in culture.
So I think that, that’s really important. And the way to change cultures and mindsets, of course, as you say Frances, is to have those targets and metrics and KPIs and accountabilities. That’s really key.
I think if we leave it to individual organisations to do the hard work, I think we’re going to end up with a kind of imbalance. And that’s where I think we need regulatory systems to raise the bar collectively.
And so I would say that that regulations that are about expecting large organisations, and we’re talking large organisations here, so the French Act only applies to large organisations. The Australian Modern Slavery Act only applies to large organisations.
So these large organisations have the power and actually have the bottom line to be able to be working a little bit more in this area than they may have in the past. And I guess if you get down to the operational level, and you touched on this, Frances, about getting those procurement offices, those buyers onboard. There’s some research that was done out of Harvard that showed that whilst there was a lot of senior leadership discussion and commitment to more sustainable and ethical supply chain practices, that hadn’t filtered down to the procurement officers. And it hadn’t filtered down to even the tier one procurement officers.
So let’s, at the operational level, start getting our procurement officers onboard and start getting our suppliers’ procurement officers on board. Because in these complex supply chains, as Frances mentioned earlier, we have several tiers. So they should be at least getting, offering training and incentives for their first tier suppliers for their own procurement offices. So metrics and targets really trickle down to where things are done. So I would say that, that’s a really important thing.
I think using technology a bit better to better understand your supply chain. It’s really interesting how few organisations have a really good handle on the complexity of their own supply chains when you go down to those lower tiers. So having that visibility and some of the large companies are doing that really well, Patagonia map it out quite well.
And then getting data on how things are going. So I think that’s information technology has a lot of capabilities in, but it needs to have that culture, that mindset behind it, otherwise it may just become sort of green-washing and not something that’s actually working in practice.
Michele Roberts: You’ve both talked about the importance of hard targets and commitments and that tone from the top, but even in the case of the Modern Slavery Act, we just saw that report from the Australian Human Rights Institute based at UNSW suggesting that even where there is excellent legislation, we’re still not seeing the outcomes that we need. Can you talk to us a bit more about that, Tracy?
Tracy Wilcox: That report you’re talking about, Michele, that was undertaken by UNSW’s Australian Human Rights Institute and Justine Nolan and her team. They found that 68 per cent of companies are still failing to comply with the basic reporting requirements of this Act. Now these are large companies. These are companies with a hundred million plus turnover. So we’re not talking about requiring unsustainable reporting from small businesses. So let’s just get that point now. And there’s no action, but that’s probably because there is no consequence.
So if you want regulation to have teeth, then there has to be some kind of sanctioning. And we saw this with gender equity legislation for years and years and years. If you want something to change, there has to be consequences for not complying with it. And I think that’s really where we need to go if we are serious in Australia about the modern slavery issue and trying to eliminate that in our supply chains.
Michele Roberts: To what extent is this now a technology and a data problem? Frances, this is an area of your expertise. Is it really just going to come down to that transparency and visibility driven by technology and data?
Frances Atkins: Supply chains is one of those areas where it lends itself to leveraging the technology that’s available to us, whether it be artificial intelligence, statistical analysis, big data, advanced analytics, all that kind of thing to be able to enhance their understanding of their own supply chain.
I often say that sustainability is critically linked to an organisation. They can’t be making sustainability claims about their performance unless they have an understanding of how their suppliers are performing.
When you start to look at the supply chain given the complexity, the breadth of ESG issues, and then typically large organisations have thousands of suppliers, that lends itself to a technology solution. To get that sort of data, to get that insight at that scale requires organisations to take advantage of what’s out there today.
Michele Roberts: And Tracy, in terms of solutions for tech and data, what are you seeing?
Tracy Wilcox: Look, I mean, I think what Frances is saying is absolutely right. It is these newer forms of organisations like Givvable that actually enable that kind of transparency to be more easily attained by companies. I think technology is always going to be part of the solution. And we’ve seen some really interesting examples of how blockchain’s used to gather data. But the data is the other question. And I think the people is really, having that mindset is going to be always important because it doesn’t matter if... You can talk about technology and hand the responsibility over to technology when really it’s the leadership team that needs to take responsibility and technology’s the tool to get you there.
Frances was talking about the fact that organisations have thousands of suppliers, and I mean, for example, Unilever have 58,000 suppliers. So that complexity’s there, but there was some interesting work done by WWF that showed that in the supply chain around three to 500 companies control 70 per cent of the choices that organisations can make.
So there really is a leverage point there where, if you look at those companies and then look at who’s funding those companies. So look at those financial services organisations that are funding the companies. And we’ve seen how civil society groups have put pressure on financial services institutions, whether it’s about coal mines or whether it’s about sustainable palm oil financing or unsustainable palm oil and deforestation financing. We’ve seen how using those financial services companies as a lever for change has been a really interesting development, I think in the last 15 years or so.
Michele Roberts: Are we seeing new, interesting collaborations emerge and companies becoming more thoughtful about the ecosystems they build to achieve sustainable supply chains?
Tracy Wilcox: You’ve got the standout companies that everybody knows, like Patagonia, who have been a real leader in sustainable supply chain in terms of the environmental impact, in terms of their energy footprint, in terms of their work practices. And they were rated very highly. There’s a report that’s put out every year called the Sustainable Fashion Guide and the Ethical Fashion Guide, and they’re always rated up the top in that.
So I mean, they know exactly what their suppliers are doing, they can drill down into details, they can have a look at what’s happening in terms of paying a living wage to the workforce of their suppliers. So I think that’s a standout organisation. Even big organisations like Intel, which is the world’s largest manufacturer of semiconductors, they’ve been looking at conflict minerals and particularly in the Congo and making sure that they’re not using conflict minerals in their manufacturing.
So I think that’s really interesting to see how they have really taken those steps to look at that complexity of the supply chain and to use the information that they have available to try and work with that.
And then you’ve got information technology companies like IBM and SAP that are also working in this space and working with companies as well.
Michele Roberts: Yep. There’s some great work being done by the digital sustainability research hub at UNSW on this.
Tracy Wilcox: Absolutely, yes, yes.
Michele Roberts: I guess one area that we should just touch on is the role of government and policy. We are seeing new policy instruments being introduced around the world. And Tracy, you referred to policy that we’re seeing in new regulation in Europe. What are you seeing emerge and how is it going to impact Australian leaders if they haven’t built the right supply chains that they need?
Tracy Wilcox: I actually think that this is something that is inevitable is that we’ll start to get more regulations around this, as we start to learn more about what actually is going on in supply chains. And this will be demanded by people and that the French Bureau is a really good example of how people power brought about a change in regulations.
So I think that, that will continue, and I think that’s very important. We can’t just leave it to companies because the playing field is not level. So having regulations levels the playing field and really asks everything as companies to really think about things, I would be interested to see what’s happening if we look at the whole value chain both upstream and downstream, and we’re starting to see some pressure put on organisations, on fast moving consumer goods organisations, for example, to think about downstream waste and their contributions to downstream waste.
And we’re having regulations here in New South Wales. We’ve just had some regulations kick in around plastic waste. So I think that’s happening already and will continue to happen. And what’s really interesting is when you look at the organisations that are doing a lot already, a lot of those leaders are based in Europe, and Europe has the strongest regulations around sustainable and ethical supply chains and around those ethical and sustainable business practices.
So I think it’s kind of more of a virtuous circle that’s happening there. And here in Australia, we’re following that lead as are other big countries. But yeah, it will take time because it is turning around a supertanker.
Michele Roberts: Absolutely.
Tracy Wilcox: But you need all parts of the economy and society playing their part. So yes, consumers can play a part and that it’s great that they are starting to play a part. And research is showing that 50 per cent of consumers will take sustainability into account when they’re making a decision.
So we’ve got this research that’s showing consumers can play a part and producers can play a part too, but governments and societies really need to be playing a part. So I think everybody needs to be on board with this particular issue.
Michele Roberts: And Frances, what is your perspective from the market? Are you seeing some of the European and US legislation starting to have impacts here in Australia? Do you imagine that there will be more policy introduced within Australia that’s going to impact supply chains?
Frances Atkins: Yeah, absolutely. I mean, my personal view is that at some point we’re going to have mandatory reporting on a number of these issues in Australia, I think there’s a period to go through where there needs to be a more standardised approach, essentially offshore before they’re going to start accommodating some of those things locally. But it is going to happen, that’s my personal view.
But even aside from that, you’ve got stock exchanges all in the region basically saying that, “You’ve got to provide some form of sustainability reporting or a please explain,” and no one wants to have to explain why they’re not issuing a sustainability report.
Obviously, the quality of some of these, they vary. So that’s sort of the regulatory landscape, but then you have third parties that are reviewing the quality of these things. There are indexes out there that create certain pressures on organisations to up their game.
And as Tracy says, I mean ultimately this is an ecosystem. This requires an ecosystem solution. And I think we are starting to get there. So we’ve talked about the regulatory environment, we’ve talked about customer expectations, and Tracy’s mentioned the consumer, but also think about it from a large corporate buyer being a customer.
We have corporate clients that have set certain targets, Net Zero 2040 targets and interrogating their suppliers to see which ones align to those Net Zero 2040 targets. And what we’re identifying is not only the suppliers that haven’t set a target and are not demonstrating any third-party action towards any form of target, but we’re also identifying the suppliers that have a mismatch in their target.
So you got a client with a 2040 target that includes the supply chain, and then you’ve got a major supplier that has a 2050 target that includes their supply chain.
So we’ve got these mismatches happening and ultimately we’re going to have to figure out how we deal with those. I like the comment about incentives and the role of finance. So this is something I’m an advocate of. I think ultimately, we need to put in place the right incentives to drive supplier action. They need to see a return on investment for taking action on sustainability. And that can come in a number of different ways. So we’ve seen corporate issuance on sustainability-linked facilities where they get a discount or benefit on that lending.
My view is that needs to trickle down faster to the suppliers that actually hold the credentials on sustainability and let them see a tangible financial benefit for that. Ultimately, the challenge with sustainability and across ESG issues, which includes obviously modern slavery and true human rights, is these things that we are asking our suppliers to do take time and they require an investment.
And so in order to accelerate the action, we really need there to be, for the suppliers to, I guess accrue a return on investment for taking those actions. And at the moment, I think that’s a little bit hard for them to see. So I think if we take all these things together, customer requirements, both consumers and the corporate buyer, the regulatory environment, the role of finance, and then if you’ve got corporates and organisations setting targets, indeed governments. So state government setting targets, all of these combined should help accelerate and drive us to a higher quality in terms of addressing these issues.
Michele Roberts: Right. And you talked about the financial burden on suppliers, I think it’s a really interesting area. I was having a presentation in one of our MBA classes from a global expert on chocolate sustainability, Giselle Weybrecht. And Giselle was telling us that most chocolate, most cocoa farmers are smallholders. Sort of families working a plot of land, three generations involved and they cannot get the accreditation, the certification for fair trade chocolate because it costs a huge amount to go through this accreditation.
And so farms that really are fair trade and really have got very few impacts on the land are missing out. So is there any way that we cannot disadvantage small farmers and small producers throughout our supply chains as we increase our sort of reporting burden?
Tracy Wilcox: Yeah, look, I mean, fair trade’s an interesting one because it’s been around for a very long time and it has developed its own kind of infrastructure. And originally, if you look at the early fair trade work that was done by the Fair Trade trademark, the costs were not passed onto the producers. They were borne by the purchases. But I think really for a lot of those organisations, we need to be focusing on the purchasers. So what is it that the Cadbury and the Nestle’s are paying? Because that’s where those costs should be built in.
They shouldn’t be borne by the small growers and producers. And I think most of the work that you’ll see in ethical supply chains would support that. It’s not about punishing those small growers and small producers. It’s about asking these large organisations and that we’re talking about organisations with multibillion-dollar profits. Let’s not forget that.
Frances Atkins: I think there are things that the larger companies can do to start to demonstrate the value of that sort of certification to their business. There are things like preferred supplier status, giving them longer contract cycles, paying them faster. There’s a whole range of different things that they can do here, potentially in addition to subsidising the cost of those certifications to make them accessible to smaller producers.
And these are the sorts of things that we are actively communicating to at least our clients, to help them understand the full range of the different types of incentives that they can start to make available to suppliers to drive the behaviour that they wish to see in their supply chain.
Michele Roberts: We’ve talked about someone needing to pay a price, and I know when I sort go shopping, I always think, “Well, if you buy a dress and it only costs $50, well someone’s paid.” If you buy a tee-shirt and it costs $20, there’s a price being paid somewhere. And is that the price on the worker, the planet?
So what are you seeing in that gap? In marketing, we call it an attitude behaviour gap, the gap between consumers saying they would pay more and actually paying more, Tracy?
Tracy Wilcox: Look, I think there’s a huge role for education of consumers in this, Michele. If you look at your example of fast fashion, I don’t think that most consumers would know that 10 per cent of global carbon emissions are caused by the fast fashion industry. They wouldn’t know that Australians just throw away 10 kilos on average of clothing waste every year, and that the number of times a tee-shirt or a garment’s been worn has declined by around 36 per cent in 15 years.
Tracy Wilcox: So this throw-away fast fashion is incredibly damaging to the environment. It’s incredibly damaging to the livelihoods of the people that are working at below a living wage to actually make these clothes. And I think we need to educate consumers, and we’ve seen some great things in Australia. We saw the war on waste, which our students of course all love looking at showing consumers the impact of these decisions that they make.
So it’s not that people have to necessarily spend a bigger part of their budget on clothes, it’s about buying fewer clothes. We’re seeing that right to repair idea coming back into vogue. And the survey that was done by Monash showed that 80 per cent of consumers want to have items that are durable and repairable.
So let’s buy fewer things and let’s make them last longer and be repairable. And I think we’ll start to see big changes being made. And I think that’s where the consumer side can really make a difference is again, by really encouraging those kinds of practices.
Michele Roberts: And any thoughts that you’d like to add, Frances, or anything on how consumers can identify clothing, coffee, chocolate, that’s ethical?
Frances Atkins: Well, I mean certainly there are indicators out there. I mean there’s a whole range of certifications and accreditations and things like that that try to mark out for a consumer whether or not this is a business that has the sorts of practices in place that they hope to see. So there’s certainly things like that.
I think what’s becoming challenging though is just the sheer number of these types of certifications and accreditations. It can be difficult to understand their scope, the level of audit or verification and what they actually mean. And that’s definitely a role that Givvable plays in terms of doing that translation piece. Predominantly, we do that for our corporate and government buyers, but it applies to consumers as well, really understanding what all these things mean.
I do believe that organisations should be considering the lifespan of any product. They should be considering what the cost of discarding that product is at end of life. When you think of, for example, just in the property and construction space, the cost of sending construction waste to landfill can tally very quickly up into the millions.
And then also if an organisation is starting to use waste as an input, and that creates a cost-saving, offsetting the upfront cost for that or contemplating that in the process. And from what I can see and the observation of organisations, these sorts of things aren’t being considered in the ordinary workflow and they should be.
There are challenges around this though. It’s not easy to do this, to quantify all of these costs. And, so one of the things that we say to suppliers is, “Unfortunately, I think at the moment, the burden’s on you. You really need to demonstrate the value proposition around these other items that isn’t built into the unit price upfront.”
So I think there’s definitely things that we can do to start to contemplate these things and know what the real cost is of the things that we consume and buy, both from a consumer’s perspective and from the corporate or organisational perspective as well.
Michele Roberts: Any advice for organisations on how to identify and eliminate green-washing about your supply chain? I read a report that it is absolutely rampant that one study found that 50 per cent of all fashion garments made a claim about sustainability that was in no way substantiated. Some of these claims are indeed extremely vague as to what they’re referring to.
As a leader, how do you identify, safeguard and prevent elaborate claims that overstate what’s actually being achieved by your organisation at this point?
Frances Atkins: Well, I can answer from at least a corporate and government perspective. What we’re seeing now is that very little, if any weight is being placed on self-reported claims of suppliers on sustainability and ESG. It really needs to be backed by evidence. Because of a procurement and sourcing workflow, so that the time at which decisions are made, ultimately businesses need to be able to run their business. So how do they get this into a workflow?
We are seeing organisations increasingly look to third-party validated credentials around these sorts of things to avoid the risk of green-washing. Again, not all credentials are created equal. It can be a very complex space and does require translation, but there are tools out there that do that. And obviously Giveable is one of those.
But ultimately, I think there’s a lot of learning that needs to happen. For a procurement and sourcing person that’s sustainability is not really in their tool kit. It just hasn’t been a part of the skill set that they’ve had over time, but now it is. And so we do really need to skill up and make that function aware of what all of these things mean so that they can go through a procurement workflow in a timely fashion and be confident that they’re making the right decisions.
Michele Roberts: Tell us what you want to see organisations doing right now.
Frances Atkins: For me, there are two things, really. There really are no excuses for organisations not to take some action on sustainability and the supply chain. There are tools available to them now to get the visibility, to get the data, to get the insights that they need to start making better decisions. So that’s the first thing. And I mention that because the number of times I’ve heard a corporate say, “Oh look, we’re still early on our journey.” We’re running out of time. We need to start somewhere. And the longer it takes for organisations to take that first step and to take action, we’re just not going to meet the targets that have been set for us.
The second one is I’d like to see companies implement more incentives to drive action, because I think ultimately that’s what’s going to accelerate this. We mentioned through this podcast a number of different incentives that organisations can put in place. Some of them are very easy to implement. Things like a preferred supplier status, preferential supplier terms, things like that, that are really easy to start recognising the actions that suppliers are taking. And then hopefully we’ll start to see down the track more financial benefits accrue to SME suppliers for taking this sort of action and getting that recognition through the financial system.
So it’s two things: it’s, there’s no excuses, so you’ve got to take action; and secondly, let’s accelerate that action through incentives.
Michele Roberts: And Tracy, what are the actions that you recommend leaders take now?
Tracy Wilcox: So the actions that businesses and government organisations can take now include the sorts of things that Frances was talking about. I think that accountability piece is really important and setting those metrics and targets is important. I think understanding the complexity of your own value chain and having taking the time to map that out, including mapping out the kind of data that you have available. I think that’s really important.
And I absolutely agree with what Frances was saying earlier about third-party certification and third-party auditing. I think that’s an area that we’re going to see a lot of growth in. And I’m actually really optimistic when I see organisations like Frances’ and the kinds of the ways that they’re harnessing technology and harnessing people and actors in this whole value chain to try and make those differences. I think I am optimistic that we’ll see less and less of the sort of green-washing and shirking and more of actual action.
Michele Roberts: Fantastic. Thank you, Tracy. We are out of time for today’s episode, but a huge thank you to both Tracy and Frances for a really insightful and engaging discussion of these complex issues.
Tracy Wilcox: Thank you.
Frances Atkins: Thank you for having us, Michele. It’s been a delight.
OUTRO NARRATION
Thank you for joining us for AGSM’s The Business of Supply: How ethical is your supply chain?
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