Socially responsible supply chain tools

Rising pressure for socially responsible supply chain management

Globalization presents businesses with immense opportunity to produce affordable goods and services at scale, but it comes with growing demand—from governments, shareholders, investors, employees, and consumers—to protect the safety and dignity of workers. Labor exploitation poses a complex, dynamic, global socioeconomic risk that spans industries, but promising new solutions are emerging to reduce it.

Our new report, Responsible supply chain tools: Understanding the market opportunity, looks at growing demand for socially responsible supply chain management—and the opportunity it’s creating for supply chain tools that support environmental sustainability, supply chain sustainability, and other aspects of socially responsible global business practices.

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Socially responsible supply chain tools: Current and future state

The market for socially responsible supply chain tools is well positioned for growth over the next five years, with a growing need for tools that go beyond social compliance audits and offer real-time transparency into practices of actors in the supply chain, programs that digitally facilitate sourcing from ethical suppliers, and grievance mechanisms for employers or buyers when workers identify issues.

Interviews and research for socially responsible supply chain tools indicate that leading companies:

• Find audits insufficient and ineffective, but note that they still dominate practice
• Are concerned about mounting public pressure and growing business risk
  
• Believe that the complexity of their global supply chains means that it is difficult to scale digital tools beyond the pilot stage
  

Our analysis indicates that over the next five years, the market for socially responsible supply chain tools may grow considerably, particularly with increasing regulatory and industry pressure, with risk assessment and product traceability tools expected to see the highest growth. By contrast, we expect the market for social compliance audits to remain flat.

Figure 1: Estimated market for responsible supply chain tools (excluding audit), 2018 and 2023

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Why corporations are embracing the socially responsible supply chain

Increasingly—due to regulations as well as pressure from investors and shareholders, consumers, employees, the media, and civil society groups—many corporations have embraced responsibility for the safety, health, and wellbeing of individuals along all phases of operations, including deep into their supply chains.

This concept of “responsible supply chains” integrates environmental, social (including human and labor rights), and good governance factors into the lifecycles of goods and services.

Socially responsible supply chain management can help create, protect, and grow long-term environmental, social, and economic value for stakeholders along a company’s value chain. By implementing socially responsible supply chain practices, companies can protect the long-term viability of their business and secure a social license to operate.

Consumer sentiment is clearly an important factor in this shift, but global policies are already in effect to hold corporations responsible for socially responsible supply chain practices. In 2011 the United Nations Human Rights Council endorsed the United Nations Guiding Principles on Business and Human Rights (UNGPs), outlining how states and businesses should operate around three pillars:

• The state duty to protect human rights
• The corporate responsibility to respect human rights
  
• Access to remedy for victims of business-related abuses
  

The UNGP asserts that companies have a responsibility to protect human rights along all phases of their value chain, inclusive of manufacturing and outsourced supply chains. Between public opinion, investor pressures, and global regulations, corporations have many reasons to embrace new socially responsible supply chain tools.

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Objectives, methodology, and conclusions

A team from Monitor Institute by Deloitte conducted research and synthesis for Responsible supply chain tools: Understanding the market opportunity. Working Capital, founded by Humanity United, commissioned the report with funds from the United Kingdom’s Department for International Development. Our objective is to increase awareness and stimulate a discussion about resources available to companies that seek to manage responsible supply chains and identify strategies that might be used to strengthen the market for useful tools to help accelerate better practices across supply chains.

The data collection process involved secondary research and interviews with representatives from companies (buyers and suppliers) as well as consultancies and vendors of responsible supply chains and tools.

We encourage you to explore the full report, including overall findings, industry-specific findings, implementation resources, calculations and assumptions for market size estimates, and conclusions.

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