Why You Should Do a Supply Chain Audit? - YTao

Why You Should Do a Supply Chain Audit?

We are living in an era of cancel culture, where consumers, emboldened by the power of their keyboards, will fearlessly call-out those whose actions and ethics are not deemed ‘problematic’. Brands are not immune to this cultural shift in power dynamics; in fact, brands are directly in the firing line. Now, potentially more than ever, the public is attuned to business ethics and consumers are willing to hold brands to account for their actions – and for their inaction. 

While some companies have viewed this shifting tide as passing internet hysteria, the truth is that people care how they spend their money and who they spend it with. New conscious consumers see an opportunity to leverage their spending to influence the change that they want to see in the world – politically, socially and environmentally. In the Australian market, Nielsen’s Changing Consumer Prosperity study revealed that “the majority of Australian consumers are either highly or somewhat willing to pay more for products that are environmentally friendly or sustainable (62%), contain organic or all-natural ingredients (59%), or carry social responsibility claims (55%)”. Increasingly consumers are seeing the companies that they invest in, or purchase from, as an extension of their own values, ethics and moral codes.

In a looming economic recession consumers will be even more vigilant about how they spend, making reputation and trust become crucial factors in brand salience. Similarly, in an increasingly risky environment for business, understanding networks and supply chains is fundamental for best practice. It is no longer enough for a business to proclaim compliance – it must embody ethical conduct, from the outside in. 


So how can a business embody ethical conduct?

Supply chains are central to the operations of any business. While the complexities and intricacies of a supply chain can vary in each industry and unique organisation, the reality is that the first step towards embodying ethical conduct is with supply chain transparency. We cannot improve what we cannot see. This is particularly true in manufacturing, consumer goods and the fashion and beauty industries, where supply chains are under scrutiny as key indicators of brand reputation. There is no use in making targets and ethical statements without first thoroughly investigating your supply chain.


So where does a business start?

A supply chain audit should be on the agenda for any company who is serious about ethical conduct in 2020. End-to-end transparency is becoming more possible due to innovative technologies that are disrupting supply chain management practices and transforming the industry. What was once a complex process of mapping networks has become a simple matter of identifying and validating transparency to make sure there are no criminal activity, human rights violations or animal cruelty behind a product journey. Beyond just environmental impacts, a supply chain audit can investigate more insidious aspects and violations, such as: modern slavery, production certification, organic production, child labour, human trafficking, criminal activity and more

Conducting an independent audit in any capacity functions to support continuous improvement. A supply chain audit is a crucial step towards a business refocusing their strategy to one that centres supply chain transparency and therefore one that embodies ethical conduct. These changes will allow brands not only to meet regulatory needs but will also transform a brands reputation, which category leaders understand has positive flow-on effects for business equity and profitability. According to Gartner, “Organisations are now understanding that they can’t afford the financial or reputational costs that come from managing ESG issues on a case-by-case basis.” In other words, reputation depends on not only managing a supply chain and mitigating risks, but in proactively investing in transparency and governance.  

It has long been acknowledged by industry leaders that achieving reputational gains can ultimately lead to increased revenue. Great brands comprehend the intangible importance of reputation and how it is interrelated with sustainability and ethical conduct. In this regard, a clean supply chain can also act as a key marketing strategy to achieve competitive differentiation. A brand that has conducted an audit and put energy into an ethical supply chain strategy is a brand that has shown genuine care and taken authentic action towards best practice. It’s overall story is credible and worth the trust of consumers.

Ultimately, a business cannot purport to be ethical without conducting an audit of their supply chain, because ethical practice means end-to-end transparency. In an increasingly risky and uncertain world for business, reputation is about more than risk mitigation, it is a matter of survival. Completing a supply chain audit can allow companies to do more than meet theoretical corporate sustainability goals and flex healthier brand reputations, ethical conduct can allow businesses to be leaders in creating a cleaner and more equitable world for us all.

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