22 March 2021
Topics in this article
  • Supply Chain & Logistics
  • Sustainability

As the global economy was plunged into lockdown last year, the public conversation turned towards resetting and rebuilding better. Lockdowns allowed businesses and consumers to imagine a greener, more sustainable and more socially equitable way of doing things in a world after COVID.

While social value policies had been rising on the corporate agenda for a long time, the past 12 months placed them firmly front and center. Our Finance Leaders Outlook report in February underlined this, finding that 75% of US and 62% of UK finance leaders said that the pandemic had caused social value initiatives to rise as a budget priority.

But within this trend, we have seen a changing understanding of what social value can be for businesses and how they can drive genuine social impact. One of the key areas of change has been an increase in social value policies across supply chains and supplier networks. 

Why is this?

Businesses are much more than their internal operations. In fact, 80% of a business’s social and environmental impact is incurred by its supplier base. If businesses want to drive genuine change with their social value policies, they need to look towards their supplier base.

And businesses are doing just that. In our Finance Leaders Outlook report, we found that over three-quarters of U.S. finance leaders (78%) say they are using social value as a decision-making criterion in their suppliers and 20% are planning to implement this. In the UK, 75% of finance leaders said they were already using social value as a decision-making criterion in supplier selection and a further 23% said they are not yet using it but have plans to.

With this shift in focus to the supplier network, new teams and areas of expertise will be needed to drive social value policy. The CPO and procurement teams will play a critical role here in navigating the complex supplier landscape and driving positive social change alongside business results.

Supply chain scrutiny is increasing

Social value and sustainability are fast becoming purchasing priorities for consumers alongside price and convenience, and supply chains are under intense scrutiny as a result.

Businesses are acting proactively and decisively to get ahead of this. Unilever was among the biggest names to implement rigorous policies on this in 2020, vowing to pay all employees across its value chain at least a living wage by 2030, as well as committing to spending €2bn annually with suppliers consisting of under-represented groups by 2025.

Apple similarly announced its commitment to achieve net zero climate impact across its entire supply chain by 2030, in addition to carbon neutrality for its corporate emissions worldwide.

Consumers are already holding businesses that do not act to account. A number of high-profile reputational crises have underlined the financial threat of poor social governance in the supply chain, with Boohoo being one of 2020’s highest-profile casualties. The fast-fashion retailer suffered reputational and financial damage after its factories were found to be employing staff below minimum wage and have now responded with a range of measures to address the issues.

There is still work to be done

There are major global issues facing us which require urgent and collaborative action from corporations, policymakers, and societies.  A United Nations assessment in 2021 found that the world is wildly off track on meeting the Paris Agreement goal of holding temperature rises to 1.5°C, and the Global Slavery Index estimates there are 136,000 people living in modern slavery in the UK and 403,000 in the USA alone.

As 80% of businesses’ overall environmental impact comes from the supply chain, they need to look beyond their own boundaries to begin tackling these issues. However, a 2020 report from the Massachusetts Institute of Technology (MIT) Centre for Transportation and Logistics, and Council of Supply Chain Management Professionals (CSCMP), found that 35% of businesses still do not have any sustainability targets within the supply chain.

The social impact of the supply chain cannot be underestimated. At Proxima, we work with many leading organisations to help them solve their biggest issues, and sustainability is a topic high up on that agenda. Inside our own organisation, colleagues are passionate about social value and we’ve developed a Proxima UN SDG approach, which includes accreditation to the UK Living Wage Foundation and ensures that we work with many social enterprises in our supply chain.

As policy makers look to push the green agenda forward on both sides of the Atlantic in 2021, we expect business to quickly begin looking at their supply chain more closely to increase both shareholder and social value.

Changing role of the supplier network

This approach to social value in supply chains underlines a shift in understanding of the supplier network more broadly.

Businesses are increasingly looking to suppliers as more than just a means of purchasing products and services. With a rigorous approach to sustainability across the supply network, businesses can create new opportunities, drive innovation and position themselves to drive real social value with their business.

Read more on what UK and US business leaders think about social value and other key topics in our 2021 Finance Leaders Outlook by clicking below.

Proxima Finance Leaders Outlook 2021 report - download now

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