Sustainability is high up on the board agenda, with research revealing that 46% of UK businesses have adopted sustainability reporting and 60% have implemented a sustainability strategy.
But despite this, supply chain sustainability is all too often overlooked. Recent years have seen a string of supply chain scandals and failures caused by weak social sustainability, from luxury brands, to fast fashion, to household tech businesses.
In this article we’ll explore the true costs of poor oversight and how to move toward genuinely sustainable supply chains.
Where do supply chain abuses come from?
In the vast majority of cases, the problem of sustainability in supply chains isn’t about organisations going out of their way to work with unsustainable suppliers. Rather, it’s down to unsustainable practices slipping under the radar – until they inevitably get exposed.
One of the biggest factors is around supply chain transparency. Per research from McKinsey & Company, one-third of global supply chain leaders say they only have visibility over their tier one suppliers, while one in 10 admit to having no tier transparency at all.
Similarly, an Amazon-KRC Research survey of 3,000+ procurement leaders found that gathering ESG information from suppliers is “increasingly painstaking”, with 85% saying that challenges sourcing sustainable suppliers is holding back their strategic sustainability goals for procurement.
But transparency isn’t the only issue here. Sometimes, organisations believe they have visibility over their supplier’s practices, when in reality they only know a fraction of the story.
The fact is, on paper, many supply chains look sustainable. Yet they lack the credible, validated data to back this up – which leaves them open to a whole host of supply chain sustainability-related risks.
Hidden risks of socially unsustainable supply chains
Every procurement leader dreads being burned by suppliers who fail to deliver on their promises. But a lack of sustainability in supply chains can yield far more serious outcomes than the occasional delay or quality control issue.
Let’s explore three key risks arising from socially unsustainable supply chains:
1. Reputational damage from supplier misrepresentation
When suppliers misrepresent or exaggerate their social or environmental performance, the reputational fallout often extends to the organisations they serve. Stakeholders increasingly hold buyers accountable for the conduct of their supply chains; even isolated breaches can undermine years of brand equity and stakeholder trust.
2. Increased regulatory scrutiny and disclosure requirements
Legislative frameworks around working conditions, ESG reporting, and responsible sourcing are becoming more stringent, from the UK’s new Transparency in Supply Chains guide to the Corporate Sustainability Due Diligence Directive (CSDDD). Organisations that fail to demonstrate good practices in their supply chains risk not only financial penalties but also exclusion from bids, strained investor relations, and long-term compliance burdens.
3. Operational risks
Suppliers with poor social or environmental practices are often less resilient to shocks, exposing buyers to risks of disruption, cost escalation, or supply shortages. Beyond this, organisations may face active opposition from communities and stakeholders if supply arrangements are seen as exploitative or unsustainable – resulting in project delays and reputational cost.
The business benefits of socially sustainable supply chains
But it would be wrong to view supply chain sustainability as purely a risk factor - socially sustainable supply chains are a strategic advantage for organisations that build them:
- Stronger resilience: Socially sustainable supply chains are better placed to stand up to external threats, minimising the risk of supply shortages, delays, and reputational damage for buyers. As the World Economic Forum notes, “social sustainability is closely tied to the diversification of supply chains… the search for complementary trade relations that meet social standards often also leads to more resilient supply chains”.
- Better compliance: When supply chains meet regulatory standards, buyers are less likely to have to deal with increased compliance-related requirements, saving time and money.
- Improved brand trust: Organisations with sustainable supply chains are often seen as more trustworthy, with NielsenIQ research revealing that 92% of shoppers feel sustainability is important when choosing a brand.
But what, exactly, does it take to build a supply chain that’s truly socially sustainable?
At Social Value Portal, we've worked with numerous leading businesses to do exactly that - and we've seen that effective measurement factor makes the difference.
Measurement: Key to sustainable supply chains
As discussed, many brands lack adequate visibility into the sustainability practices of their supply chain partners - the solution lies in using measurement and validation tools to separate “genuine” suppliers from those that may be “social washing”.
The Global TOM System (Themes, Outcomes, Measures) is the leading global solution for demonstrating not just compliance but active value creation in supply chains.
It measures the impact of initiatives such as local employment, apprenticeships, workforce diversity, carbon reduction initiatives, ethical procurement practices and more, through both direct metrics - for instance, hours of volunteering - and a robust financialised value. This value is adaptable to different currencies in different countries, providing a truly comparable view of your impact across markets.
Crucially, the TOM System mitigates the threat of social washing by only allowing businesses to claim value for outcomes they have actively supported suppliers to achieve.
Worldwide brands like ISS, Admiral and Compass Group are already using it to set clear and measurable standards around supply chains on a global scale.
Over the past three years, Social Value Portal have been invaluable in supporting our social impact journey through the robustness of the TOM System, which has given our reporting true credibility and transparency.
Laura Neville, Head of Social Value, Compass Group UK & Ireland
Ready to take action?
Every organisation should be aiming to build a socially sustainable supply chain - the key is to take an approach rooted in tangible initiatives that can be tracked, measured and reported.
👉 Explore our unique social impact measurement solution
📃Or, download our new report: A new approach to social impact in business
.svg){kind=small}
