Why Should CEOs Embrace Supply Chain Ethics? Because Everybody Benefits

When it comes to the apparel industry, there's a “gap” in how much water is used in their manufacturing processes and how much water could be saved.

According to an article in Bloomberg, Gap Inc. CEO Art Peck is pushing for his company to reduce water waste and look for ways to reduce water usage. For Peck, addressing this issue is more than a corporate social responsibility (CSR) and supply chain matter. In fact, it could very well be tied to his compensation package.

Now more than ever, consumers are pushing ethical envelopes to know the products they consume are made via socially, economically, legally and morally driven processes. The drive for a responsible and sustainable supply chain is an enterprise imperative, encompassing every aspect of the supply chain from planning, sourcing, manufacturing, delivery, return and enablement. Consumers are much more attuned about what brands “do” in addition to what they “sell.” What used to be recognized as conscious consumerism has transformed into companies becoming more mindful about the choices they make and the impact they have on a larger group of stakeholders. Look no further than Zara, another global apparel company, that recently announced that all of its clothes will be sustainable by 2025.

Ethical Supply Chains: A Requirement and an Opportunity

To be sure, the changes made by Gap Inc. and Zara aren't snaps-of-a-finger decisions to appease critics. In fact, smart companies have analyzed the totality of their efforts over several years. Over the past decade, supply chain leadership has evolved from “lowering costs” and “driving efficiency” to differentiating a company’s strategic initiatives.

A 2018 study by the Loyola University Chicago’s Supply and Value Chain Center showed that 64 percent of responding company executives plan on tying compensation — particularly at the senior levels — to ethical results. However, many companies don’t have a guidepost on how to assess performance other than what CSR efforts tell them.

With this in mind, ASCM has developed the first corporate supply chain designation that measures ethical responsibility, economic sustainability, and ecological stewardship.  The certification, built on the foundation of the supply chain operations reference (SCOR) model, enables organizations to benchmark their supply chain on the three dimensions that are critical to an effective, responsible and sustainable supply chain. The program was established to help organizations reach goals, improve results, and be more competitive in today’s global business world. This is a significant opportunity for C-level executives to become the voice of change. To enable this change, we’re providing the certification standards to leadership teams free of charge because it is, in fact, the right thing to do.

We often hear from companies that “the costs of doing business” prohibit them from really pushing the needle to do better. My response is always the same: if you make a short-term investment now, it will pay off in spades later, even if your company has what outsiders perceive as an already strong supply chain.

As a food company with one of the most efficient supply chain networks across any industry, McDonald’s was constantly fighting to gain market share against Wendy’s, which claimed that serving fresh (and never frozen) beef made for a better tasting burger. Recently, McDonald’s said it gained burger market share in the informal eating-out category for the first time in five years in part to its nationwide launch of fresh beef for its Quarter Pounders.

McDonald’s also announced commitments to sourcing 100 percent cage-free eggs by 2025, and a similar move to sustainably sourced coffee. Why? Because McDonald’s listened to its customers about what's important to them. When combined with a strong attempt of changing an already strong supply chain, the results are real.

Gap Inc., Zara, and McDonald’s all point to an opportunity for corporate management teams to create new and exciting pathways to connect the dots between supply chain management and corporate performance. Organizations that are able to demonstrate their supply chains meet rising consumer expectations will be recognized and rewarded with customer loyalty and increased brand value.

Abe Eshkenazi, CSCP, CPA, CAE, is CEO of the Association for Supply Chain Management (ASCM), the largest nonprofit association for supply chain and the global leader in supply chain organizational transformation, innovation and leadership.