A small label on a t-shirt with an eco-friendly symbol may not seem remarkable at first glance, but the story behind this label is rich.
It’s a story that begins with a wool supplier in Ireland, continues through intercontinental freighters, encompasses a clothing manufacturer in Mexico and ends with a retail store in Portland, Maine. Each of these companies tells their part of the story through data that is either actively shared with supply chain partners or regulators around the world, or discreetly collected.
The interconnectedness of this history is critical to supply chain management, but is often haphazard in the sense that organizations may not even be aware that this data is being shared. For example, a clothing company may not realize that their shipping company’s data is readily available and shared as part of their own industry needs. Worse, the shipping company may misreport this data by miscalculating fuel costs or misattributing CO2 emissions to electric trucks. It’s up to you to ensure the data is accurate, contextual, and organized to support your brand’s narrative while also looking for opportunities for improvement.
Three forces are driving the need for more data transparency today: consumer preference, investor interest, and regulatory compliance. Consumers and investors want to make informed decisions about the products they buy or invest in: are they good for the environment? Are workers treated fairly? What political and social positions does the company hold? These stakeholders look for data to demonstrate a company’s commitment to specific environmental, social and governance (ESG) standards. Meanwhile, regulatory requirements are popping up around the world, from the French labeling law to the New York Fashion Act, each with their own stringent requirements for data aggregation and presentation. There are definitely more to come. In both cases, it is the responsibility of companies not only to consistently present reliable data, but also to collect and present that data throughout their supply chain.
As a supply chain professional, your constant focus is tracking and managing a million details, from shipping and transportation to manufacturing. Regulations might make you think about how to collect all this impact data. To put it in perspective, imagine you are a furniture manufacturer. To comply with the new regulations, you not only need to show how your company is committed to environmentally responsible practices, but you also need to show that your partners are doing the same. Does the company supplying your wood replant the trees they cut? How much fossil fuel do your vans use? Does the company that supplies your leather dispose of its cow manure in an environmentally friendly manner? Today we are all part of an interconnected supply chain where even your slurry is everyone’s business.
While we’re just seeing the beginning of these data sharing requirements, the data is already out there. That’s the difference how it is reported. At the moment, your suppliers may disclose some of this information themselves, and industry consortia and regulators may uncover other data as part of their reporting and oversight. The problem with this data is that it could tell the wrong story due to inaccurate assumptions. Using our earlier illustration, there could be data on haul miles assuming you use fossil fuels when in fact 25% of your haul fleet is electric. When you let other companies present your data, you let them control the narrative.
As a supply chain professional, you must help your organization control how it collects, disseminates, and presents its data consistently throughout your supply chain. This means data needs to be collected and shared in the right format with the right context – whether your partners are reporting cow gas or carbon emissions – to ensure they are using an agreed set of metrics. The challenge is that each regulator has its own definition of what is right. The information you collect and present to meet the requirements of European Union directive on corporate sustainability Due diligence will look very different than, say, the state of the art California’s plastic reporting requirements. Because your business is likely to have to comply with multiple regulations depending on where you do business, make sure the data you collect gives you a comprehensive view of your supply chain so you can easily adapt to new regulatory requirements, regardless of their focus.
Businesses, like the products they sell, are a by-product of their own supply chains. The COVID-19 pandemic has highlighted how fragile our supply chains are, but it’s not just about fragility; It’s also about responsiveness. Taking responsibility within a globally networked supply chain means increasingly reacting to global events. Look no further than the headlines on the Russia-Ukraine conflict to see the importance of a flexible supply chain. If you did business with a Russia-based supplier three months ago, you probably won’t do business with them now.
Businesses need to be able to quickly switch to new suppliers, whether the catalyst is global solidarity or shifting consumer sentiment. In the future, your supply chain is your business and your supply chain data is everyone’s business. How you present this data is critical, both for regulatory compliance and the story it tells your customers about your environmental and social values.
What you stand for as a company matters a lot. Carbon consumption matters. Corporate social responsibility counts. Even cow dung counts. It’s up to every business to take responsibility for their data and stand up and be counted. Those companies that take active ownership of their data first will be able to shape not only their own narratives, but the future direction of the industry.
John Armstrong is Chief Technology Officer at Higg.
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