Should Your Supply Chain Be Cancelled?

The phrase ‘cancel culture’ has become increasingly prominent in the past 12 months. But could your supply chain be the next to be cancelled?

When a celebrity or a politician delivers a message that rubs enough people the wrong way, they may find themselves cancelled – fired from jobs or sponsorship and hounded out of public view.

A similar process is happening to major corporations worldwide, as activists protest the environmental impact of carbon emissions, environmental damage and unethical labor practices.

No company desires to be the target of organized activism. But as a procurement professional, you must consider the possibility that the mob may be correct to some degree.

The largest companies make the most prominent targets. Extinction Rebellion, which describes itself as an international “non-violent civil disobedience” movement, grabbed headlines with blockades of Amazon warehouses in the UK during Black Friday sales in November. Labor disputes spurred by the pandemic have locked down businesses around the globe.

Supply Chain in the Crosshairs

Groups like Extinction Rebellion targeted Amazon and other retail giants to highlight the environmental impact of large corporations, like many companies that sell through Amazon. In Australia, activists shut down the world’s largest coal port by climbing onto machinery and pressing an emergency stop button. In September, eco protesters shut down Britain’s busiest ferry port in Dover. Activists are willing to put themselves in the path of bodily harm to make their point.

Passionate activists are hoping to force action with blockades, boycotts, and disruption. Your company could be the target or simply be caught up in the chaos as your procurement activities are disrupted. Keep in mind activists will pressure companies through the boardroom as well as the loading dock. Investor groups have pressured boards to act on alleged human rights violations and sourcing as well as financial performance.

What happens when protestors target your supply chain?

Do you have a plan in case your procurement activities could become embroiled in these situations? A progressive stance on social media won’t protect your company if it or some of your suppliers operate in defiance of accepted or legal practices. 

While regulatory agencies and international bodies are pushing for corporate involvement in battling climate change and unethical sourcing, the biggest push may be coming from the next generation of consumers. A BBC survey found that younger people are most likely to agree with the aims of Extinction Rebellion. Its leaders say they plan to put world leaders under pressure to commit to reducing global emissions. These are the people most likely to engage in protest, regardless of their knowledge of your company.

Procurement in the ESG Spotlight

Procurement leaders are becoming the de facto leaders in environmental, safety and governance (ESG) efforts to manage compliance with a wide range of compliance regulations. For international companies with global supply chains, the complexity quickly becomes overwhelming.

However, it’s become an expectation that procurement professionals track the sources of every direct and indirect spend item. Activists and regulators won’t accept excuses. Unfortunately, smaller suppliers may be flooded with requests to document compliance with sustainability and diversity initiatives and bow out of responding to rigorous RFPs. So, look for ways to nurture smaller suppliers like joining industry groups to standardize information requirements.

Consider these three steps to prepare as your procurement team considers its exposure in a polarized environment. 

1. Walk the Talk

If your company pledges to meet a carbon emissions goal or source ethically produced goods, ensuring those are not empty promises is critical. Given the complexity of deep-tier suppliers, it can be challenging to monitor the actions of a small vendor half the world away. But it’s necessary. Perhaps the only thing worse than not making an effort is to lie about making a commitment with no intent to follow through. Sure, sometimes mitigation plans don’t work as intended. That’s one thing. But deliberately lying or manipulating data to show compliance is much worse. And it will come back to you at some point. 

2. Monitor and Measure

Companies were stunned by how little they knew about their far-flung supply chains during the pandemic. Disruptions at small companies two or three steps removed from the prime vendors could expose their large customers to turmoil or accusations of illegal or unethical practices.

As a result, companies in the fashion industry, industrial supplies, and the auto industry had to forge closer relationships with deep-tier suppliers. Fashion is one of the leaders – in the 2021 Fashion Industry Benchmarking Study, 83% of fashion company respondents planned to strengthen relationships with key vendors and leverage digital tools.

It’s essential to track this information in a centralized master vendor database, so it’s accessible and accountable throughout the company. Solutions on the market monitor the Internet for news and updates about vendors so those factors can be included in the database independent of the vendor’s reporting. Independent, on-the-ground knowledge can be critical to monitor labor conditions and ethical sourcing.

Quality compliance providers can monitor suppliers in other nations and provide reports on performance in following your organization’s requirements.

3. Develop Deep Visibility

Covid shutdowns highlighted these problems when an essential component was delayed because a deep-tier supplier could not maintain production. Often, the buyer didn’t know that company was involved in the supply chain until it was too late. Because of that lack of visibility, your organization’s top suppliers may be sourcing materials and components from unknown vendors that could be involved in child or coerced labor, illegal mining operations, corruption, or other behavior that’s blatantly illegal or unethical. Outcries from activists could lead to regulatory inquiries, fines, and even criminal charges. To mitigate these possibilities, it’s essential to look beyond the first and second-tier suppliers. 

Even considering these three factors, your organization could still become a target. Just because a company operates in the B2B space doesn’t mean it’s immune to scrutiny. It may take activists longer to find you, but it doesn’t mean they’re not looking.

Prepare for a New Era

Regulations and industry standards may not go far enough. Some companies are applying their own criteria to commercial activities. As a result of new B2B activism, companies find their products removed from shelves, contracts terminated, and content deleted from online platforms. Companies are not afraid of firing clients and supply-chain partners that don’t align with a corporate brand’s stated values.

We are seeing the rise of the social supply chain, driven by political and social justice consideration as much as the bottom line. Your organization must have a plan to, first, make good faith initiatives to meet mainstream expectations such as carbon reduction and ethical sourcing. Second, engage with relevant groups to support common goals.

Even the best public relations plan won’t save an organization that doesn’t engage with the process. There’s still a chance a company may become the target of activists. But it’s wise to make deposits in the bank of goodwill by doing good. Companies that fail to take these efforts seriously may damage the brand, face business interruption, and suffer adverse shareholder action.