How important are supply chain audits?
Updated: Dec 16, 2020
CONTRIBUTOR Hagan-Brown, Environmental Engineer specialising in water pollution control, en sustainability as well as managing systems that affects health and safety issues, quality and nature.
Supply chain, a complex or simple web of individuals or companies that help facilitate the products and services of an organisation. A high percentage of an organization’s environmental, economic and social performance is influenced by its supply chain, in as such, improper or failure to manage this chain can lead to numerous risks. Analysing and proceeding to take action in the supply chain can help an organization prevent risk of prosecution, reputational damage and pollution.
The benefit of the audit system
An audit that focuses on dealing with the systematic documentation and objective evaluation of evidence against a set of criteria is a way of preventing these risks.
Nestle has faced charges under California Supply Chain Transparency Act in relation to pet food with tuna sourced from its supplier Thai Union. According to Greenpeace, an environmental organisation, Thai Union overfished, caught juvenile tuna from vulnerable stocks causing imbalance in the ecosystem leaving a high ecological footprint. Nestle could have prevented reputational damage and prosecution if it had performed an efficient and effective environmental audit on its supplier Thai Union.
Similarly, top clothing brand like Lacoste or Adidas together with other companies tackled and are still in the fight to prevent the risk of losing their reputation from the probability of sourcing ‘unsustainable cotton’ from factories in regions where forced labour and poor environmental performance are common. Alike, Ralph Lauren, a US manufacturing company, did not only audit its first, second and third tiers suppliers in conformance to its forced labour abolishing policies but also went on to strictly monitor suppliers besides giving its workers a voice.
To effectively manage the supply chain, and as part of the selection of suppliers by an organisation, an audit based on criteria consisting of organisation’s requirements, industry standards and that of product and services provided will identify the risks to be prevented. Once suppliers are on board, a continuous and periodic evaluation and assessment to determine compliance and on-going commitment to the organisation’s values should take place to keep all risk eliminated and also identify opportunities to improve performance.
In an environmental supply chain audit where suppliers are audited on environmental metrics such as energy usage, air emissions, Green House Gas (GHG) emissions among others, the audit aligns organization’s targets and goals with that of suppliers as well as create strong relationships between suppliers and the organization to build a strong environmental awareness culture to mitigate any future issues that could lead to threats. For instance, through collaborations and audits, Walmart is encouraging its suppliers to report social, environmental and other key performance indicators through the sustainability index in order to eliminate prosecution and reputational damage.
Moreover, supply chain audit provides the advantage of evaluating and monitoring the progress of suppliers besides identifying achievements and critical issues. In addition to reporting on suppliers’ performance, an audit also confirms priorities and provide guidance for future actions to improve suppliers’ performance. This in turn produces a learning business environment between an organisation and its suppliers that has the greatest tendency in surviving risks.
In a world where sustainability has been the an integral part business and survival, performing an audit in the supply chain not only builds strong culture to align goals and target with suppliers as it evaluates but also monitors progress on metrics, as well as reporting and monitoring performance to prevent the risk of prosecution, pollution and reputational damage and alongside identify opportunities for improved performance.
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