How Retailers Can Meet Demand for Sustainable Supply Chains

By implementing responsible sourcing practices early, companies can significantly mitigate the risk of future legal penalties, fines, or sanctions that result from violations of labor laws, environmental regulations, or other compliance mandates.

Metamorworks Adobe Stock 484354328
metamorworks AdobeStock_484354328

Every month brings new evidence of how dramatically consumers’ growing preferences for sustainability are reshaping their shopping habits. A new study by NielsenIQ found that 69% of global consumers say that sustainability and environmental, social, governance (ESG) concerns have become increasingly important to them over the last two years. Another study of U.S. consumers found that 66% are willing to pay more for sustainable products.

These shifting consumer preferences are pressuring retailers to accelerate their investment in ESG initiatives and finally retire the outdated perception of sustainability as cost-prohibitive. The business rationale for responsible sourcing is now well understood: From improving efficiency and risk management to building customer loyalty, ethical supply chains are now directly linked to long-term growth, stability, and profitability. Ethical supply chains enhance brand reputation, which has become increasingly important in differentiating brands in consumers’ minds. Leading companies have recognized that this can translate into increased market share and lower the costs of customer acquisition and marketing, while opening doors to new customer segments that value corporate responsibility.

Beyond the business incentives to invest in ethical supply chains, legal mandates are also driving the shift toward more responsible sourcing, as governments across the globe rapidly introduce tighter new due diligence legislation. By implementing responsible sourcing practices early, companies can significantly mitigate the risk of future legal penalties, fines, or sanctions that result from violations of labor laws, environmental regulations, or other compliance mandates. These same practices also help build more durable, adaptable supply chains, since responsible sourcing necessitates greater transparency and traceability, which is also integral for resiliency. This increased visibility allows for better monitoring and management of potential risks and quicker responses to disruptions when they occur.

Digitalizing with sustainability and efficiency in mind

Thanks to multi-enterprise platforms, investing in ethical supply chain and efficient supply chains are no longer mutually exclusive, since the very practices that enforce ethical standards also introduce cost-saving efficiencies by eliminating multiple errors and redundancies and dramatically reducing lead times. In addition to automating workflows and processes including purchase order management, quality inspection, and vendor onboarding, multi-enterprise platforms are continually introducing new capabilities, leveraging artificial intelligence (AI) and business intelligence to better identify strategic opportunities for supply chain departments.

This technology creates enormous efficiencies through multi-enterprise visibility, keeping all supply chain processes and networks aligned and ensuring data accuracy. Just as critically, it also keeps businesses aligned with their suppliers, introducing the visibility that businesses need to constantly monitor, analyze, and improve the sustainability performance of their supply chains down to the Nth tier, including water and energy consumption and Scope 3 carbon emissions. This visibility, in conjunction with cloud-based collaboration tools, allows retail businesses to share agreed sustainability goals and properly monitor their performance through their complete value chain.

Ethical sourcing hinges on businesses synchronizing with their vendors. Every stakeholder, from the raw material provider to the final logistics partner, must have a clear understanding of the company’s expectations. Through digitalization with a multi-enterprise platform, brands and retailers can enforce their sustainability standards and monitor suppliers’ progress while fostering the collaboration and communication necessary to work toward these goals together. This collective alignment also enables accurate, transparent reporting on corrective action plans and the sustainability performance of suppliers down to the Nth tier, which is increasingly mandated by new due diligence laws like the German Supply Chain Act (LkSG) and the United States’ Uyghur Forced Labor Protection Act.

By natively collecting and making all sustainability data available to all stakeholders, a multi-enterprise platform provides a complete solution to environmental and social sustainability that spans from partner selection, through product creation, production, and logistics. These cloud-based platforms aid companies in tracing products back to their source, tracking chain of custody and certifying that they come from sustainable and ethical origins, while also helping companies qualify and manage suppliers based on their ESG performance and risks.

Multi-enterprise platforms further mitigate risk through a rigorous, multi-tier supplier verification process that ensures suppliers meet the company’s specific sustainability standards. To facilitate vetting against the recognized sustainability standards of organizations, these platforms serve as a central repository of all mandatory, ESG-related information, making it readily accessible to all stakeholders.

By adopting a multi-enterprise supply chain platform now, retail businesses can position themselves to stay ahead of both global regulations and evolving consumer expectations. The interoperability of these platforms eliminates the inefficiencies inherent in siloed systems, ensuring that every stakeholder—from a raw material provider in Indonesia to a vendor in India to a sourcing executive in Hong Kong—operates from a shared, accurate data set. This real-time exchange of critical ESG data lays down a powerful foundation, enabling brands and retailers to effectively architect and execute sustainability initiatives they can grow with well into the future, while introducing the efficiencies they need to remain competitive.