Surveys of corporate disclosure practices consistently find that more than 90% of the world’s largest 250 companies now publicly report on aspects of their sustainability performance. However, improving overall performance requires moving beyond an internal operational focus and to the corporation’s supply chain. In its most recent study of corporate responsibility reporting, one of the key conclusions reached by KPMG was that “Supply chain reporting needs more focus”. However, questions remain as to what should be reported in this area.
Many corporations turn to the guidelines provided by the Global Reporting Initiative (GRI). In its most recent set, the GRI provides 15 performance indicators that address supply chain issues in some way.
While these indicators give a solid reference point for supply chain reporting, the guidelines are voluntary and reporting on the suggested measures is inconsistent. Few mandatory reporting requirements on supply chain sustainability exist, which means that corporations have considerable discretion in deciding what to report. This flexibility is both the key challenge and opportunity in reporting on supply chain sustainability.
A key challenge is the myriad possibilities for reporting that go beyond the GRI’s standard disclosures. For example, a recent study we co-authored in the Journal of Cleaner Production analysed the metrics used in academic literature to measure performance in sustainable supply chains.
The results showed that a total of 2,555 different metrics were published in 445 different articles. The most commonly published metrics were quality, air emissions, energy use, and greenhouse gas emissions. One striking feature of the review was the lack of agreement on what should be measured. For example, 113 different metrics were suggested to measure energy-related issues. Another 76 metrics were suggested to measure water-related issues. Overall, a staggering 93% of the metrics were used 3 times or fewer.
The up side is that corporations have the ability to focus on reporting the supply chain issues that are most relevant to them. One particular opportunity is to focus on the development of metrics that link the corporation’s supply chain to the broader sustainability context in which it operates.
The GRI’s sustainability context principle states that performance should be assessed in “the context of the limits and demands placed on environmental or social resources at the sector, local, regional, or global level.” Context-based metrics, therefore, should assess whether the corporation’s activities can be sustained by the environmental and social resources upon which it draws. As our study (and other work) shows, relatively little has been done in this area to date.
Developing clear, measurable, context-based metrics relevant each individual corporation is complicated by a number of factors. First, reporting on supply chain performance means that all key players in the chain (ie, suppliers, distributors, retailers, consumers, etc.) need to be considered.
Identifying priorities and tracing impacts in chains that can encompass potentially thousands of players can be extremely difficult. Alongside this, collecting data in a complex supply chain is difficult, particularly aligning data collection and reporting systems. There may also be little existing capacity to collect such information at various points in the chain. There also must be some level of comparability in reporting and data collection boundaries need to be transparently communicated.
We need a concise set of standardised metrics and to allow for different results to be compared, there needs to be a minimal level for reporting. These metrics would complement those designed by individual corporations tailored to the unique needs of their own supply chains.
While the specific metrics are open to debate and may vary by industry, they could build on existing work on environmental limits and social foundations. We believe that standardised metrics would be best achieved through linkages to science-based targets. The development of standardised, context-based metrics could unfold in a number of ways. They would, however, represent an important advance in reporting on supply chain sustainability.
Cory Searcy is an Associate Professor and Payman Ahi is a Research Associate at Ryerson University in Toronto, Canada.
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