Transcript

[MUSIC PLAYING]

NARRATOR:

To become sustainable, companies need to recognise their roles and responsibilities in addressing employment conditions and social and environmental impacts within their supply chains. Compliance is an important element in helping companies achieve this.

A business's compliance programme is made up from the internal processes and policy decisions employed by the business to meet the standards set by the government laws and regulations. Key elements of a typical compliance programme include managing risk, meeting global standards, preventing corporate loss, insurance systems are in place that would reduce any penalties incurred in civil or criminal judgments, improving the business's public image. Together they represent the many things that the compliance programme aims to achieve. And they are the first steps companies need to take on the road to sustainability.

Compliance is complicated with laws and regulations varying country by country, and perhaps, region by region or city by city. But once enterprises have learned to keep pace with regulation, they are likely to become more proactive about sustainability issues and social and environmental impacts within their supply chains.

On their own, traditional compliance programmes do not always produce sustainable change. New approaches to compliance are needed, particularly to address environmental and social performance issues in supply chains. These might include shifting from pass/fail to continuous improvement, replacing audits with collaborative assessment and root cost analysis, helping suppliers identify the business case for better social and environmental performance.

A well-managed supply chain will aim to reduce the cost and complexity of the production process and environmental cost at all stages of the process. Sustainable supply chains offer a win-win situation. They are profitable for the businesses involved and they are beneficial for the environment.

Value chains are the processes or activities a business uses to add value to its end product or service. The traditional value chain is a linear system with upstream suppliers providing component parts for products, and downstream entities providing product distribution and point of sale. The key elements of a value chain, as first described by the American academic Michael Porter, are inbound logistics, including acquiring and storing raw materials; operations, the processes needed to convert the raw materials into the finished products or services; outbound logistics, getting the product or service to the end users; marketing and sales; and after sales service.

Each step in the value chain offers opportunities to add value to the product or service. Enterprises develop sustainable operations by analysing each link in the chain and looking for ways to improve its efficiency. These improvements are enabled by what Michael Porter calls, the support activities of the value chain: procurement of the raw materials, technological developments to improve the processes, human resource management, and company infrastructure.

But in practice, value chains are often far from linear. Businesses need to take into account a whole range of stakeholders when seeking to create social, environmental, and organisational sustainability.