Review: “Supply Chain Transparency”

Sadie Keljikian, Express Trade Capital
Recently, ‘supply chain transparency‘ has become a paramount issue for the American consumer. Manufacturers, as well as some “fast-fashion” retailers, are shifting sourcing strategies to insure that their products are made according to certain environmental and ethical standards.  Many speculate that this trend began with reports of sweatshop labor in Southeast Asia in the early 1990’s, when companies like Nike were criticized for underpaying factory workers abroad. Soon thereafter the public began to realize that nearly every large-scale retailer had similar problems related to supply chain activities.

Although increased public knowledge of these issues has improved matters, there are still areas in which we, as consumers, are completely left in the dark. Bloomberg reports that the latest difficulty in supply chain transparency involves conflict minerals. Around the turn of the millennium, western society became aware of the horrific conditions surrounding De Beers diamonds, which were mined by slaves and sold by armed rebels. What many of us didn’t realize was that other minerals used by companies like Apple Inc. and General Motors Co., among many others have equally problematic histories.

Since the 2010 Dodd-Frank Act, US-listed companies have been required to investigate supply chains involving tin, tantalum, tungsten, and gold. This is due to similar problems that existed in the diamond mining industry, most notably mining revenue funding militia groups in the Democratic Republic of the Congo, as well as surrounding countries. Because manufacturers of electronics and gasoline require a number of minerals from different geographical location, keeping track of these aspects of their supply chain gets very complicated. The difficulty is compounded by the fact that, according to the United Nations Security Council, rebel militia are still profiting illegally.

In the 2015 reports filed over the last several months, however, companies seem to be making a more concerted effort to thoroughly investigate their supply chains and squash any illegal activity. Chris Bayer, an independent academic with Development International, a non-profit, says “[c]ompanies that…are looking at this as a litmus test for their suppliers are going to be seen as leaders. It’s not just about conflict minerals. We’re looking at how much command and control you have over your supply chain.”

Some companies, however, lack internal mechanisms necessary to investigate their supply chains as thoroughly as is needed. Nearly half of companies that filed 2015 conflict materials reports had all four materials in their supply chain, according to Bayer. About 10% of conflict material filers (over 100) said or implied that their products are conflict free, but only 19 of them underwent an audit for claims on their products.

The issue of criminal activity in the global supply chain is a complicated one, but hopefully, consumers better equipped to detect and minimize the ethical issues that arise in international sourcing and manufacturing.

Click to learn about how purchase order financing can help you manage your supply chain.

Contact us for more information.