We’ve talked a lot on this blog about the desire many companies have to move towards more sustainable, socially responsible supply chains. It sometimes feels as if companies can be divided into two camps: those who have embraced sustainability whole heartedly AND those who would … if they could only figure out where to start.

Well, you can definitely count Starbucks among the former rather than the latter. Through their Corporate Social Responsibility (CSR) efforts, they’ve done a great job of stating their goals and giving clear visibility into their progress (and even lack thereof in some areas). But rather than a lot of talk and no action, Starbucks is literally putting their money where they mouth is.

Based on the audit of suppliers providing branded goods, Starbucks found that 41 out of 78 didn’t meet their CSR guidelines. In fact, 14 of their suppliers were so far out of compliance with child labor and payment of wages standards, Starbucks ended their relationships with them.

That kind of accountability is only possible within a comprehensive supply chain strategy that seeks to minimize risk - from product safety to company reputation. At a minimum, these 4 components should be a part of that process:

1. Improved Sourcing - You can eliminate a lot of potential risks by avoiding risky suppliers altogether. Take the time to develop and execute a strategic sourcing process with Requests for Information that include questions about the supplier’s business practices, including their commitment to ethics programs, corporate responsibility, fair pay, child labor, etc.
2. Supplier Site Visits - The only way to ensure a supplier has accurately reported on their internal activities is to see it for yourself. Inform suppliers that you’ll be visiting their sites and what you’d expect from them during such a visit. A complete plant tour and interviews with executives is within the boundaries.
3. Test & Report - Require that your suppliers provide quarterly reports on the state of their business, including activities in ‘green’ research and testing.
4. Keep Score - Many companies lack a formal Supplier Performance Management process. But that lack of visibility into your suppliers’ practices puts you at risk. Establish a scorecard that measures potential risks, track it religiously and if necessary … cut suppliers that aren’t holding up their end of the bargain. After all, it’s your company’s reputation and customers who are at risk.

Ellen Terchila is a Senior Consultant in Ariba’s Spend Management Services group. Ellen specializes in strategic sourcing in the retail sector.

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