For a long time, industrial supply chains were not discussed. How a business engineered its final product was a protected trade secret. Even the largest and most integrated supply chain-organizing entities did not use the phrase and did not have visibility. Their suppliers’ practices were also trade secrets. So long as the buyer was satisfied with the purchased object or service, the job was done, and no further information was needed. This standard persisted for centuries.
Three major concerns began to change things:
- First, the prohibition of human enslavement required enforceable standards for fair treatment and compensation of workers; whether people were enslaved or abused could no longer be kept secret. Human rights were rightly becoming a higher priority than trade secrets.
- Next, it was becoming clear that the practices used in the production, storage, packaging, and distribution of food could create serious risks, not only to one consumer or household, but to entire populations. For the protection of public health, it was necessary to create enforceable standards.
- Meanwhile, in the purchase of high-value properties, such as art and real estate, it was clearly necessary to have factual understanding of the provenance, authenticity, and specifications of a given object or property. To protect against fraud, enforceable standards were needed.
Throughout the 20th century, the responsibility for managing supply chains ethically and transparently was still resisted by major industrial-scale actors. Part of the motivation for this resistance was the desire to reduce legal liability by reducing awareness and evidence; it was also a potentially unworkable challenge—to perfectly clean up supply networks at global industrial scale.
In the 21st century, however, we see a new paradigm emerging. Supply chains are full of opportunities for improving standards, practices, and outcomes, across all metrics. Each time a procurement decision is made, by any entity large or small, multiple decisions are made—consciously or not—about what will follow:
- Will the production process or final product affect human health positively or negatively?
- Inside the operation of the production process or in the wider consumer economy?
- Will the total volume of pollution from human industry be increased or decreased by this choice?
- What kind of pollution are we talking about—climate, toxic, plastic, or other disruptors of ecological or endocrine health?
- How does this affect the actual value proposition? Is the quality obtained for the purchase price enhanced or degraded?
- Are these procurement decisions helping to create an economy of scale that favors clean production or pollution and harm?
- Can the business in question advertise its practices as ethical, health-building, safe, and constructive?
- If not, how does that convert advertising for the product or service in question into an act of deception?
- Are business partners or consumers—or the wider society, or future generations—given fair consideration and real benefits?
Digital technology has made it much easier to track every aspect of the logistics, composition, and provenance of supply chains. Large, wealthy organizations can set standards, demand better practices, and enforce them through tracking and transparency measures. Increasingly, this same capability is available to smaller scale actors, and businesses focused on improving supply chains are setting up shop and becoming competitive.
Small, local shops and restaurants, grocers and builders, should be able to affordably access, and demonstrate transparently that they do this, better quality, more ethically produced goods and services. Governments—at national, regional, and local levels—should incentivize this access and related practices. Reward businesses that make it easier to keep supply chains clean and ethical, so that value is delivered more reliably and transparently.
As climate risk and resilience measures are refined and mainstreamed, it will become increasingly necessary to establish supply chains that reduce risk and harm and favor health, resilience, safety, and sustainable opportunity. The non-financial benefits of a product, service, or value chain, will be increasingly relevant, and fiscal pressures will drive public authorities to favor cleaner producers of goods and services.
Active Value ratings will aim to highlight a number of supply-chain improvement mechanisms, including climate risk reduction and resilience value, actions to prevent pollution, ecosystem and biodiversity co-benefits, fair treatment of workers and consumers, and transparency, among others.
We are moving into the resilience economy. It will happen, as the witticism goes, slowly at first, and then suddenly.
