Focuses on firms’ logistical organization and coordination with its suppliers, including social and environmental conditions and impacts. Also includes adherence to supply chain labor standards, sourcing controversial raw materials, and adherence to or development of industry best practices.
Supply chain management (SMC) encompasses the planning and management of all activities involved in sourcing, procurement, conversion, and logistics management. SCM is increasingly focused on ESG/sustainability issues as a condition for and part of contracts. There has been a consistent gap between the sustainable actions of reporting global firms and their suppliers, which do not begin to meet best practice sustainability standards. These standards can also be known as green supply chain management, ethical supply chain management, socially responsible supply chain management, etc. Overall, ‘green’ supply chain management is rapidly increasing due to political, consumer and social (from non-governmental organizations) pressures, along with internal dynamics within firms themselves. Sustainable supply chain management therefore incorporates a very wide range of ESG issues, from human trafficking to carbon emissions to water usage to ownership of supply firms. In fact, it incorporates potentially all ESG issues.
Increasingly in various legal jurisdictions there are requirement for mandatory disclosure. Many global firms incorporate elements of SCM into their employee code of ethics, which means that their managers are responsible for implementing and monitoring these issues. Major laws that target SCM include, for example, the U.S. Dodd-Frank Act, which specifically targets conflict minerals in the supply chain. Similarly the UK Modern Slavery Bill prohibits suppliers from contracting with those that fall below its standards.