Increasingly, multinational corporations (MNCs) are pledging to procure the materials and services they need from companies committed to fair labor practices and environmental protections. But the reality is that their suppliers–especially those at low levels of the chain–often violate sustainability standards, exposing MNCs to serious financial and social risks.
To explore this problem–and identify solutions–the authors studied the supply networks of three MNCs deemed to be sustainability leaders. These companies engage in behaviors that are worth emulating; for example, they have established long-term sustainability goals, and they try to cascade good practices all the way down to lower-tier suppliers, using a combination of direct, indirect, industry wide, and global strategies. But all MNCs have more work to do to develop sustainable supply networks.
They must emphasize social and environmental responsibility, along with economic considerations, at every level of the supply chain. They must give their procurement officers better training and incentives to pursue supplier sustainability. And to encourage widespread dissemination of best practices, they need more direct contact with the procurement people at their first-tier suppliers.