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Advice and Information for Finance Professionals

How Transparent Supply Chains Can Improve Brand Integrity

I love grocery stores.

As a kid, I quickly learned it was always a good idea to accompany my mother to the store. I could nudge her to purchase my favorite snacks by subtly placing them into our shopping cart; she typically wouldn’t notice until we were at checkout where she would begrudgingly purchase them.

Now when I stroll the grocery store aisles I’m more concerned about whether the fruit I’m putting into my smoothie is organic, if the steak I’m bringing to Taco Tuesday is grass-fed, and the coffee I’m drinking every morning is fair-trade certified. Like many of the Millennial generation, I want to support brands whose business practices consistently have a positive impact on the environment, their employees, and the regions from which they source their materials.

My preferences aren’t unique; rather, they’re a reflection of a wider societal trend.

A New Consumer Landscape

Accenture’s 2018 global consumer pulse report surveyed over 30,000 consumers to understand why they purchase certain brands (beyond price and quality). The report identifies key factors that explain the increase in the popularity of purpose-led brands. Consumers still care about selection and price, but now place significant emphasis on what a brand says, does, and stands for. The survey found:

  • 62% of consumers want companies to take a stand on current and broadly relevant issues like sustainability, transparency, or fair employment practices
  • 62% of consumers are attracted to companies that believe in reducing plastics and improving the environment
  • 66% of consumers want companies to be transparent about where they source their materials, how they treat their employees and deliver on their promises

For example, a consumer goods giant with over 400 brands in its portfolio made the decision to develop a line of purpose-based products. Consumers responded positively. Now, nearly half of their top 40 brands are those branded as ‘sustainable living.’ These brands are growing 50% faster than other internal brands, and accounted for more than 60% of the company’s overall growth in 2016. 

How Transparency in the Supply Chain Can Hold Companies to a Higher Standard

I had the opportunity to sit down with Jon Chorley, Oracle’s chief sustainability officer, who also happens to be group vice president of supply chain product strategy. We had an in-depth conversation about how companies can leverage transparency in their supply chain to protect their brand and satisfy customer demand. 

Q: Why is business ethics an important issue for companies?

A: There are several dimensions businesses need to consider. Firstly, there’s the need to maintain your license to operate. This includes following codified ethical requirements like environmental regulations, minimum wage, and restrictions against using materials like conflict minerals. Second, ethical violations that may not rise to the level of violating laws, but which are perceived as negative in the eyes of customers and consumers, can still inflict significant damage. The key point is that it’s the brand owner who takes the hit, regardless of where in the supply chain these violations occur. Finally, there’s the need to maintain your social reputation in the marketplace to attract and retain the right talent. Take Oracle, for example; as an IP-driven company we are always competing for talent, especially in high-demand fields like software engineering. Today’s graduates want to work for ethical, environmentally responsible companies, so we need to align with those values to stay competitive.  

Q: What new technologies or tools have emerged to help companies remain compliant?

A: Internet of Things (IoT) is highly effective at tracking goods and assets in real time—whether deployed or in transit. Technologies like machine learning (ML) and artificial intelligence (AI) can be used to monitor for any data anomalies and flag or remediate issues. Also, blockchain is emerging as a powerful tool to increase transparency of goods as they are sourced and move along the supply chain. 

Q: Are there any Oracle customers currently leveraging these technologies to address the conflict mineral tracking issue?

A: Circulor is bringing a unprecedented level of transparency to consumer electronics and electric vehicle manufacturers. By leveraging AI and blockchain, Circulor provides solutions to track provenance and improve efficiency in global supply chains. They developed a platform, powered by Oracle Blockchain Platform, which allows them to track raw materials in supply chains from mine to the finished product and then to recycling, assuring manufacturers that the raw materials sourced are ethical and sustainable. 

Q: In the recent past, what could a company have done to avoid the use of conflict minerals? 

A: Companies would do their best to source conflict-free materials by putting various policies in place and creating due diligence measures for their suppliers to help ensure their components remained conflict-free. It was a difficult process to implement and challenging to identify where materials came from as they moved along the supply chain. 

Q: Why should finance leaders care about this? How do business ethics extend beyond supply chain and operations?

A: Finance leaders care about anything that impacts the bottom line. Customers demand that the companies they do business with behave in a socially, ethically, and environmentally responsible manner. From a cost management perspective, the CFO want to be proactive about managing risk to ensure there are no surprises and unplanned costs. A dedicated solution like Oracle Risk Management Cloud can help CFOs deal with today’s unprecedented levels of complexity.  It’s embedded with AI, it provides high levels of data security across all privileges, and it helps ensure the business is prepared to tackle the latest compliance challenges and process issues. Finally, from a brand equity standpoint it’s important to avoid any reputational damage that can arise from mismanaged supply chains because of forced labor, child labor, or other human rights abuses. 

Learn how a major car company is using Oracle Blockchain for supply chain tracking, helping ensure that recycled cobalt in their electric car batteries is ethically sourced.

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