Engage with your suppliers to protect your business

By now, everyone has heard the term supply chain. Empty shelves in stores during the pandemic highlighted the complexity of global supply chains and how one kink in the chain can have a massive domino effect. Getting goods through the supply chain is one thing, getting information through may be even harder. Responses to requests to suppliers are often like those of the childhood game ‘telephone’ where the initial request gets changed with each pass to another person in the chain, so the end response has nothing to do with what was originally asked.

Why the push for supply chain transparency?

Regulatory Compliance

In the past few years, we have seen several regulatory drivers pushing companies to increase their supply chain transparency generally, but also specifically when it comes to the chemicals used in their products and processes.

• Digital Product Passports: While specific requirements under the European Green Deal are still unknown, it is likely they will include a listing of master data, such as product, manufacturer, composition, chemicals of concern, toxicity, and sourcing information.
• PFAS Reporting Requirements: Globally, we are seeing an increase in rules and regulations requiring companies to report on the presence of PFAS in their products, detailing the amount, as well as the purpose of the PFAS. Companies can often do finished product testing which will show them there is PFAS in the finished product, but they won’t know where it is coming from and how to go about replacing it.
• Corporate Sustainability Due Diligence Directive: Although not yet approved, the Directive would require companies to identify, prevent, stop, or mitigate impacts on human rights and the environment throughout their value chains.

Sustainability Initiatives

While the majority of companies are still focused on climate change, we are seeing an increasing number of companies branching out into other sustainability initiatives around product circularity, increasing reusability and recyclability, preventing biodiversity loss, etc. that will involve gathering chemical data from suppliers and getting them onboard with new initiatives.

Consumer Demand

We are seeing an increase in consumer demand to understand what’s going into the products they use. From food to cosmetics, children’s toys to clothes, people want to understand potential risks and choose safer products. A quick search in your phone’s app store will yield several results for apps where consumers can scan products in stores, review ingredients and associated safety information, as well as compare products. In the digital age, consumer product information is widely available, so it’s important to identify any issues and make the necessary changes in your products before consumers raise a flag.

Challenges to engaging with suppliers

As we work with companies across sectors, we see that they all struggle to engage with their multi-tiered supply chains. Common themes relate back to the fact that when it comes to chemicals management, most companies have very lean teams, and struggle to communicate effectively with their suppliers. Communication within a single company is a challenge, now think about communicating to hundreds of suppliers who speak different languages and many of which you may not even realize supply something in your product. Engaging the supply chain is hard and tedious work and requires lots of upfront planning and buy in.

Generally, companies run into the following issues:

• Data: don’t know what specific information to obtain from suppliers
• Analysis: don’t know what to do with that information once it is obtained and who needs to be involved in the review process
• Staff: don’t have dedicated staff to engage with the supply chain and chase suppliers
• Buy-in: don’t have buy-in across departments such as sourcing, purchasing, and compliance
• Cost: don’t want to increase costs or add additional requirements on suppliers
• Tools: don’t have single system/solution across the organization
• Relationships: don’t know who their suppliers are or how to access them

Add to these the many reasons that suppliers are reluctant to cooperate. Suppliers are constantly receiving information requests from their customers, which, while often asking for similar data, are in different formats, units, systems, etc. They don’t understand how their data is going to be used and by whom. A supplier’s ingredient information is their most valuable possession, so they need to be sure it will be protected. All of these requests also translate into added costs on the supplier.

Where we see success

While engaging with the supply chain is difficult, many companies are seeing success and there is a lot of variation in their approach. Some companies, such as Under Armour and Nike, focus on new product innovation. Lisa Clerici, Senior Manager Global Restricted Substances Compliance at Under Armour, explains that their supply chain engagement strategy is part of their broader sustainability goals. “We realize that in order to do business—especially in places like Europe—we really have to be sustainable. The consumers are asking for it, and NGOs are asking for it. And then of course, there are regulations, like the PFAS regulations coming through, which is just a small little section of things, but there’s such a push for it, and it’s just going to keep going and going.”

Like Under Armour, Nike understands the importance of and ensuring that problematic chemicals are not included in the product in the first place. Renee Hackenmiller-Paradis, Former Lead, Chemistry Center of Excellence, Global Sustainability at Nike, stated, “One of our goals related to all of our chemistry assessments is that our chemical suppliers give us preferred chemicals…Understanding all chemicals used in a new process is really important because we don’t want to start using something that may not be regulated right now but is just as bad as what it is replacing.”

Other companies choose to approach their supply chain engagement differently. Some look at their top existing products to identity opportunities to substitute safer alternatives. Others look across their suppliers to identify those that impact the most products.

Although the approach and the reason behind engagement may be different, we see that there are commonalities among the successful programs. These companies have buy-in around supplier engagement initiatives at the highest levels of the company and several teams supporting. The teams are committed and willing to put in the effort to effectively communicate with suppliers and give them the support they need. There is clear guidance on what information is needed, how it will be collected, who will have access, how supplier information will be protected, and how the information will be used. They start small and then scale up once they determine effective communication and processes.

Best practices for engaging suppliers

We suggest a 5-step process to ensure success when engaging your supply chain.

1. Define your why
2. Find your foothold
3. Create clarity
4. Implement your process
5. Empower your suppliers

Define your why

In order to have a successful program, you need to first decide your goals and what success looks like. Why are you engaging with your suppliers in the first place? Is it to meet sustainability goals? Protect your workers, consumers, and the environment? Maintain competitive advantage? Your “why” will set the foundation of your program, and provide context for why you are reaching out to suppliers in the first place.

Find your foothold

Many clients ask us “Where do I begin?” That’s a tough question to figure out but let your “why” inform that decision. Are you looking towards the future with new materials like Nike and Under Armour? Are you trying to get an understanding of potential hazards in your current products to identify risks? Are you trying to identify opportunities to phase out chemicals of concern and replace them with safer alternatives? The answer to these questions will help you determine which suppliers to engage with.

Create clarity

Clarity is of key importance, as misunderstanding within the supply chain is one of the key reasons for not getting necessary sourcing information. Consider:

• What level of disclosure do you require? Ingredients? Impurities?
• What are you doing with the information? How are you using it?
• Who will have access to the information submitted by suppliers?
• How will the suppliers be impacted; are your expectations reasonable?
• What is your timeline?
• What are the rewards/punishment for responding/failing to respond?

The clearer you are with your requests to suppliers, the more likely they are to respond.

Implement your process

Once you have your “Why”, your Foothold (where to start), and your Clarity (the “why” and “how” for your suppliers), you can move into implementation. Over time, what we’ve seen is that it’s critical to have these steps in place and solidified, for implementation to be a success and there are different ways to implement.

You can take a Top-down approach like Beautycounter® who came up with their own Restricted Substances List (RSL) or “Never” List, utilizing verified CHAs to create a list that goes beyond any current regulatory list.​ Lindsay Dahl, SVP of the Mission Team at Beautycounter, explains: “There seems to be no indication that governments are slowing down in continuing to advance chemicals policies. So, if current formulations are not on existing authoritative lists that’s great, but it does not mean that a brand is safe, and it would take a full-time person to constantly be assessing what’s coming next. And for us, it would be better to invest in thinking about what would come next in scientific literature rather than always having to play catch up after it’s too late.”

Another option is a prior review and approval approach like Nike uses, where suppliers need to provide full disclosure of their chemical products (this can be redacted) and this information needs to be assessed using Nike’s framework that includes list screening and Chemical Hazard Assessments. Nike then works with their supplier to better understand any flagged chemicals before it can be approved for next steps in the innovation process. ​

Another approach to supply chain transparency is through certification requirements. Depending on your sector or products, certification programs exist that aim to address chemical transparency and Chemical Hazard Assessments. For example, in the textiles world, EIM and Screened Chemistry are two such programs.

Empower your suppliers

Regardless of which one of these approaches works best for your scenario, make sure you are empowering your suppliers.

• Consider engaging suppliers in developing an innovative process that works for everyone
• Help suppliers understand the why: To help protect workers, products, and business
• Build clear requests for information
• Set expectations for an adequate response
• Provide further clarification as needed
• Enable access to tools to help them proactively meet expectations