How CPOs can drive ethical standards across supply chains in 2025

This article was originally published in January 2025 on CPO strategy's website, access here.

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Chief Procurement Officers are increasingly taking on responsibility for their organisation’s success in meeting environmental, social, and governance (ESG) goals. This is partly due to the intensification of the ESG regulatory landscape. The EU’s Corporate Sustainability Due Diligence Directive (CSDDD) is one instance, requiring larger companies to have oversight of their entire supply chain.

But regulation isn’t the only force driving the demand for greater transparency. Consumers and purchasing organisations want to buy from responsible companies. According to research from PWC, nearly half of consumers say that they buy more sustainable products as a way to reduce their impact on the environment. Then there’s the reputational impact to consider. Shein is an example of a company which faced a media storm earlier this year after instances of child labour in its supply chain were reported.

With pressure growing from all directions, what steps can procurement teams take to ensure they are promoting strong ethical standards across their supply chain?

Facilitate communication

The CSDDD ‘s requirement for companies to carry out due diligence throughout their supply chain is an opportunity to get to know suppliers better, and through this, to drive labour and environmental standards higher.

Start by taking a look at the network of suppliers that exists in your supply chain. While you may have a direct relationship with your Tier 1 supplier for example, they will likely have dozens, if not hundreds of suppliers of their own – all related to your finished product or service in some way.

To unlock a greater level of transparency, it’s vital to have open and honest conversations with suppliers about their own supply chains and how they are managed, clearly explaining why you need to know. Note that, for some, this may be a relatively new request, particularly when asking about compliance issues such as social / labour or environmental policies. It’s therefore important to take the time to explain why you need this visibility and reassure them by outlining how you can help them to gather the information. This may include looking at a self-assessment or verified assessment, costs of which are generally much lower than feared and easy to deploy, using technology.

Building collaborative relationships

Change can’t happen overnight and working towards goals will take time. Setting achievable and realistic deadlines is vital and, in many cases, this will require a multi-year plan that outlines not only the goals, but the resources and processes needed at each stage.

It’s also important to ensure this process isn’t bureaucratic – overall, it’s about creating a culture of collaboration which fosters a genuine willingness for suppliers to work with you. To support this, you might consider setting up a channel where suppliers can feed back on what’s working and highlight where they may need more support or training. This helps to keep things on track and ensure that if plans need to change, they can do so quickly and with minimal disruption.

By working collaboratively, procurement teams can build a secure, stable supply chain – and one that stands up to the scrutiny of customers, employees, investors, legislation and your wider stakeholders.

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This article was originally published in January 2025 on CPO strategy's website, access here.

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