Today, leading companies understand that they must look beyond their own operations when assessing and addressing their environmental, social, and governance (ESG) impacts. To deliver maximum business and social returns, they should consider and incorporate their supply chains when developing corporate citizenship programs.
Those that do are presented with the opportunity to address inefficiencies and risks—many of which could have severe ramifications to a firm’s reputation, as research finds that consumers are likely to hold a firm responsible for unsustainable activity regardless of where it occurs within the supply chain. A 2014 study finds that, while the severity of the incident increases backlash, the relationship the supplier has to the firm (direct vs. indirect) and the importance of the supplied product in no way mediates consumer anger.[i] That means that the behaviors of even a supplier that makes a negligible part of a product could pose a serious threat to company reputation and profit.