In today’s business landscape, companies are eager to show off their eco-friendly materials, cut down on single-use plastics and commit to carbon neutrality. Sustainability demands more than superficial changes, however, to adequately respond to investor, consumer and regulatory pressures. It requires a deep examination of the entire supply chain, particularly the factories that underpin it.
Factories are often the least transparent part of a supply chain, despite being central to the production process. According to McKinsey, more than 80 percent of a product’s greenhouse gas emissions and more than 90 percent of its biodiversity impact originate from its supply chain. Concerningly, many companies still struggle with visibility into their suppliers’ operations. A recent survey revealed that nearly 50 percent of businesses feel they are either “struggling” or “not great” at digitizing their supply chain, with morethan half lacking insight into their upstream activities.
Investor Pressure: Beyond Compliance to Accountability
Investor expectations are beginning to shift significantly. More than 77 percent of individual investors globally are seeking companies that not only offer market-rate returns, but also demonstrate a commitment to positive social and environmental impacts. This shift isn’t just a trend; it reflects a fundamental realignment towards responsible investing. Activist shareholders are increasingly holding companies accountable for human rights abuses within their supply chains. Earlier this year, a Business of Fashion article detailed how shareholders pressured a major corporation to address allegations of human rights violations, showcasing how even industry leaders face backlash, fines, and reputational damage when falling short of expectations.
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Companies that pay attention to the players that they’re including in their supply chains are even rewarded with better financing terms and improved operational performance. A Harvard Business Review study found that firms with strong sustainability practices enjoy a lower cost of capital and enhanced shareholder value, making sustainability as a strategic advantage.
Consumer Pressure: The Demand for Transparency
Consumers are also driving the push for sustainable practices. An IBM survey revealed that 57 percent of consumers are willing to alter their purchasing habits to mitigate environmental harm, and 79 percent consider sustainability important. Brands that fail to offer transparency risk losing consumer trust and loyalty. Conversely, those demonstrating an authentic commitment to ethical practices can forge stronger connections with customers and gain a competitive edge.
Accenture’s research supports this, showing that companies with robust sustainability initiatives often outperform their peers. Approximately 63 percent of consumers prefer to buy from purpose-driven brands, translating into increased sales, higher retention rates, and a more resilient market position.
Regulatory Pressure: Global Legislation Intensifies
Governments worldwide, too, are tightening regulations to enforce sustainability and social compliance. In the U.S., the Uyghur Forced Labor Prevention Act (UFLPA), enacted in 2021, presumes goods from the Xinjiang Uyghur Autonomous Region are made with forced labor unless proven otherwise. This law has already led to the detention of over $1.7 billion worth of shipments in 2024 alone, illustrating the severe risks of non-compliance.
Canada’s 2023 Fighting Against Forced Labor and Child Labor in Supply Chains Act mandates annual reporting on measures to prevent illegal labor practices. In addition, the European Union’s Corporate Sustainability Reporting Directive (CSRD) requires comprehensive reporting on sustainability and social compliance metrics for companies importing into the EU. Non-compliance with these regulations can result in substantial fines and legal repercussions, not to mention negative press.
Conclusion
Investing in supply chain transparency and sustainability is not just a regulatory or ethical mandate—it is a strategic imperative with significant business implications. Sustainable practices can lead to cost savings through improved resource efficiency and reduced waste. In addition, they can drive innovation, as companies developing sustainable technologies and processes often gain a competitive edge and create new market opportunities.
Sustainability strategies must look beyond surface-level initiatives like give-back programs and eco-friendly materials but must take that next step to examine the environmental and social compliance footprints of their factories. By addressing the pressures from investors, consumers, and regulators, companies can forge a more resilient, operationally efficient supply chain that is truly sustainable.
Jane Mosbacher Morris is the founder and CEO of TO THE MARKET, a supply chain software for ethical and sustainable sourcing. She is also the author of Penguin Random House’s “Buy the Change You Want to See: Use Your Purchasing Power to Make the World a Better Place” (2019). Women’s Wear Daily named her one of the most influential ESG leaders in retail.