As your business commits to social and environmental responsibility, it can be hard to know how to package your efforts – whether as CSR, ESG, or sustainability. Today, leaders at many consumer goods companies are wrapping their heads around the fundamentals of this practice and what it can mean for their business.
While the industry is converging around data-driven frameworks for measuring environmental impact, there is less consensus on how to approach social progress. Rarely mentioned even a few years ago, ESG (or a business’s handling of Environmental, Social, and Governance performance) has rapidly gained prominence with the investor community. Especially for brands doing business across the world, your ESG strategy has to focus on global labor standards just as much as it does on environmental impacts.
To advance social progress in the value chain, the industry should improve data collection in these three areas:
1: Standardize audits
It’s difficult to uniformly collect social data across thousands of manufacturing facilities that span dozens of countries. Some companies ask their manufacturers to complete self-assessments, and others work with private auditing groups or verification bodies to confirm factory conditions. Each has its benefits and challenges – studies show that the auditing system can be flawed with inexperienced auditors, yet self-assessments require a high level of trust between you and your manufacturer.
The solution is not one size fits all. Instead, regardless of how you collect data, it’s important to be able to review findings side by side and obtain a holistic view of your value chain. Technology solutions exist to help you view social data across suppliers. For example, Higg recently added a new capability to help companies benchmark their social and labor performance across all factories, or compared against industry peers. This feature helps you illuminate hotspots and prioritize where improvements must be made.
Social data should be used as a launching point into working with manufacturers as true partners to improve labor standards. By taking a collective approach, your business is more likely to deliver lasting impact, too. According to a study from the SSRN, manufacturers are more likely to improve factory working conditions when buyers are willing to work with them collaboratively on solutions.
2: Include workers
Often, facility managers are charged with completing the factory audit, yet the best auditors are the workers themselves. Unfortunately, workers have been known to feel uncomfortable reporting problems to factory auditors, sometimes wary of penalization from management. As a key stakeholder in influencing worker well-being, your business must ensure workers’ voices are heard and fairly represented. In order to obtain a comprehensive view of a manufacturing facility, ensure your workers have the chance to express issues on the ground. Solutions such as setting up mobile phone surveys, hotlines, and off-site interviews are all proven strategies to help workers feel safe about voicing concerns. Your data collection technology should equip you to process these findings.
3: Layer your data
The next step is to weave social impact data into all parts of your value chain. Sourcing and procurement often focus on cutting costs, sometimes squeezing factories to do so. This is a great place to reduce friction.
Procurement is built on rich datasets, tracking how much of a product your company purchases, where it was made, and by whom. By blending this information with social impact data, your businesses will be better equipped to understand which processes might be driving the highest impacts and where you can make improvements.
Collecting data that can be integrated across functions will help you obtain a holistic view of your value chain and implement strategies with worker well-being in mind.
Prioritize the infrastructure
At Higg, we believe in data-driven solutions that help businesses make foundational decisions towards future transformation. Workers and the planet deserve a more equitable, responsible, and sustainable approach to business.
The transition to gathering more comprehensive data is more timely than ever. The consumer goods industry, and especially apparel, must overcome challenges not only with greenwashing, but also with sometimes misinterpreted claims of negative environmental and social impacts. Today’s investors are focused on credible data-backed sustainability programs, and laying the foundational groundwork today will support investor and due diligence requirements in the future.
The key pillars of ESG represent important cornerstones of building a comprehensive impact strategy. To thrive through the evolution of sustainability, the quality, integrity, and completeness of your data is what matters most.