How supply chain transparency can improve decision-making

By Matt Dallisson, 23/06/2020

Faced with major disruption events, decision makers need to get their heads around the why and when to act (the reaction) before working out how best to mitigate the impacts (the response). The speed of reaction and the efficacy of response will decide the ultimate outcomes for people and the environment.

With COVID-19, this process has happened at alarming speed, although there are still variations on a country by country basis. Nations have reacted at their own pace and found different responses to the global crisis. Only when the storm passes, are we likely to understand which leaders, scientists and organisations have made the best calls.

One of the big reasons for this inertia is visibility – or lack of it. There simply isn’t enough accountability and data transparency to show how best to improve systems. Too often, leaders are flying blind. Any change of direction feels risky, especially if it means a drastic break with the past. CEOs are nervous of a shareholder backlash. Premiers forget the demands for action they made on the campaign trail.

Returning to COVID-19, it’s interesting to note how quickly politicians have come under fire for a perceived lack of clarity around movement of people, medical supply chains for equipment such as ventilators and protective gear, and testing for frontline caregivers. Conversely, South Korea has been singled out for its ability to contain the outbreak with the use of big data and smart technology. When a cure or vaccine becomes available, the ability to reach vulnerable people will again provide a test of national data systems.

In recent years, financial regulation has provided a catalyst for change across different industries. One of Mark Carney’s legacies as the Governor of the Bank of England was his support for the Task Force on Climate-related Financial Disclosures (TCFD). This set of guidance, instigated by the G20, demands that financial institutions account and disclose climate risks in their portfolios. As a vocal proponent, Carney was issuing a challenge to the financial sector to accelerate the transition to net zero.

In recent years, we’ve seen the shift from Know Your Customer (KYC) to Know Your Business (KYB), as banks have become more responsible for the legitimacy of their account holders. Could the next step become KYO – Know Your Object – whereby businesses must reveal the lifetime story of any products and materials that pass through their books? Rather than degrees of separation along the supply chain, all stakeholders would be connected by traceable information – and therefore accountable for each other’s actions.

It’s not that long ago that people were happy to be defined by the bank card in their wallet, the car in their driveway and the watch on their wrist. Working for the same company or voting for the same party all your life was a badge of honour. Nowadays, society asks different questions. We’re more aware, restless and demanding.

Social currency is increasingly impacting the bottom line of companies. Customers and voters are more concerned about stakeholder value (including the planet we live on) than shareholder profit. In recent years, across many industries, we have seen declining trust in major institutions that were the custodians of trust for so long. Organizations that can show themselves to be trustworthy are therefore pushing against an open door.

Time will tell if the surge in community spirit during the COVID-19 outbreak will cause brands and leaders to re-evaluate their position in society. Could this human tragedy bring people together across the world – or will it cause nations to retreat behind their borders? Has the enforced slowdown in trade offered a window of opportunity to recalibrate – or will it prompt global supply chains to become more complex than ever?

In today’s global marketplace, all sectors have entered an era of transition. COVID-19 brings acute disruption, but there are other chronic disruptions at play, whether digital transformation, climate change or globalization. While financial stability will still depend on traditional drivers such as cost effectiveness, efficiency and high performance, the need to work in harmony with the environment and local communities will prove increasingly impactful on the bottom line. Natural and human capital will continue to rise up the agenda, in line with consumer and shareholder expectations.

How long can businesses afford to operate in spite of the world around them? To succeed, they must bring the world with them on the same journey. Business resilience and socio-environmental resilience are becoming inextricably linked. Considering and appreciating wider stakeholders must become integral to the reaction-response process.

As the economist Azeem Azhar argues in his Exponential View, the world can’t afford to simplify any recession within a two-dimensional graph of time and value. We need a Z axis to capture the detail of change – the how (and the where and the who, for that matter). This new landscape will throw up opportunities, especially for relevant start-ups that are already well-positioned to take advantage, as well as those resilient companies with the cash flow to pivot.

In times of uncertainty, being forewarned is forearmed. Those decision makers with the most relevant information will be better equipped to make the right calls under pressure. Again, that’s where transparent provenance data can help to pre-risk the critical situations of tomorrow. It’s often said that the smartest way to deal with a risk is to avoid it in the first place. Ever more knowledge in the world is a good place to start.

This content was originally published here.