What’s Your Strategy for Supply Chain Disclosure?

We live in an era in which many organizations operate highly complex and globalized supply chains. While these supply chains are now required to be lean, agile, and sustainable, they are also the focus of growing attention from a variety of external stakeholders seeking information that includes and frequently exceeds what the company is legally obliged to disclose. (See “About the Research.”) However, many companies have limited visibility of their supply chain information, have a poor understanding of their capabilities for capturing and reporting this information, and have not overtly considered their supply chain information disclosure strategy.

In this article, we discuss the pressures on companies to disclose supply chain information, the drivers and impediments to supply chain disclosure, and the types of supply chain information typically made available to the public. Finally, we identify the broad disclosure strategies companies can use to release supply chain information and offer managers guidance on designing the optimal disclosure strategy for their company.

Pressures to Disclose Supply Chain Information

To understand how best to strategically manage public supply chain information disclosure, it is important that managers appreciate the diverse forces and actors driving and enabling this trend. Aside from internal governance and risk concerns, external pressure has come from government regulations, best practices of peers, and changing expectations from salient stakeholder groups such as nongovernmental organizations.

Recent examples of new regulatory pressure in the United States include the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act and the California Transparency in Supply Chains Act of 2010; in Europe, examples include the Restriction of Hazardous Substances Directive and the Registration, Evaluation, Authorisation, and Restriction of Chemicals regulation. At the same time, leading companies in many industries are shifting the boundaries of supply chain information disclosure. We have seen this in the apparel and electronics industries, with companies such as Nike Inc. leading the field in supply chain information disclosure and other companies following their lead. Once a brand leader begins to open its supply chain to public scrutiny, it is difficult for others in the industry to resist without a good commercial reason.