Idea in Brief

The Problem

Many multinational corporations have committed themselves to using suppliers with sustainable social and environmental practices, but suppliers—especially those low in the supply chain—often don’t comply with standards. This poses serious financial, social, and environmental risks.

The Research

The authors studied the supply networks of three MNCs considered to be sustainability leaders. They discovered a set of best practices—but also saw how difficult it can be to enforce standards.

The Solution

Awareness is key. Companies should consider adopting the best practices featured in this article, such as establishing long-term sustainability goals and including lower-tier suppliers in an overall sustainability strategy.

In recent years a rising number of multinational corporations have pledged to work only with suppliers that adhere to social and environmental standards. Typically, these MNCs expect their first-tier suppliers to comply with those standards, and they ask that those suppliers in turn ask for compliance from their suppliers—who ideally ask the same from their suppliers. And so on. The aim is to create a cascade of sustainable practices that flows smoothly throughout the supply chain, or, as we prefer to call it, the supply network.

A version of this article appeared in the March–April 2020 issue of Harvard Business Review.