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How to Ensure Your Supply Chain Is Ethical Enough for Gen Z

By Scott Mars

A new generation of shoppers is placing emphasis on buying ethically sourced goods.

According to a new report on consumer trends from First Insight, 62% of Generation Z prefer to buy from sustainable brands—a number echoed by Millennials. Moreover, a majority of Generation Z (54%) say they are willing to spend 10% more on products to ensure they are buying sustainable goods, and 50% of Millennials say the same.

For retail and CPG organizations, living up to these expectations can be difficult due to the global nature of supply chains, not to mention the very nature of a company's relationship with its suppliers. Retailers and CPG brands want to ensure their suppliers comply with standards and contractual commitments around environmental, social, and governance (ESG) practices. Suppliers similarly want to prove that they comply but do not want to expose the details of their subcontracts within the supply chain.

Thankfully, new technologies exist today that can resolve these traditional roadblocks to supply chain transparency.

Advanced contract lifecycle management (CLM) software leveraging capabilities like blockchain helps companies track and enforce sustainable practices in their supply chain and can be a differentiator for companies trying to appeal to the ethically- or sustainability-minded customer.

CLM and More Ethical Supply Chains

Contracts can be a critical element in enforcing ethical practices across operations. They contain crucial business information that defines what a company buys and on what terms. By digitizing and structuring contract information, then connecting it to operational systems across the supply chain with suppliers, distributors, wholesalers, and customers, as well as third-party systems like Dun & Bradstreet—retailers can actively monitor compliance after a contract is executed.

At Icertis, we call this ability to ensure that the intent of every contract is fully realized contract intelligence.

The power of contract intelligence is further enhanced with advanced technologies like AI and blockchain, as evidenced by Icertis' proof of concept initiative with Mercedes-Benz.

Powered by blockchain technology, the Icertis/Mercedes-Benz partnership leverages smart contracts to ensure global sourcing and contracting practices adhere to Mercedes-Benz's strict requirements for working conditions, human rights, environmental protection, safety, business ethics, and compliance, without compromising contract confidentiality. Mercedes-Benz Cars and its suppliers will place their compliance terms on the blockchain, ensuring that the required terms are present in all contracts constituting the supply chain. This ensures the tracking of commitments across suppliers, enabling a new level of commercial collaboration, visibility, and accountability.

In addition, the Icertis Blockchain Framework allows participants the option to leverage Icertis' AI capabilities to automatically verify the contractual obligations around agreed terms, such as sustainability. The technology can also be used to enforce compliance requirements like data privacy (including the GDPR), information security, the International Traffic in Arms Regulations (ITAR), the Foreign Corrupt Practices Act (FCPA), and other regulations.

This transparency is critical for retail and CPG companies. Their brands are on the line with every item they source in an age when ethics and sustainability are premiums valued by the consumer. For retailers, supply chain transparency means opening up visibility to customers so they can understand not just what products are available for purchase through which channels (in-store, pickup, delivery), but where products were sourced from, how they were produced, and their impact on sustainability. With supply chain transparency, customers can be confident that merchandise is ethically sourced and conforms to their beliefs on sustainability, animal treatment, carbon neutrality, etc.

As Microsoft states in a 2021 retail report: "Customers expect greater inventory transparency and accessibility, regardless of how and where they choose to shop. They seek personalized service and experience delivered by knowledgeable associates, and they're increasingly willing to share data to receive it. Purpose-led practices, particularly around sustainability, continue to impact purchasing decisions and long-term loyalty."

If supply chain diversity is all about building the right portfolio of suppliers, supply chain transparency is all about understanding in real time how that supply chain is performing—all the way up through multi-tier supply chains and down to the point of purchase.

How Contract Intelligence Can Help

The next generation of shoppers arrive at the market with extremely high expectations around sustainability and ethical sourcing, and they are willing to vote with their dollars for products and vendors that live up to their values. Retailers and their manufacturing/CPG partners must rethink their approach to business and explore new technologies that provide them the supply chain transparency they need to meet these new demands.

Contract intelligence empowers retailers and all their partners in the supply chain, from manufacturers to farmers, to drive transparency across their supply chain and differentiate themselves in the market.

For details on what a diverse and transparent supply chain looks like, download our free eBook, Supply Chain Diversity and Transparency: The New Differentiators for Retail.