An analysis of disclosure of supply chain sustainability by Australia's biggest companies shows considerable variability between and within industry sectors. Paula Wallace provides a snapshot.

Supply chain impacts are poorly disclosed to the public, reveals an assessment of disclosure practices among Australia's 100 leading listed companies. The top score was just 54 per cent, the average a miserly 14 per cent.

The 'Disclosures on Supply Chain Sustainability' report by the Net Balance Foundation is the latest fruit of a partnership with the Association of Chartered Certified Accountants (ACCA) and the Sustainable Investment Research Institute.

It looks at both the upstream and downstream elements of a company's supply chain, an area of increasing interest to stakeholders ranging from investment analysts to environment groups.

That top average score across environmental and social categories was earned by ANZ. Another 19 companies scored zero across all measurement categories, while 51 firms scored 10 per cent or less.

The sectors with the highest average level of supply chain disclosure were consumer staples, telecommunications and IT, and real estate and Australian Real Estate Investment Trusts (A-REIT).

The consumer staples sector performed well as three of its mainstays, Woolworths, Wesfarmers and Metcash, performed consistently across all categories in the study. The healthcare and consumer discretionary sectors were trailing across all categories.

Net Balance's Mark Lyster said this may reflect the complexity of supply chain sustainability and that, as a result, many companies are yet to shift their reporting focus to look beyond the traditional boundaries of their organisation.

"If you look at a company like Rio Tinto, you look at their response to the GRI... and they openly say that they have not screened their major suppliers from a human rights perspective. It's almost unbelievable in this day and age that a company of that size and impact would not do that," he said, although it has now agreed to do so.

Supply chain complexities
Lyster believes supply chain disclosure will become a critical part of good ESG (environment, social, governance) practice, not just to attract socially aware investors but mainstream investors too.

However, the study revealed some of the complexity of incorporating sustainability within the supply chain. It requires collaboration between different functions of an organisation that may not have previously worked closely together.

Furthermore, there are a variety of guidelines and frameworks for implementing and reporting on different aspects of supply chain sustainability, many of them sector or product specific and few encompassing both upstream and downstream elements.

This is reflected in the Net Balance data, which shows, for example, that retailers of consumer staples are responding to a variety of pressures with both upstream and downstream initiatives.

"The whole social media as a campaigning platform on procurement - it's mainly upstream on social issues and environmental issues – is gaining momentum wherever you go," said Lyster.

"And then on the downstream side there's a lot of market-based approaches... The retailers will drive that more. If you look at Walmart, they're able to offer their customers solutions to live better, smarter etc - like their tagline says."

As customer, investor and shareholder expectations of corporate sustainability increase, corporate reporting will need
to keep abreast of new developments in this area.

"So I think there are going to be a lot of market-based solutions, but government equally is starting to lift its game," said Lyster.

He was amazed to see a section in last year's Wall Street Reform and Consumer Protection Act in the US that the State Department has a mandate to ensure no products are purchased that have sourced any mineral products from the Democratic Republic of Congo.

It seems likely that the focus on extending sustainability reporting beyond an organisation's boundaries will continue to grow in importance, especially as the greatest sustainability impacts for many companies are not in their own operations but within their supply chain.

"As a result of this, many companies will need to dedicate greater resources both to increasing efforts to improve supply chain sustainability and then to reporting on those efforts," the report stated.