Small- and medium-sized enterprise (SME) suppliers exist in most companies’ supply chains, particularly at the sub-tier levels, from local farmers in the food and agriculture industry, to small-scale miners in the IT and automotive industries. In addition, companies are increasingly sourcing from SMEs as part of their policies to diversify their supply chains, generate innovation and provide access to new products. Due to lack of financial and technical resources, capabilities, expertise and understanding of sustainability issues SME suppliers can sometimes bring significant risk to a company’s supply chain and to the environment where it operates. Extending corporate sustainability strategies through the supply chain requires commitment and a growing number of Global Compact participants are stepping up their efforts to support their suppliers in meeting sustainability standards.
Companies should encourage their SME suppliers to join and participate actively in the Global Compact and its Local Networks around the world. Local Networks have a lot of useful resources and strategies for implementing sustainability and the Global Compact’s Ten Principles. They create opportunities for multi-stakeholder engagement and collective action, and deepen the learning experience of all participants through activities and events to promote action in support of UN goals. Companies can also save costs on educating their suppliers on sustainability by promoting it collectively with other companies, for example through the Local Networks. Some companies have asked suppliers to join the Global Compact as a condition of being their supplier. An important next step would be to check that the supplier remains an active participant by submitting their annual communication on progress (COP) to meet Global Compact requirements. The Global Compact offers a basic template for submitting the COP, which SMEs with limited resources have benefitted from.
Ensure that company practices do not make it harder for suppliers to meet sustainability requirements. For instance, companies should provide suppliers with sufficient time and resources to satisfy orders in a way that meets sustainability requirements and expectations rather than setting targets that might prompt suppliers to cut corners, e.g. by exceeding overtime limits or outsourcing to unauthorized sub-contractors. Procurers within a company could also award suppliers who are or work with SMEs. Additionally, it is important to remember that companies should encourage SMEs to improve their sustainability standards and that suppliers should not lower their standards in order to engage with SMEs.