Small suppliers in global supply chains

MNCs are increasingly introducing programs to ensure that their suppliers uphold certain social and environmental standards. Many suppliers who deliver components or finished products – either directly or indirectly – to the MNCs are SMEs. Social and environmental requirements often put additional strains on the limited financial and human resources of such companies. This report presents the findings from a project centred on sustainable supply chain management. It looks into how SMEs in Central and Eastern Europe region deal with social and environmental issues. The report also develops guidelines on how MNCs can work with these SMEs in their sustainable supply chain management programs.
The guidelines have been developed on the basis of findings from 1) a study of the sustainable supply chain management practices of the multinational information technology corporation Hewlett-Packard (HP), 2) on-site assessments of the social and environmental practices of SME suppliers in HP’s supply chain in the Czech Republic, Hungary and Poland, and 3) capability-building activities aimed at the SME suppliers.

The guidelines include: 

• Focusing on management systems as an integrated part of business operations: SMEs may not always have adequate management system processes in place to ensure conformance with applicable laws and regulations, identification and mitigation of risks, and continual improvement. Lack of adequate management system processes may lead to deficiencies within the areas of health & safety, environment, labour and ethics. MNCs can encourage SME suppliers to implement more adequate management systems
  
• Following up on written requirements: SMEs often experience that customers neglect to validate their compliance with social and environmental requirements. Customers thereby risk sending mixed signals regarding their priorities and may spur SMEs to think that social and environmental responsibility is not that important after all. MNCs can emphasise their high priority to social and environmental responsibility by carrying out social and environmental audits to convince the SMEs that their social and environmental performance important for continuation of the business relationship
  
• Continuing the dialogue: Since SMEs often apply a reactive approach to social and environmental responsibility, they have to be continuously reminded of the importance of this responsibility and supported in their efforts. MNCs can maintain momentum at SME suppliers by engaging in continuous dialogue – e.g. using audits as a platform – whereby the SMEs can be constantly reminded of the customers’ expectations and receive guidance on how to correct deficiencies
  
• Engaging in industry-wide initiatives: SMEs may experience that customers apply individual codes of conduct, which increases their workload and leaves them confused about which requirements to prioritise. MNCs can reduce the workload and confusion among SME suppliers and increase their overall leverage vis-à-vis the suppliers by engaging in industry-wide initiatives with joint codes of conduct thereby presenting their common suppliers with only one set of requirements to prioritise