《供应链管理 Supply Chain Management》课程教学资源（研讨资料）What’s Your Strategy for Supply Chain Disclosure?

MITSloan Management Review What's Your Strategy for Supply Chain Disclosure? WINTER 2016 Thanks to social media and an increasing flood of data,the capacity to generate causes and controversies almost instantly has become the new norm in today's "super-transparent society."Most business leaders have not yet come to grips with the new reality-and what it means for their organizations. Donna Marshall Lucy McCarthy Paul McGrath Fiona Harrigan Vol.57,No.2 Reprint#57219 http://mitsmr.com/1NIH2w0

WINTER 2016 Donna Marshall Lucy McCarthy Paul McGrath Fiona Harrigan What’s Your Strategy for Supply Chain Disclosure? Thanks to social media and an increasing flood of data, the capacity to generate causes and controversies almost instantly has become the new norm in today’s “super-transparent society.” Most business leaders have not yet come to grips with the new reality — and what it means for their organizations. Vol. 57, No. 2 Reprint #57219 http://mitsmr.com/1NlH2w0

THE AGE OF SUPER-TRANSPARENCY:SUPPLY CHAINS What's Your Strategy for Supply Chain Disclosure? THE LEADING With pressures to increase public disclosure of supply chain QUESTION information mounting,executives need to appreciate the diverse How much information forces and actors driving and enabling this trend-and learn should a com- how to cope with them. pany disclose BY DONNA MARSHALL,LUCY MCCARTHY,PAUL MCGRATH,AND FIONA HARRIGAN about its supply chain? FINDINGS The demands for transparency in WE LIVE IN AN ERA in which many organizations operate highly complex and globalized supply chain infor- mation are growing supply chains.While these supply chains are now required to be lean,agile,and sustainable,they are Once a brand leader also the focus of growing attention from a variety of external stakeholders seeking information that opens up its supply chain to public includes and frequently exceeds what the company is legally obliged to disclose.(See"About the scrutiny,it's difficult for others in the Research,"p.38.)However,many companies have limited visibility of their supply chain informa- industry to have a tion,have a poor understanding of their capabilities for capturing and reporting this information, different position. and have not overtly considered their supply chain information disclosure strategy. Companies should anticipate the In this article,we discuss the pressures on companies to disclose supply chain information,the information de- mands of external drivers and impediments to supply chain disclosure,and the types of supply chain information stakeholders. PLEASE NOTE THAT GRAY AREAS REFLECT ARTWORK THAT HAS BEEN INTENTIONALLY REMOVED. WINTER 2016 MIT SLOAN MANAGEMENT REVIEW 37 THE SUBSTANTIVE CONTENT OF THE ARTICLE APPEARS AS ORIGINALLY PUBLISHED

WINTER 2016 MIT SLOAN MANAGEMENT REVIEW 37 WE LIVE IN AN ERA in which many organizations operate highly complex and globalized supply chains. While these supply chains are now required to be lean, agile, and sustainable, they are also the focus of growing attention from a variety of external stakeholders seeking information that includes and frequently exceeds what the company is legally obliged to disclose. (See “About the Research,” p. 38.) However, many companies have limited visibility of their supply chain informa￾tion, have a poor understanding of their capabilities for capturing and reporting this information, and have not overtly considered their supply chain information disclosure strategy. In this article, we discuss the pressures on companies to disclose supply chain information, the drivers and impediments to supply chain disclosure, and the types of supply chain information THE LEADING QUESTION How much information should a com- pany disclose about its supply chain? FINDINGS The demands for transparency in supply chain infor￾mation are growing. Once a brand leader opens up its supply chain to public scrutiny, it’s difficult for others in the industry to have a different position. Companies should anticipate the information de￾mands of external stakeholders. What’s Your Strategy for Supply Chain Disclosure? With pressures to increase public disclosure of supply chain information mounting, executives need to appreciate the diverse forces and actors driving and enabling this trend — and learn how to cope with them. BY DONNA MARSHALL, LUCY MCCARTHY, PAUL MCGRATH, AND FIONA HARRIGAN THE AGE OF SUPER-TRANSPARENCY: SUPPLY CHAINS PLEASE NOTE THAT GRAY AREAS REFLECT ARTWORK THAT HAS BEEN INTENTIONALLY REMOVED. THE SUBSTANTIVE CONTENT OF THE ARTICLE APPEARS AS ORIGINALLY PUBLISHED

THE AGE OF SUPER-TRANSPARENCY:SUPPLY CHAINS typically made available to the public.Finally,we Pressure also comes from what we term"critical identify the broad disclosure strategies companies events."Such events-for example,the 2013 Rana can use to release supply chain information and Plaza garment factory collapse in Bangladesh,in offer managers guidance on designing the optimal which more than 1,000 people died-often act as disclosure strategy for their company. tipping points,bringing about a fundamental shift in public opinion and major changes in industry Pressures to Disclose disclosure practice.NGOs and activist groups can Supply Chain Information play a critical role in pushing this process.Through To understand how best to strategically manage effective use of traditional and social media,they public supply chain information disclosure,it is undertake sophisticated media campaigns to ex- important that managers appreciate the diverse pose poor supply chain practices.The campaigns(a forces and actors driving and enabling this trend. good example was global environmental organiza- Aside from internal governance and risk concerns, tion Greenpeace's campaign against Nestle S.A.'s external pressure has come from government regu- palm oil supplier's deforestation practices in 2010) lations,best practices of peers,and changing can have potentially serious implications for brand expectations from salient stakeholder groups such reputation. as nongovernmental organizations. Recent examples of new regulatory pressure in Enablers and Barriers the United States include the 2010 Dodd-Frank to Transparency Wall Street Reform and Consumer Protection Act With pressures to increase public disclosure of sup- and the California Transparency in Supply Chains ply chain information mounting,key enablers and Act of 2010;in Europe,examples include the Re- barriers will determine the extent to which a com- striction of Hazardous Substances Directive and pany can effectively respond to the demands.The the Registration,Evaluation,Authorisation,and adoption of new information and communication Restriction of Chemicals regulation.At the same technologies,particularly in the areas of tracking time,leading companies in many industries are and tracing,such as radio frequency identification, shifting the boundaries of supply chain informa- has facilitated tremendous transparency potential. tion disclosure.We have seen this in the apparel For example,Switcher SA,a Swiss clothing com- and electronics industries,with companies such as pany,lets customers trace the T-shirt they are Nike Inc.leading the field in supply chain infor- wearing back to every participant in the produc- mation disclosure and other companies following tion process.The information systems can also their lead.Once a brand leader begins to open its facilitate other types of information collection, supply chain to public scrutiny,it is difficult for such as employee welfare and working hours.De- others in the industry to resist without a good spite the potential of these technologies to create commercial reason. almost complete transparency within supply ABOUT THE RESEARCH annual and corporate social responsibility re- fashion,food,and pharmaceuticals)to enable us For this paper,we conducted three levels of re- ports and the relevant content of their websites to explore varying transparency practices across search.First,we did a literature review around to explore what they were saying about supply different industries.The specific cases draw on the topic of supply chain transparency,review chain transparency practices and trends. publicly available information and are used for ing 179 academic articles on the topic.We We also conducted 20 in-depth case studies illustrative purposes rather than as evidence of then set about identifying companies that were (separate from the companies mentioned above) empirical support for the arguments made.The likely to be relatively advanced in their supply of selected exemplars and nonexemplars of sup- identity of the companies in the case studies re chain disclosure practices,choosing the top ply chain transparency practice.In these cases, mains confidential,as required under our research 20 companies by revenue across five selected we focused our interviews on supply chain,pur- protocol and research ethics guidelines.From the industries groupings (electronics,medical chasing,and corporate social responsibility research and associated analysis,we developed devices,fashion,food,and pharmaceuticals). managers.The cases,following a grounded the and,through the empirical case studies,tested using the Forbes Global 2000 list.We undertook ory research design,are representative of five the tools and frameworks presented in this paper a detailed content analysis of the companies' industry sectors (electronics,medical devices, for relevance,validity,and robustness. 38 MIT SLOAN MANAGEMENT REVIEW WINTER 2016 SLOANREVIEW.MIT.EDU

38 MIT SLOAN MANAGEMENT REVIEW WINTER 2016 SLOANREVIEW.MIT.EDU THE AGE OF SUPER-TRANSPARENCY: SUPPLY CHAINS typically made available to the public. Finally, we identify the broad disclosure strategies companies can use to release supply chain information and offer managers guidance on designing the optimal disclosure strategy for their company. Pressures to Disclose Supply Chain Information To understand how best to strategically manage public supply chain information disclosure, it is important that managers appreciate the diverse forces and actors driving and enabling this trend. Aside from internal governance and risk concerns, external pressure has come from government regu￾lations, best practices of peers, and changing expectations from salient stakeholder groups such as nongovernmental organizations. Recent examples of new regulatory pressure in the United States include the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act and the California Transparency in Supply Chains Act of 2010; in Europe, examples include the Re￾striction of Hazardous Substances Directive and the Registration, Evaluation, Authorisation, and Restriction of Chemicals regulation. At the same time, leading companies in many industries are shifting the boundaries of supply chain informa￾tion disclosure. We have seen this in the apparel and electronics industries, with companies such as Nike Inc. leading the field in supply chain infor￾mation disclosure and other companies following their lead. Once a brand leader begins to open its supply chain to public scrutiny, it is difficult for others in the industry to resist without a good commercial reason. Pressure also comes from what we term “critical events.” Such events — for example, the 2013 Rana Plaza garment factory collapse in Bangladesh, in which more than 1,000 people died — often act as tipping points, bringing about a fundamental shift in public opinion and major changes in industry disclosure practice. NGOs and activist groups can play a critical role in pushing this process. Through effective use of traditional and social media, they undertake sophisticated media campaigns to ex￾pose poor supply chain practices. The campaigns (a good example was global environmental organiza￾tion Greenpeace’s campaign against Nestlé S.A.’s palm oil supplier’s deforestation practices in 2010)1 can have potentially serious implications for brand reputation. Enablers and Barriers to Transparency With pressures to increase public disclosure of sup￾ply chain information mounting, key enablers and barriers will determine the extent to which a com￾pany can effectively respond to the demands. The adoption of new information and communication technologies, particularly in the areas of tracking and tracing, such as radio frequency identification, has facilitated tremendous transparency potential. For example, Switcher SA, a Swiss clothing com￾pany, lets customers trace the T-shirt they are wearing back to every participant in the produc￾tion process. The information systems can also facilitate other types of information collection, such as employee welfare and working hours. De￾spite the potential of these technologies to create almost complete transparency within supply ABOUT THE RESEARCH For this paper, we conducted three levels of re￾search. First, we did a literature review around the topic of supply chain transparency, review￾ing 179 academic articles on the topic. We then set about identifying companies that were likely to be relatively advanced in their supply chain disclosure practices, choosing the top 20 companies by revenue across five selected industries groupings (electronics, medical devices, fashion, food, and pharmaceuticals), using the Forbes Global 2000 list. We undertook a detailed content analysis of the companies’ annual and corporate social responsibility re￾ports and the relevant content of their websites to explore what they were saying about supply chain transparency practices and trends. We also conducted 20 in-depth case studies (separate from the companies mentioned above) of selected exemplars and nonexemplars of sup￾ply chain transparency practice. In these cases, we focused our interviews on supply chain, pur￾chasing, and corporate social responsibility managers. The cases, following a grounded the￾ory research design, are representative of five industry sectors (electronics, medical devices, fashion, food, and pharmaceuticals) to enable us to explore varying transparency practices across different industries. The specific cases draw on publicly available information and are used for illustrative purposes rather than as evidence of empirical support for the arguments made. The identity of the companies in the case studies re￾mains confidential, as required under our research protocol and research ethics guidelines. From the research and associated analysis, we developed and, through the empirical case studies, tested the tools and frameworks presented in this paper for relevance, validity, and robustness

A 2013 survey of Australian fashion companies revealed that 93%of the companies surveyed didn't know where their raw materials came from. chains,certain industries,including fashion,often this facilitates tailored data gathering,it can still be have limited knowledge of their supply chains and costly.What's more,it is unlikely to foster a collabor- engage in limited public disclosure.For example,a ative engagement with suppliers and may create an 2013 survey of Australian fashion companies re- ongoing dependency on external experts. vealed that 93%of the companies surveyed didn't Of course,developing one's own data-collecting know where their raw materials came from.2 and audit capabilities,coupled with a collaborative Improved transparency,however,is not without philosophy across the supply chain,offers the its costs,especially in complex,multilevel supply greatest potential for developing a high-quality chains.The cost and effort in setting up,using,and transparency system.However,tools such as real- monitoring a transparent reporting system across a time monitoring,product coding,and serialization complex supply chain can be steep.In our research, will require substantial up-front investment in many people we interviewed commented onaudit both resources and industry collaboration.Once fatigue"associated with the growing level of trans- the investments have been made,companies would parency-related data gathering and reporting.The have substantially improved data capabilities to lack of standardized reporting systems,the absence pursue further transparency and process improve- of a common technology platform,ill-defined ments.Companies exploring or adopting this standards,and a lack of supplier education can also approach,such as the Coca-Cola Co.,tend to pro- pose serious hindrances to companies wishing to vide guidance and assistance to their suppliers to improve their supply chain transparency. help them attain high levels of transparency,thus A 2014 report by Deloitte Consulting LLP3 de- increasing joint competencies and minimizing the scribed a number of approaches companies can use administrative burden while maximizing the qual- to improve their supply chain transparency,which ity of the data transfer. typically involve trade-offs between cost or effort and quality.At the low-cost end of the spectrum, Types of Supply Chain Information companies can gather basic information from their Once a company understands the pressures it faces tier-one direct suppliers using simple solutions such to release supply chain information to the public and as Excel spreadsheets or SMS texting surveys,with is aware of its information-gathering constraints the potential to gradually adopt more sophisticated and capabilities,it must understand the scope of reporting technologies such as product coding and supply chain information available for release.We real-time monitoring tools.A second,more involved identified four common types of supply chain infor- approach requires suppliers to meet externally certi- mation that tend to be publicly disclosed:supply fied accreditations as a precondition for becoming chain membership,provenance,environmental in- part of the supply chain.For example,suppliers formation,and social information. might have to comply with environmental manage- ment standards such as ISO 14000.This approach Supply Chain Membership Releasing information externalizes the cost of audit and compliance,but it on the suppliers that make up the supply chain is is limited in terms of its ability to be tailored to the especially important if suppliers are involved in specific needs of the company.A related,potentially practices that are a risk to the reputation of a com- more expensive approach is to outsource all or part pany.Publicizing basic information within this of the audit function to third-party bodies.Although category will,at a minimum,involve providing SLOANREVIEW.MIT.EDU WINTER 2016 MIT SLOAN MANAGEMENT REVIEW 39

SLOANREVIEW.MIT.EDU WINTER 2016 MIT SLOAN MANAGEMENT REVIEW 39 chains, certain industries, including fashion, often have limited knowledge of their supply chains and engage in limited public disclosure. For example, a 2013 survey of Australian fashion companies re￾vealed that 93% of the companies surveyed didn’t know where their raw materials came from.2 Improved transparency, however, is not without its costs, especially in complex, multilevel supply chains. The cost and effort in setting up, using, and monitoring a transparent reporting system across a complex supply chain can be steep. In our research, many people we interviewed commented on “audit fatigue” associated with the growing level of trans￾parency-related data gathering and reporting. The lack of standardized reporting systems, the absence of a common technology platform, ill-defined standards, and a lack of supplier education can also pose serious hindrances to companies wishing to improve their supply chain transparency. A 2014 report by Deloitte Consulting LLP3 de￾scribed a number of approaches companies can use to improve their supply chain transparency, which typically involve trade-offs between cost or effort and quality. At the low-cost end of the spectrum, companies can gather basic information from their tier-one direct suppliers using simple solutions such as Excel spreadsheets or SMS texting surveys, with the potential to gradually adopt more sophisticated reporting technologies such as product coding and real-time monitoring tools. A second, more involved approach requires suppliers to meet externally certi￾fied accreditations as a precondition for becoming part of the supply chain. For example, suppliers might have to comply with environmental manage￾ment standards such as ISO 14000. This approach externalizes the cost of audit and compliance, but it is limited in terms of its ability to be tailored to the specific needs of the company. A related, potentially more expensive approach is to outsource all or part of the audit function to third-party bodies. Although this facilitates tailored data gathering, it can still be costly. What’s more, it is unlikely to foster a collabor￾ative engagement with suppliers and may create an ongoing dependency on external experts. Of course, developing one’s own data-collecting and audit capabilities, coupled with a collaborative philosophy across the supply chain, offers the greatest potential for developing a high-quality transparency system. However, tools such as real￾time monitoring, product coding, and serialization will require substantial up-front investment in both resources and industry collaboration. Once the investments have been made, companies would have substantially improved data capabilities to pursue further transparency and process improve￾ments. Companies exploring or adopting this approach, such as the Coca-Cola Co., tend to pro￾vide guidance and assistance to their suppliers to help them attain high levels of transparency, thus increasing joint competencies and minimizing the administrative burden while maximizing the qual￾ity of the data transfer. Types of Supply Chain Information Once a company understands the pressures it faces to release supply chain information to the public and is aware of its information-gathering constraints and capabilities, it must understand the scope of supply chain information available for release. We identified four common types of supply chain infor￾mation that tend to be publicly disclosed: supply chain membership, provenance, environmental in￾formation, and social information. Supply Chain Membership Releasing information on the suppliers that make up the supply chain is especially important if suppliers are involved in practices that are a risk to the reputation of a com￾pany. Publicizing basic information within this category will, at a minimum, involve providing A 2013 survey of Australian fashion companies revealed that 93% of the companies surveyed didn’t know where their raw materials came from

THE AGE OF SUPER-TRANSPARENCY:SUPPLY CHAINS names of first-tier direct suppliers.For example,in meet appropriate regulatory standards.For exam- the electronics and fashion industries,many compa- ple,many consumers are unaware that tantalum, nies publish lists of first-tier suppliers,but this is less tungsten,tin,and gold are common elements in common in the food,pharmaceutical,or medical electronic devices and that companies may have devices industries.A growing trend among exemplar sourced them from suppliers in locations where companies is to disclose information on supplier lo- armed gangs profit from their extraction and where cation and also about lower-tier suppliers.Nike,for mining processes are dangerous.Intel Corp.took instance,began to move toward disclosure through- the lead as the first electronics brand to offer mi- out the late 1990s,and in 2005 it became one of the croprocessors made with materials from smelters first companies to reveal a global suppliers list con- validated as conflict-free. taining information on 90%of its suppliers.Now, corporate responsibility information appears on Environmental Information Most corporate re- Nike's main website,and the company reveals a sup- sponsibility reports include a wide range of plier list for its entire product range,including the environmental measures such as carbon and en- name,location,workforce composition,and sub- ergy usage levels,water use,and levels of waste in contracting status of every supplier. the supply chain.For example,Puma SE,the ath- letic footwear and clothing company based in Provenance Information on the materials used in Herzogenaurach,Germany,leads the field in envi- a product,the source location of the material or in- ronmental reporting of its supply chain.Puma gredients,and details on how the material or discloses information on water use,land use,air ingredients were extracted and produced is becom- pollution,and waste from its own operations as ing increasingly common.The point is to ensure well as its lower-tier suppliers,and it publishes an that there are no harmful or hazardous compo- environmental profit-and-loss statement. nents in the finished product and that the materials Social Information Companies may provide details on labor policies,human rights,and social THE SUPPLY CHAIN DISCLOSURE RADAR impacts within the supply chain.Information about This disclosure radar identifies four main categories of supply chain disclosure infor- labor policies may include work hours and holidays, mation and subcategories within them.It allows companies to evaluate their degree of wages and benefits,working conditions,and health transparency within these categories along a 0-100 scale (with 0 signifying no disclo- sure of supply chain information to the public and 100 signifying full disclosure). and safety reports.Human rights reports may in- clude information about child labor,forced labor, Social Society First tier Membership freedom of association,and nondiscrimination. information 100 Social impact information includes anti-corruption Human Supplier rights 0 location policies,impact on local communities,local en- gagement and development programs,and noncompliance with rules and regulations. 40 Labor Lower We have developed a supply chain disclosure rights tier radar that provides a visualization of the four broad categories of supply chain information discussed above and their key subcategories.(See "The Sup- Waste Material ply Chain Disclosure Radar.")This radar is not used intended to capture the full extent of all possible supply chain information gathered by organiza- Material tions.Rather,it is designed as a broad guide for Water location managers to help them categorize and plot their current approach to information gathering and Environmental Energy Material disclosure,and to frame thinking and change in re- information extraction Provenance lation to future disclosure strategies. 40 MIT SLOAN MANAGEMENT REVIEW WINTER 2016 SLOANREVIEW.MIT.EDU

40 MIT SLOAN MANAGEMENT REVIEW WINTER 2016 SLOANREVIEW.MIT.EDU THE AGE OF SUPER-TRANSPARENCY: SUPPLY CHAINS names of first-tier direct suppliers. For example, in the electronics and fashion industries, many compa￾nies publish lists of first-tier suppliers, but this is less common in the food, pharmaceutical, or medical devices industries. A growing trend among exemplar companies is to disclose information on supplier lo￾cation and also about lower-tier suppliers. Nike, for instance, began to move toward disclosure through￾out the late 1990s, and in 2005 it became one of the first companies to reveal a global suppliers list con￾taining information on 90% of its suppliers. Now, corporate responsibility information appears on Nike’s main website, and the company reveals a sup￾plier list for its entire product range, including the name, location, workforce composition, and sub￾contracting status of every supplier.4 Provenance Information on the materials used in a product, the source location of the material or in￾gredients, and details on how the material or ingredients were extracted and produced is becom￾ing increasingly common. The point is to ensure that there are no harmful or hazardous compo￾nents in the finished product and that the materials meet appropriate regulatory standards. For exam￾ple, many consumers are unaware that tantalum, tungsten, tin, and gold are common elements in electronic devices and that companies may have sourced them from suppliers in locations where armed gangs profit from their extraction and where mining processes are dangerous. Intel Corp. took the lead as the first electronics brand to offer mi￾croprocessors made with materials from smelters validated as conflict-free. Environmental Information Most corporate re￾sponsibility reports include a wide range of environmental measures such as carbon and en￾ergy usage levels, water use, and levels of waste in the supply chain. For example, Puma SE, the ath￾letic footwear and clothing company based in Herzogenaurach, Germany, leads the field in envi￾ronmental reporting of its supply chain. Puma discloses information on water use, land use, air pollution, and waste from its own operations as well as its lower-tier suppliers, and it publishes an environmental profit-and-loss statement. Social Information Companies may provide details on labor policies, human rights, and social impacts within the supply chain. Information about labor policies may include work hours and holidays, wages and benefits, working conditions, and health and safety reports. Human rights reports may in￾clude information about child labor, forced labor, freedom of association, and nondiscrimination. Social impact information includes anti-corruption policies, impact on local communities, local en￾gagement and development programs, and noncompliance with rules and regulations. We have developed a supply chain disclosure radar that provides a visualization of the four broad categories of supply chain information discussed above and their key subcategories. (See “The Sup￾ply Chain Disclosure Radar.”) This radar is not intended to capture the full extent of all possible supply chain information gathered by organiza￾tions. Rather, it is designed as a broad guide for managers to help them categorize and plot their current approach to information gathering and disclosure, and to frame thinking and change in re￾lation to future disclosure strategies. THE SUPPLY CHAIN DISCLOSURE RADAR This disclosure radar identifies four main categories of supply chain disclosure infor￾mation and subcategories within them. It allows companies to evaluate their degree of transparency within these categories along a 0-100 scale (with 0 signifying no disclo￾sure of supply chain information to the public and 100 signifying full disclosure). 10 0 20 30 40 50 60 70 80 90 100 First tier Lower tier Material used Material location Material extraction Water Waste Labor rights Human rights Social information Environmental information Provenance Society Membership Energy Supplier location

Selecting a Disclosure Approach A SUPPLY CHAIN TRANSPARENCY MATRIX After identifying the types of information a company This matrix outlines four types of transparency strategies,based on the can disclose,the next challenge is supportingstrategic amount and depth of evaluation and the level of public data disclosure. Managers can use it to describe and reflect on the coherence of their thinking around the level of supply chain information current approach to supply chain transparency. disclosure.Based on our research,we developed a High transparency matrix to frame four typical supply Secret Transparent chain disclosure strategies:transparent,secret,dis- This strategy involves being oper concealment of certain information with supply chain information as a tracting,and withheld.On one axis,companies can from competitors. core competence. Examples:WD-40 and Coca-Cola Example:Nike fully disclosed its select the degree of supply chain disclosure they want. never reveal their secret product supply chain membership and On the other axis,they can show their assessment of formulas. provenance in order to improve intemal competences and satisfy supply chain information:Does the company have a external stakeholders. good grasp of the information in the supply chain, Degree of and if so,is it reported accurately and appropriately? assessment Withheld Distracting (See"A Supply Chain Transparency Matrix.) This is a strategy of nondisclosure, This strategy involves flooding the either intentionally hiding poor public domain with information that Transparent A company following this strategy aims ncymn confuses stakeholders,either intentionally or unintentionally. for maximum public disclosure of all supply chain Example:Suppliers in the prawn Example:BP was awarded Emerald Paintbrush information.This practice typically extends both in- rights information and were Award for greenwashing due to exposed by a media investigation. overemphasizing information ternally through its supply network and externally about its investment in alternative energy sources. into the public domain.Companies committed to LOW transparency tend to regard disclosure as a core com- Low High petence or capability.For example,Patagonia Inc., the Ventura,California-based outdoor apparel com- pany,provides a map of suppliers,indicating which the popular WD-40 lubricating spray provides a materials or processes a supplier is involved with. good example.Although the WD-40 Co.,based in Nike is another company that provides a rich variety San Diego,California,reveals what is not in WD-40 of detailed supply chain information.Tainted in the ("silicone,kerosene,water,wax,graphite,or chloro- 1990s for reports about sweatshop labor and poor fluorocarbons(CFCs)"),it guards its 1953 formula in working conditions in its supply chain,Nike is now a bank vault.The company further protects the for- known for responsible supply chain membership,mula's secrecy by mixing the substance in three provenance,and environmental and social sustain- different cities before passing it on to its manufactur- ability disclosure.Although scrutiny of the company ing partners for production.6 Closely guarded continues,Nike has been cited as a company that formulas also protect the ingredients for Coca- "turned full disclosure into a badge of honor."s Cola,the recipe for Twinkies,and the recipe for KFC fried chicken batter. Secret Companies employing this strategy have a high degree of knowledge about their supply chain Distracting Companies following this strategy re- activities but will not disclose or will disclose very lit- port substantial information to external stakeholders tle information into the public domain.In fact,they but in a manner that is either unwittingly or wittingly may deliberately and selectively conceal supply chain distracting.In the first instance,the company doesn't information,protecting their intellectual property to understand or evaluate what is pertinent to stake- enhance their brand value and,ultimately,competi- holders and the public and instead reports excessively tive advantage.Issues such as new products under on other practices.However,companies will occa- development,unique manufacturing techniques, sionally and deliberately distract stakeholders from sources of supply,recipe composition,technical focusing on questionable practices by flooding the specifications,or simply lists of customers may be public domain with excessive levels of data on self- kept under wraps,as they constitute important stra- selected practices and hiding or downplaying others. tegic information to a competitor.The formula for For example,the practice of"greenwashing,"a SLOANREVIEW.MIT.EDU WINTER 2016 MIT SLOAN MANAGEMENT REVIEW 41

SLOANREVIEW.MIT.EDU WINTER 2016 MIT SLOAN MANAGEMENT REVIEW 41 Selecting a Disclosure Approach After identifying the types of information a company can disclose, the next challenge is supporting strategic thinking around the level of supply chain information disclosure. Based on our research, we developed a transparency matrix to frame four typical supply chain disclosure strategies: transparent, secret, dis￾tracting, and withheld. On one axis, companies can select the degree of supply chain disclosure they want. On the other axis, they can show their assessment of supply chain information: Does the company have a good grasp of the information in the supply chain, and if so, is it reported accurately and appropriately? (See “A Supply Chain Transparency Matrix.”) Transparent A company following this strategy aims for maximum public disclosure of all supply chain information. This practice typically extends both in￾ternally through its supply network and externally into the public domain. Companies committed to transparency tend to regard disclosure as a core com￾petence or capability. For example, Patagonia Inc., the Ventura, California-based outdoor apparel com￾pany, provides a map of suppliers, indicating which materials or processes a supplier is involved with. Nike is another company that provides a rich variety of detailed supply chain information. Tainted in the 1990s for reports about sweatshop labor and poor working conditions in its supply chain, Nike is now known for responsible supply chain membership, provenance, and environmental and social sustain￾ability disclosure. Although scrutiny of the company continues, Nike has been cited as a company that “turned full disclosure into a badge of honor.”5 Secret Companies employing this strategy have a high degree of knowledge about their supply chain activities but will not disclose or will disclose very lit￾tle information into the public domain. In fact, they may deliberately and selectively conceal supply chain information, protecting their intellectual property to enhance their brand value and, ultimately, competi￾tive advantage. Issues such as new products under development, unique manufacturing techniques, sources of supply, recipe composition, technical specifications, or simply lists of customers may be kept under wraps, as they constitute important stra￾tegic information to a competitor. The formula for the popular WD-40 lubricating spray provides a good example. Although the WD-40 Co., based in San Diego, California, reveals what is not in WD-40 (“silicone, kerosene, water, wax, graphite, or chloro￾fluorocarbons (CFCs)”), it guards its 1953 formula in a bank vault. The company further protects the for￾mula’s secrecy by mixing the substance in three different cities before passing it on to its manufactur￾ing partners for production.6 Closely guarded formulas also protect the ingredients for Coca￾Cola, the recipe for Twinkies, and the recipe for KFC fried chicken batter. Distracting Companies following this strategy re￾port substantial information to external stakeholders but in a manner that is either unwittingly or wittingly distracting. In the first instance, the company doesn’t understand or evaluate what is pertinent to stake￾holders and the public and instead reports excessively on other practices. However, companies will occa￾sionally and deliberately distract stakeholders from focusing on questionable practices by flooding the public domain with excessive levels of data on self￾selected practices and hiding or downplaying others. For example, the practice of “greenwashing,” a A SUPPLY CHAIN TRANSPARENCY MATRIX This matrix outlines four types of transparency strategies, based on the amount and depth of evaluation and the level of public data disclosure. Managers can use it to describe and reflect on the coherence of their current approach to supply chain transparency. Secret This strategy involves deliberate concealment of certain information from competitors. Examples: WD-40 and Coca-Cola never reveal their secret product formulas. Transparent This strategy involves being open with supply chain information as a core competence. Example: Nike fully disclosed its supply chain membership and provenance in order to improve internal competences and satisfy external stakeholders. Withheld This is a strategy of nondisclosure, either intentionally hiding poor practices or failing to collect and disclose necessary information. Example: Suppliers in the prawn industry failed to disclose labor rights information and were exposed by a media investigation. Distracting This strategy involves flooding the public domain with information that confuses stakeholders, either intentionally or unintentionally. Example: BP was awarded Greenpeace’s Emerald Paintbrush Award for greenwashing due to overemphasizing information about its investment in alternative energy sources. Degree of assessment Degree of disclosure Low Low High High

THE AGE OF SUPER-TRANSPARENCY:SUPPLY CHAINS marketing tactic some companies use to present buys fishmeal from suppliers that"own,operate or themselves as environmentally friendly even if their buy from fishing boats manned with slaves."7 practices are not,falls into this category.Greenpeace Our transparency matrix helps managers clarify highlighted this practice in 2008,when it awarded its their current approach to supply chain information Emerald Paintbrush Award to BP plc,which focused disclosure and helps integrate the company's ap- its marketing campaign on green energy even though proach to disclosure with its core business strategy. its investment in solar and wind energy at the time Although we don't think there is an optimal one- represented only about 4%of its total investments. size-fits-all approach that suits every company, companies need to undertake an adequate level of Withheld Companies using this approach withhold assessment to minimize their exposure to brand risk. supply chain information from the public.They have not disclosed supply chain information either be- Determining What to Disclose cause they have not collected the data about Once managers understand the pressures for in- dangerous practices in their supply chain(they are creased transparency and identify what their unknowingly withholding information)or they have transparency strategy is,they need to determine the intentionally avoided releasing data that would reveal information they will disclose.This brings to the harmful practices in the supply chain(knowingly fore decisions about how reactive or proactive the withholding information).In terms of supply chain company wants to be in this area.Ideally,a com- membership,it is vital to have information about pany should anticipate the information demands suppliers used for high-risk tasks(such as environ- of its external stakeholders ahead of time in order mentally damaging material extraction)and those to determine the materiality of the information to with tainted records (such as reported human-rights the company.In our view,reactive responses reduce abuses).A good example is the 2014 investigation by the time for planning,participation,and experi- The Guardian that found that a large Thai prawn mentation and limit opportunities for early-mover farmer supplying some very large global retailers competitive advantage. We developed another matrix for categorizing supply chain information disclosure,one that bal- A SUPPLY CHAIN DISCLOSURE MATRIX ances the value to the company and the associated This matrix helps companies identify distinct categories of supply chain information pertinent in their particular supply chain and guides them in amount of risk to the supply chain.It describes strat- developing their disclosure strategy. egies for critical,strategic,optional,and noncritical High disclosure.(See"A Supply Chain Disclosure Matrix.") Strategic Critical Thecritical"category involves information that is This strategy can be employed when This strategy is used when an an information category is not high information category impacts both both high risk and high value to the company.Com- risk but can lead to enhanced brand value and reputation and must reputation. be disclosed to the public domain. panies taking advantage of this approach recognize Example:Disclosing the fact that Example:As child labor is an that there are issues in their supply chain that,if left there are organic ingredients in emotve issue.steos tor food,beauty,and fashion monitoring and eradicating this unaddressed and undisclosed,are likely to result in products can provide differentia- practice in high-risk areas must tion for products and enhance be disclosed. pressure from NGOs,the media,and eventually end marketing capabilities. Value to the customers,resulting in damage to brand value.(This Company Noncritical Optional might include information relating to unsafe,poor- Companies can use this strategy Companies can choose not to quality,contaminated products;bribery and when information is neither disclose information if the necessary nor demanded. inforation doesnoimpactthend corruption in the supply chain;worker suicides;or customer and is only an intemal Example:Child labor statistics. major environmental degradation.) although relevant in high-risk concem. areas,are less relevant in Example:Faults or quality issues in A second category involves information that's countries where child labor the internal supply chain need not regulations are strongly enforced. be disclosed if they were caught low risk in the supply chain but has high brand value and did not affect the end to the company.We call this type of information customer Low "strategic."Although stakeholders may not demand the information,by releasing it,management hopes Risk in the High Supply Chain to achieve product differentiation and enhance the 42 MIT SLOAN MANAGEMENT REVIEW WINTER 2016 SLOANREVIEW.MIT.EDU

42 MIT SLOAN MANAGEMENT REVIEW WINTER 2016 SLOANREVIEW.MIT.EDU THE AGE OF SUPER-TRANSPARENCY: SUPPLY CHAINS marketing tactic some companies use to present themselves as environmentally friendly even if their practices are not, falls into this category. Greenpeace highlighted this practice in 2008, when it awarded its Emerald Paintbrush Award to BP plc, which focused its marketing campaign on green energy even though its investment in solar and wind energy at the time represented only about 4% of its total investments. Withheld Companies using this approach withhold supply chain information from the public. They have not disclosed supply chain information either be￾cause they have not collected the data about dangerous practices in their supply chain (they are unknowingly withholding information) or they have intentionally avoided releasing data that would reveal harmful practices in the supply chain (knowingly withholding information). In terms of supply chain membership, it is vital to have information about suppliers used for high-risk tasks (such as environ￾mentally damaging material extraction) and those with tainted records (such as reported human-rights abuses). A good example is the 2014 investigation by The Guardian that found that a large Thai prawn farmer supplying some very large global retailers buys fishmeal from suppliers that “own, operate or buy from fishing boats manned with slaves.”7 Our transparency matrix helps managers clarify their current approach to supply chain information disclosure and helps integrate the company’s ap￾proach to disclosure with its core business strategy. Although we don’t think there is an optimal one￾size-fits-all approach that suits every company, companies need to undertake an adequate level of assessment to minimize their exposure to brand risk. Determining What to Disclose Once managers understand the pressures for in￾creased transparency and identify what their transparency strategy is, they need to determine the information they will disclose. This brings to the fore decisions about how reactive or proactive the company wants to be in this area. Ideally, a com￾pany should anticipate the information demands of its external stakeholders ahead of time in order to determine the materiality of the information to the company. In our view, reactive responses reduce the time for planning, participation, and experi￾mentation and limit opportunities for early-mover competitive advantage. We developed another matrix for categorizing supply chain information disclosure, one that bal￾ances the value to the company and the associated amount of risk to the supply chain. It describes strat￾egies for critical, strategic, optional, and noncritical disclosure. (See “A Supply Chain Disclosure Matrix.”) The “critical” category involves information that is both high risk and high value to the company. Com￾panies taking advantage of this approach recognize that there are issues in their supply chain that, if left unaddressed and undisclosed, are likely to result in pressure from NGOs, the media, and eventually end customers, resulting in damage to brand value. (This might include information relating to unsafe, poor￾quality, contaminated products; bribery and corruption in the supply chain; worker suicides; or major environmental degradation.) A second category involves information that’s low risk in the supply chain but has high brand value to the company. We call this type of information “strategic.” Although stakeholders may not demand the information, by releasing it, management hopes to achieve product differentiation and enhance the A SUPPLY CHAIN DISCLOSURE MATRIX This matrix helps companies identify distinct categories of supply chain information pertinent in their particular supply chain and guides them in developing their disclosure strategy. Strategic This strategy can be employed when an information category is not high risk but can lead to enhanced reputation. Example: Disclosing the fact that there are organic ingredients in food, beauty, and fashion products can provide differentia￾tion for products and enhance marketing capabilities. Critical This strategy is used when an information category impacts both brand value and reputation and must be disclosed to the public domain. Example: As child labor is an emotive issue, steps for monitoring and eradicating this practice in high-risk areas must be disclosed. Noncritical Companies can use this strategy when information is neither necessary nor demanded. Example: Child labor statistics, although relevant in high-risk areas, are less relevant in countries where child labor regulations are strongly enforced. Optional Companies can choose not to disclose information if the information does not impact the end customer and is only an internal concern. Example: Faults or quality issues in the internal supply chain need not be disclosed if they were caught and did not affect the end customer. Value to the Company Risk in the Supply Chain Low Low High High

Reactive responses reduce the time for planning,participation, and experimentation and limit opportunities for early-mover competitive advantage. reputation of the company.In the food or beauty Inc.,using publicly disclosed supply chain infor- products industry,this might include providing mation to compare the years 2009 and 2014.When contextual information to consumers about organic Tim Cook took over as CEO in 2011,Apple had ingredients;it would allow consumers to easily dis- been in the headlines following reports of suicides cern the benefits of choosing one company's product at Taiwanese supplier Hon Hai Precision Industry over that of a competitor. Co.Ltd.(known as Foxconn).Cook had to respond We refer to information that has low value to the to the public outcry and act to protect Apple's repu- company but where the risk in the supply chain is tation and ensure that workers throughout Apple's high as"optional."This means that the information supply chain were treated fairly and in line with does not impact the end customer and is primarily basic human rights.The events at Foxconn pushed an internal supply chain concern.An example might Apple to open up supply chain details to the public, include a potential problem that was averted(for ex- moving it from an extremely secretive supply chain ample,low-qualityingredients in thepharmaceutical to a more open one.s supply chain that were removed during quality con- Apple did not release specific information on trol screening and never affected the end product). the number of suppliers in its supply chain for The final category in this matrix is information 2009;it did not publicly disclose information re- that is both low value to the company and low risk to lated to any areas of membership,provenance,or thesupply chain,with negligible effect on brand value. environmental sustainability.Its 2009 reportpro- We call it"noncritical."Examples might include infor- vided results for 83 social sustainability audits.The mation on child labor in countries where the child company's 2015 report,relating to 2014,refers to welfare laws are clear and actively enforced.Disclosure 633 supplier audits. of such information is deemed unnecessary. Beginning in 2012,Apple periodically re- The information disclosure matrix can help man- sponded to media or NGO criticism,reactively agers map their future disclosure practices for specific disclosing supply chain information,including categories of supply chain information.It outlines limited information about supplier membership when it is critical to disclose information,when infor- and provenance.By 2015,Apple produced an ex- mation shouldbestrategically disclosed to differentiate tensive array of information and reports covering a company or product,when decisions are made not to the radar categories.Included in this information disclose irrelevant or inappropriate information,or was a list of 200 first-tier suppliers,including com- when disclosure is noncritical.Managers should map pany names and addresses;a list of metals and stakeholder needs to identify material supply chain is- minerals sourced from lower-tier suppliers,their sues for disclosure.This will enable them to see where provenance,and whether the supplier was using the company might be targeting resources inappropri- a conflict-free protocol;and separate reports on ately,releasing unnecessary information,or needs the environmental and social performance of additional investment in data gathering or release of suppliers. more information The 2015 environmental report10 covers 100% of the carbon emissions of the entire Apple supply How Apple's Approach Changed chain and waste generated throughout the supply To illustrate how a company's approach to supply chain.It also reveals that the top 200 suppliers used chain transparency can evolve,we studied Apple 120 billion gallons of water,but it does not provide SLOANREVIEW.MIT.EDU WINTER 2016 MIT SLOAN MANAGEMENT REVIEW 43

SLOANREVIEW.MIT.EDU WINTER 2016 MIT SLOAN MANAGEMENT REVIEW 43 reputation of the company. In the food or beauty products industry, this might include providing contextual information to consumers about organic ingredients; it would allow consumers to easily dis￾cern the benefits of choosing one company’s product over that of a competitor. We refer to information that has low value to the company but where the risk in the supply chain is high as “optional.” This means that the information does not impact the end customer and is primarily an internal supply chain concern. An example might include a potential problem that was averted (for ex￾ample, low-quality ingredients in the pharmaceutical supply chain that were removed during quality con￾trol screening and never affected the end product). The final category in this matrix is information that is both low value to the company and low risk to the supply chain, with negligible effect on brand value. We call it “noncritical.” Examples might include infor￾mation on child labor in countries where the child welfare laws are clear and actively enforced. Disclosure of such information is deemed unnecessary. The information disclosure matrix can help man￾agers map their future disclosure practices for specific categories of supply chain information. It outlines when it is critical to disclose information, when infor￾mation should be strategically disclosed to differentiate a company or product, when decisions are made not to disclose irrelevant or inappropriate information, or when disclosure is noncritical. Managers should map stakeholder needs to identify material supply chain is￾sues for disclosure. This will enable them to see where the company might be targeting resources inappropri￾ately, releasing unnecessary information, or needs additional investment in data gathering or release of more information. How Apple’s Approach Changed To illustrate how a company’s approach to supply chain transparency can evolve, we studied Apple Inc., using publicly disclosed supply chain infor￾mation to compare the years 2009 and 2014. When Tim Cook took over as CEO in 2011, Apple had been in the headlines following reports of suicides at Taiwanese supplier Hon Hai Precision Industry Co. Ltd. (known as Foxconn). Cook had to respond to the public outcry and act to protect Apple’s repu￾tation and ensure that workers throughout Apple’s supply chain were treated fairly and in line with basic human rights. The events at Foxconn pushed Apple to open up supply chain details to the public, moving it from an extremely secretive supply chain to a more open one.8 Apple did not release specific information on the number of suppliers in its supply chain for 2009; it did not publicly disclose information re￾lated to any areas of membership, provenance, or environmental sustainability. Its 2009 report9 pro￾vided results for 83 social sustainability audits. The company’s 2015 report, relating to 2014, refers to 633 supplier audits. Beginning in 2012, Apple periodically re￾sponded to media or NGO criticism, reactively disclosing supply chain information, including limited information about supplier membership and provenance. By 2015, Apple produced an ex￾tensive array of information and reports covering the radar categories. Included in this information was a list of 200 first-tier suppliers, including com￾pany names and addresses; a list of metals and minerals sourced from lower-tier suppliers, their provenance, and whether the supplier was using a conflict-free protocol; and separate reports on the environmental and social performance of suppliers. The 2015 environmental report10 covers 100% of the carbon emissions of the entire Apple supply chain and waste generated throughout the supply chain. It also reveals that the top 200 suppliers used 120 billion gallons of water, but it does not provide Reactive responses reduce the time for planning, participation, and experimentation and limit opportunities for early-mover competitive advantage

THE AGE OF SUPER-TRANSPARENCY:SUPPLY CHAINS any information about supply chain energy usage. activity needs to become a core dimension of the Apple also reported social sustainability informa- company's approach to effective stakeholder tion for its suppliers. management. Between 2009 and 2014,Apple went from re- 2.Assess current capabilities and resource garding its supply chain information as a source of base.Companies need to audit the technological strategic secrecy to openly publicizing it as a repu- and human-factor capabilities of both their own tational insurance policy.For example,in the space company and those of their suppliers to assess cur- of a few years,Apple has become much more rent capacity for gathering critical,high-quality transparent about its material provenance,envi- supply chain information and to assess the finan- ronmental sustainability,and social sustainability. cial costs and resource feasibility of improving As for secrecy,Apple only discloses aggregate envi- transparency information. ronmental and social sustainability information, 3.Identify current levels and quality of critical keeping specific examples or cases out of the pub- information in your supply chain.Many manag- lic arena.In the future,Apple may decide to follow ers have limited knowledge of the depth and quality the example of companies such as Nestle,which of supply chain information currently available to give more specific information. them.Companies often have other information- Although Apple has come a long way on disclo- gathering systems in place,and many are already sure since 2009,there are still areas to be addressed evaluating suppliers on triple-bottom-line criteria. and improved.Regarding information that might This information could be gathered from different be considered critical,a 2014 BBC documentary departments.The radar will aid in the identifica- about Apple exposed,among other things,poor tion of current and desired levels of supply chain treatment of workers in Chinese factories in Ap- information capture and disclosure.Gaps should ple's supply chain.Following this,Apple has been be filled by new investments in supply chain infor- under pressure to provide information on how it is mation gathering. tackling first-tier and lower-tier social sustainabil- 4.Clarify strategic thinking around your sup- ity issues.Apple also hasn't yet publicly discussed ply chain information disclosure.Companies how it plans to ensure a living wage for workers in should have strategic clarity in relation to their its supply chain. broad approach to supply chain transparency,and it should be aligned with the company's core busi- Developing a Successful ness strategy and its need to protect intellectual Disclosure Strategy property.The transparency matrix will enable fo- What steps should companies take to ensure a via- cused debate in relation to this core issue. ble and high-quality supply chain transparency 5.Decide on the type and level of information strategy?We suggest the following: disclosure.Once a company is clear on its broad 1.Analyze the pressures for increased supply strategic approach to supply chain disclosure,it chain transparency.Executives should begin by needs clarity on the type and level of information it understanding which supply chain information is needs and wishes to disclose.The disclosure matrix critical to stakeholders,both internal and exter- can aid this process. nal,and use this knowledge to proactively respond 6.Ensure strategic alignment between supply to the needs of key stakeholder groups.This chain information and company strategy.The Apple went from regarding its supply chain information as a source of strategic secrecy to openly publicizing it as a reputational insurance policy. 44 MIT SLOAN MANAGEMENT REVIEW WINTER 2016 SLOANREVIEW.MIT.EDU

44 MIT SLOAN MANAGEMENT REVIEW WINTER 2016 SLOANREVIEW.MIT.EDU THE AGE OF SUPER-TRANSPARENCY: SUPPLY CHAINS any information about supply chain energy usage. Apple also reported social sustainability informa￾tion for its suppliers. Between 2009 and 2014, Apple went from re￾garding its supply chain information as a source of strategic secrecy to openly publicizing it as a repu￾tational insurance policy. For example, in the space of a few years, Apple has become much more transparent about its material provenance, envi￾ronmental sustainability, and social sustainability. As for secrecy, Apple only discloses aggregate envi￾ronmental and social sustainability information, keeping specific examples or cases out of the pub￾lic arena. In the future, Apple may decide to follow the example of companies such as Nestlé, which give more specific information. Although Apple has come a long way on disclo￾sure since 2009, there are still areas to be addressed and improved. Regarding information that might be considered critical, a 2014 BBC documentary about Apple exposed, among other things, poor treatment of workers in Chinese factories in Ap￾ple’s supply chain.11 Following this, Apple has been under pressure to provide information on how it is tackling first-tier and lower-tier social sustainabil￾ity issues. Apple also hasn’t yet publicly discussed how it plans to ensure a living wage for workers in its supply chain. Developing a Successful Disclosure Strategy What steps should companies take to ensure a via￾ble and high-quality supply chain transparency strategy? We suggest the following: 1. Analyze the pressures for increased supply chain transparency. Executives should begin by understanding which supply chain information is critical to stakeholders, both internal and exter￾nal, and use this knowledge to proactively respond to the needs of key stakeholder groups. This activity needs to become a core dimension of the company’s approach to effective stakeholder management. 2. Assess current capabilities and resource base. Companies need to audit the technological and human-factor capabilities of both their own company and those of their suppliers to assess cur￾rent capacity for gathering critical, high-quality supply chain information and to assess the finan￾cial costs and resource feasibility of improving transparency information. 3. Identify current levels and quality of critical information in your supply chain. Many manag￾ers have limited knowledge of the depth and quality of supply chain information currently available to them. Companies often have other information￾gathering systems in place, and many are already evaluating suppliers on triple-bottom-line criteria. This information could be gathered from different departments. The radar will aid in the identifica￾tion of current and desired levels of supply chain information capture and disclosure. Gaps should be filled by new investments in supply chain infor￾mation gathering. 4. Clarify strategic thinking around your sup￾ply chain information disclosure. Companies should have strategic clarity in relation to their broad approach to supply chain transparency, and it should be aligned with the company’s core busi￾ness strategy and its need to protect intellectual property. The transparency matrix will enable fo￾cused debate in relation to this core issue. 5. Decide on the type and level of information disclosure. Once a company is clear on its broad strategic approach to supply chain disclosure, it needs clarity on the type and level of information it needs and wishes to disclose. The disclosure matrix can aid this process. 6. Ensure strategic alignment between supply chain information and company strategy. The Apple went from regarding its supply chain information as a source of strategic secrecy to openly publicizing it as a reputational insurance policy

The demands for transparency in supply chain information are growing.Managers must understand these demands and respond in creative and meaningful ways. more information a company has on hand in ad- and Fiona Harrigan are both lecturers at UCD vance of a critical event (as outlined in the radar), Business School.Comment on this article at http://sloanreview.mit.edu/x/57219,or contact the quicker it can resolve the problem.The infor- the authors at smrfeedback@mit.edu. mation may also be used to gain competitive advantage and develop added value.For instance,if ACKNOWLEDGMENT the strategy is to deliver high-quality products to the customer,having complications with prove- The authors would like to acknowledge the support and generous funding of the Irish Research Council. nance or membership could be catastrophic. Disclosure reporting is too important to be the pre- REFERENCES serve of a single department or business function. 7.Build collaborative relationships.Our re- 1."Ask Nestle to Give Rainforests a Break. search suggests that the best route to high-quality www.greenpeace.org. internal and external transparency is to develop 2.G.Nimbalker,C.Cremen,and H.Wrinkle,"The Truth Behind the Barcode:The Australian Fashion Report," close collaborative relationships across the supply Baptist World Aid Australia,Aug.19,2013. chain.This may require companies providing tech- 3.D.Linich,"The Path to Supply Chain Transparency,' nical,operational,or financial assistance to Deloitte University Press,July 2014. suppliers to share the cost burden,foster learning, 4.For a full report on decisions taken by Nike,see and ensure that there is a culture of transparency D.J.Doorey,"The Transparent Supply Chain: From Resistance to Implementation at Nike and throughout the supply chain. Levi-Strauss,"Journal of Business Ethics 103, 8.Anticipate future demands.Once a company no.4 (November 2011):587-603:Nike Inc.,"Global has established a strategy for supply chain disclo- Manufacturing,"http://manufacturingmap.nikeinc.com; and Nike Inc.,"Workers and Factories,"in "Corporate sure,it should begin to investigate competitors' Responsibility Report FY07-09,"www.nikebiz.com. information disclosure strategies and gather intel- 5.See Doorey,"The Transparent Supply Chain." ligence on the changing concerns and priorities of 6.WD-40 Co.,"What Does WD-40 Multi-Use Product external stakeholders.It can also analyze the best- Contain?"www.wd40.com;and R.M.Halligan and in-class disclosure strategies of companies such as D.A.Haas,"The Secret of Trade Secret Success," Forbes,Feb.19,2010. Nike and Patagonia.In addition,it is important to 7.K.Hodal,C.Kelly,and F.Lawrence,"Revealed:Asian monitor the media and the reports and campaigns Slave Labour Producing Prawns for Supermarkets in US, of NGOs and influential commentators. UK,"June 10,2014,www.theguardian.com. The demands for transparency in supply chain 8."Apple Supplier Responsibility Progress Report," information are growing.Managers must under- 2009-2014,www.apple.com/supplier-responsibility. stand these demands and respond in creative and 9.Apple Inc.,"Supplier Responsibility:2009 Progress Report,"February 2009. meaningful ways without undermining the com- petitive advantage of their company.The tools and 10.Apple Inc.,"Environmental Responsibility Report: 2015 Progress Report,Covering FY2014,"May 2015. advice presented here will aid managers in grap- 11.R.Bilton,"Apple'Failing to Protect Chinese pling with this complex and evolving area. Factory Workers,'"BBC News,December 18,2014. www.bbc.com. Donna Marshall is a senior lecturer at UCD Business School at University College Dublin in Ireland.Lucy Reprint 57219. McCarthy is a lecturer at Queen's Management Copyright Massachusetts Institute of Technology,2016. School in Belfast,Northern Ireland.Paul McGrath All rights reserved. SLOANREVIEW.MIT.EDU WINTER 2016 MIT SLOAN MANAGEMENT REVIEW 45

SLOANREVIEW.MIT.EDU WINTER 2016 MIT SLOAN MANAGEMENT REVIEW 45 more information a company has on hand in ad￾vance of a critical event (as outlined in the radar), the quicker it can resolve the problem. The infor￾mation may also be used to gain competitive advantage and develop added value. For instance, if the strategy is to deliver high-quality products to the customer, having complications with prove￾nance or membership could be catastrophic. Disclosure reporting is too important to be the pre￾serve of a single department or business function. 7. Build collaborative relationships. Our re￾search suggests that the best route to high-quality internal and external transparency is to develop close collaborative relationships across the supply chain. This may require companies providing tech￾nical, operational, or financial assistance to suppliers to share the cost burden, foster learning, and ensure that there is a culture of transparency throughout the supply chain. 8. Anticipate future demands. Once a company has established a strategy for supply chain disclo￾sure, it should begin to investigate competitors’ information disclosure strategies and gather intel￾ligence on the changing concerns and priorities of external stakeholders. It can also analyze the best￾in-class disclosure strategies of companies such as Nike and Patagonia. In addition, it is important to monitor the media and the reports and campaigns of NGOs and influential commentators. The demands for transparency in supply chain information are growing. Managers must under￾stand these demands and respond in creative and meaningful ways without undermining the com￾petitive advantage of their company. The tools and advice presented here will aid managers in grap￾pling with this complex and evolving area. Donna Marshall is a senior lecturer at UCD Business School at University College Dublin in Ireland. Lucy McCarthy is a lecturer at Queen’s Management School in Belfast, Northern Ireland. Paul McGrath and Fiona Harrigan are both lecturers at UCD Business School. Comment on this article at http://sloanreview.mit.edu/x/57219, or contact the authors at smrfeedback@mit.edu. ACKNOWLEDGMENT The authors would like to acknowledge the support and generous funding of the Irish Research Council. REFERENCES 1. “Ask Nestlé to Give Rainforests a Break,” www.greenpeace.org. 2. G. Nimbalker, C. Cremen, and H. Wrinkle, “The Truth Behind the Barcode: The Australian Fashion Report,” Baptist World Aid Australia, Aug. 19, 2013. 3. D. Linich, “The Path to Supply Chain Transparency,” Deloitte University Press, July 2014. 4. For a full report on decisions taken by Nike, see D.J. Doorey, “The Transparent Supply Chain: From Resistance to Implementation at Nike and Levi-Strauss,” Journal of Business Ethics 103, no. 4 (November 2011): 587-603; Nike Inc., “Global Manufacturing,” http://manufacturingmap.nikeinc.com; and Nike Inc., “Workers and Factories,” in “Corporate Responsibility Report FY07-09,” www.nikebiz.com. 5. See Doorey, “The Transparent Supply Chain.” 6. WD-40 Co., “What Does WD-40 Multi-Use Product Contain?” www.wd40.com; and R.M. Halligan and D.A. Haas, “The Secret of Trade Secret Success,” Forbes, Feb. 19, 2010. 7. K. Hodal, C. Kelly, and F. Lawrence, “Revealed: Asian Slave Labour Producing Prawns for Supermarkets in US, UK,” June 10, 2014, www.theguardian.com. 8. “Apple Supplier Responsibility Progress Report,” 2009-2014, www.apple.com/supplier-responsibility. 9. Apple Inc., “Supplier Responsibility: 2009 Progress Report,” February 2009. 10. Apple Inc., “Environmental Responsibility Report: 2015 Progress Report, Covering FY2014,” May 2015. 11. R. Bilton, “Apple ‘Failing to Protect Chinese Factory Workers,’” BBC News, December 18, 2014, www.bbc.com. Reprint 57219. Copyright © Massachusetts Institute of Technology, 2016. All rights reserved. The demands for transparency in supply chain information are growing. Managers must understand these demands and respond in creative and meaningful ways