Being confronted with a vast number of sustainability issues in a value chain, companies must prioritize, focusing their resources on developing those steps in the value chain with the biggest impact. Yet, most sustainability issues occur out of their observation, beyond their direct reach at sub-supplier levels. With procured material often accounting for 50-80% of cost of goods sold, problems usually arise deep within value chains. Upstream sub-suppliers are often the origin of those problems, making Western buying companies realize the relevance of upstream value chains (beyond their direct suppliers) pointing towards a multitude of sub-suppliers. How companies can better identify relevant sub-suppliers and reliably evaluate their impact on them is the goal of this project.

Sub-suppliers relevance in a value chain varies with respect to the various aspects, e.g. stage of production and supply chain, position in the life cycle, geographical location of operations, and industry norms in those locations. The impact of non-compliant sub-supplier practices related to social, environmental and legal requirements need to be assessed. Several factors make the impact determination a difficult proposition including informal contracts, industry collusion, concentration of production capacity, intellectual property concentration, ownership, and dependence on other sectors/regions. Together many of these issues may set the context for any models or approaches developed in this project.

This project addresses these issues and asks two fundamental questions: “How can a buying company identify sub-suppliers in the upstream supply chain (beyond their direct suppliers?)” and “Which sub-suppliers are considered relevant (which are critical and which are not)?” The project aims to develop a hands-on tried-and-tested solution for business practice to detect and quantify the sustainability impact of sub-suppliers, and determine legitimate procedures to prioritize.