Board Strategies for Integrating Social Responsibility in Supply Chain Management

By Purvee Kondal, NACD.DC, Chief Operating Officer in Residence at American Luxury Portfolio Group, Publisher of the Smart Supply Dispatch & an Athena Alliance Executive Member

The 2025 geopolitical landscape—marked by tariff escalations, trade discussions, and regulatory shifts—has intensified pressure on global supply chains. Amid the turbulence, the ‘S’ in ESG has emerged as a strategic lever for resilience and long-term value creation.

Building on insights shared in the 2022 article, Supply Chain Challenges and New Perspectives on Resilience: Elevating the ‘S’ in ESG, this updated perspective explores how boards can guide management to integrate social responsibility, including fair labor, ethical sourcing, and community engagement, into procurement strategies.

Drawing on real-world examples, five actionable strategies are outlined for strengthening supply chains, enhancing stakeholder value, and navigating today’s volatile trade environment.

The Geopolitical Imperative for the ‘S’

Global trade will evolve due to geopolitical changes, including how the U.S.-China changes will impact supply chain costs across all sectors. Global challenges, coupled with labor shortages and regulatory scrutiny, are exposing vulnerabilities in sourcing and supplier management.

Social factors, such as ethical labor practices, localized supplier networks, and community impact, offer a framework to mitigate risks while fostering resilience. Board stewardship influence is vital to the continuity of governance that communicates a top-down commitment to resilience through people-first principles. By signaling a cultural tone that prioritizes people, boards can help ensure that companies remain agile and competitive.

Five Board Strategies for Resilient Supply Chains

1. Advance Ethical Sourcing Standards

Ethical sourcing aligns suppliers with fair labor and community standards, helping reduce reputational and regulatory risks. For example, in 2024, Patagonia expanded Fair Trade-certified textile sourcing, reducing supply chain risks and enhancing brand loyalty.

Board Action: Adopt ethical sourcing standards, enhance reputation through certifications like Social Accountability 8000 (SA8000), and institute a supplier audit review process to ensure compliance.
 

2. Foster Supplier Localization and Inclusion

Engaging high-quality local or underrepresented suppliers helps strengthen regional economies and reduce dependency risks. For example, in 2024, Walmart increased sourcing from U.S. small businesses, reducing logistics costs and supporting the growth of communities in which it operates.

Board Action: Request annual updates from the Chief Operating Officer on localized supplier metrics and community impact.
 

3. Embrace Artificial Intelligence (AI) for Supply Chain Transparency

AI tools help enhance visibility into supplier practices, identifying labor or compliance risks. Per Gartner, only 23% of firms have a Supply Chain AI strategy despite its demonstrated powerful abilities. For example, as outlined in the KPMG’s Intelligent Retail blueprint, Costco uses AI for predictive analytics and supplier monitoring to strengthen supply chain transparency and efficiency. Measuring the supply chain with real-time tools and analytics can make it more resilient. AI-powered inventory tracking systems provide real-time visibility of inventory across Costco’s network.

Board Action: Consider mandating AI adoption with governance protocols and review performance metrics biannually with an established AI Ethics Board that oversees AI tool selection, privacy and data safeguards, performance metrics, and change management.
 

4. Support Nearshoring for Stability

Nearshoring to trade-agreement regions like Mexico under the United States-Mexico-Canada Agreement (USMCA) helps mitigate tariff impacts and supports local workforces. For example, in 2024, General Motors’ nearshoring to Mexico reduced supply chain costs and created jobs. However, the 2025 tariff shifts require a reassessment.

Board Action: Review tariff optimization strategies, including nearshoring, and assess economic impacts annually. It is important to proactively adjust tariff optimization strategies to navigate uncertainty and capitalize on high-tech, sustainable manufacturing opportunities.
 

5. Prioritize Employee and Supplier Workforce Well-Being

Investing in internal and supplier workforce conditions helps drive stability. For example, in 2024, Nike’s supplier training and wellness programs improved retention and operational efficiency. As noted in the Future of Sourcing, the power of trust and collaboration will drive the transformation and change forward in our future with Artificial Intelligence (AI).

Boards will need to ensure that Human Resources (HR) functions are transforming their practices from merely protecting the company to proactively safeguarding its future by ensuring fair, equitable, and inclusive practices. As noted in ScienceDirect, as employees increasingly trust HR AI agents over HR professionals to help solve challenges, HR must redefine its value in the organization and prioritize associates’ well-being at all levels.

Board Action: Advocate for well-being programs across employees and suppliers and monitor hiring, promotion, and retention metrics.

Looking Ahead: The ‘S’ as a Competitive Advantage

With global trade disruptions projected for 2025 by the World Trade Organization, prioritizing workforce wellbeing and growth can help deliver measurable benefits.  Moreover, boards that embed empathy into governance, link executive incentives to talent development outcomes, and champion continuous learning will not only better weather geopolitical storms—they will empower companies to define the next era of sustainable growth

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The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc. or American Luxury Portfolio Group.