Controversial

A Startup To Save Retail’s Supply Chain Soul

If there’s anything that retail should learn from the now-deposed king of social media outrage Martin Shkreli, it’s that consumers always have a line they don’t want businesses to cross. For Shkreli, raising the price of life-saving medications should have been a no-brainer if he cared about staying on the right side of public opinion, but sometimes that’s not always a black-and-white issue for retailers engaged in multiple verticals just to get an affordable product on the shelf.

However, with millennial consumers more concerned about the social philanthropy (or at least the absence of exploitation) inherent in their favorite brands, Segura Systems is banking on turning the need for moral corporate stewardship into a cottage industry.

Segura Systems, a startup focused on supply chain monitoring with a special eye toward potential human rights abuses and other unsavory or borderline illegal production practices used by unscrupulous contracting organizations, recently announced that it had secured $3 million in funding from Octopus Ventures. The funding will be put to immediate use as the London-based Segura seeks to market its supply chain software to retailers affected by the U.K.’s passage of the Modern Slavery Act, which requires companies to keep accurate records on every step of their supply chain.

This is an infamous problem for many apparel retailers that lower costs through production agreements but cede control of workplace conditions over to third parties. The human rights issues are apparent, but there’s also the economic impact of not if but when supply chain abuses come to light. Not only are brands forced to absorb potential fines and costs from changing manufacturing arrangements, but the intangible damage to brand image among millennial consumers might be impossible to recoup.

According to an Aflac survey, the degree to which brands demonstrate corporate social responsibility determines how likely consumers are to remain loyal shoppers. For example, 81 percent of consumers are more likely to shop from brands that actively participate in charitable giving or events all year instead of at distinct times. This dynamic applies from the other perspective as well: 75 percent of shoppers said they would prefer to work for a company that demonstrates corporate responsibility.

Wanting good products and good philosophy from brands seems more like an ingrained tenet of millennial lifestyles than any market preference, and brands need to be aware that distaste for a company’s unsavory actions — however much Shkreli might approve — could be enough to turn even the most loyal millennial consumer off from otherwise high-quality products. However, as Malcolm Ferguson of Segura’s backer Octopus Ventures noted, the modern worldwide economy can be so interconnected at times that it doesn’t take evil corporate masterminds to run afoul of sound supply chain management.

“Globalization has been an incredible force, but one direct impact is that extended supply chains are now astonishingly complex,” Ferguson said in a statement. “For a business to have full visibility on its direct and extended supply chains is getting more difficult, at a time when consumers and policy-makers are growing ever more aware of the ethical risks at work.”

Segura streamlines this process by compiling all supply chain orders under a unified database, which Segura keeps updated with a list of pre-approved contracting organizations. Whenever a new partnership is made and added to the system — as well as when any new order is placed or received outside of it — the company is able to move quickly to correct the error. While this does place more burden on suppliers and has driven some away from Segura’s retail partners, certain suppliers who stayed on with their original brands and Segura increased orders by up to 1,000 percent, Fortune reported.

Of course, the good in Segura’s mission isn’t to increase profits; it’s to ensure that the global economy isn’t chewing up workers and spitting them out in the process. However, as millennials and their sense of social responsibility grows to dominate the retail landscape, bringing software like Segura’s on board might end up being a financial decision after all.

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