Published 10 months ago.
About a 4 minute read.
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A recent webinar took a deep dive into building a strategy that makes both business and compliance sense.
Between the rapidly evolving regulatory landscape and growing consumer demand
for transparency and disclosure, the supply chain is now the focus of both the
challenges and opportunities within ESG.
A company’s supply chain often makes up the bulk of its emissions output — as
much as 90 percent — so, this increasing focus makes sense as companies look to
build out progressive supply chain models that make sense for their own
businesses and the broader commercial environment.
led by experts at the intersection of supply chain evolution and ESG took a deep
dive into this topic, especially around managing the risk associated with a more
open supply chain and how to build out a broader effort to stay abreast of all
that’s changing in the space.
team lead ESG advisory at supplier platform
things off — highlighting four key areas for companies to consider pertaining to
risk: regulation, B2B customers, consumers and investors. Each stakeholder
represents its own set of risks around how a supply chain works and ultimately
brings a product to market.
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“We are moving towards harmonization at a global level,” she explained.
Patricia Quinn, group
procurement sustainability manager at insurer Swiss
Re, added that companies must
take these risks seriously because more regulation is coming “whether they like
it or not.”
Existing regulations such as the California Transparency in Supply Chains
the Uyghur Forced Labor Prevention
, the European Commission’s proposed Directive on Corporate Sustainability
and others are only a starting point; and companies will rapidly need to
understand their risk exposure along with potential compliance issues.
The best way to manage this risk — and ultimately, work with it — is to build a
strategy and get organized.
All of the presenters — including IntegrityNext key account manager Jared
Ridgley — noted that if a company
doesn’t already have someone, it’s important to designate a point person
specifically working on supply chain management within an ESG lens as part of a
larger ESG or sustainability team.
One way to do this successfully is to join a supplier management platform that’s
already helping suppliers complete a broader ESG
and compile all of that data into a ready-for-reporting format — such as the
“We have more than one million active suppliers on our network in 199 countries
within a system that has an approach for comprehensive ESG risk management,”
The idea is that having one organized entry point for all of a company’s
suppliers will help it get a full picture of its supply chain and prepare data
to meet the forthcoming regulatory requirements — along with other potential
expected, external-facing documents, such as an annual sustainability report.
At a company such as Swiss Re, with a $1.5 billion annual supply chain spend
that Quinn oversees, one of the challenges she faced was helping small and
medium-sized suppliers get on board with a system that required the supplier to
pay a fee. Swiss Re transitioned to using IntegrityNext — which is free for
suppliers to use — and was able to get more of its 7,000 vendors on the system,
to build a more complete picture of its supply chain.
“You can imagine what our data set will look like in the next two, three and
five years; and it’s extraordinary,” she said.
Of course, the more of this work a company takes on upfront, the less potential
there is for supply chain-related risk as the global economy demands more
Ridgley cited an example of Europe’s forthcoming Corporate Sustainability
which will require most large companies who want to do business on the continent
to adhere to a higher level of disclosure — part of which includes supply
chains. European Commission language on the policy says, “The first companies
will have to apply the new rules for the first time in the 2024 financial year,
for reports published in 2025;” so, time is of the essence.
Quinn added two more issues to the list: decarbonization and diversity &
inclusion. She sees the former really coming into focus over the next decade
(likely with companies trying to make various carbon-reduction goals). For the
latter, Swiss Re has collected significant data around the topic; and Quinn
advises that companies should look at diversity, equity, inclusion and belonging
on a country-by-country basis as the regulatory landscape on this issue in
particular is widely variable.
Simply put, addressing all of this is also good business. There are numerous
studies and models suggesting consumers are shifting their spend to companies
who commit resources and efforts to better sustainability practices overall, and
especially when it comes to all points and people along the supply chain.
Building out a strategy and viable practices around managing supply chain-wide
ESG risks is a great pathway towards communicating your company’s efforts
externally about the benefits and importance of this work.
Published May 3, 2023 8am EDT / 5am PDT / 1pm BST / 2pm CEST
Geoff is a freelance journalist and copywriter focused on making the world a better place through compelling copy. He covers everything from apparel to travel while helping brands worldwide craft their messaging. In addition to Sustainable Brands, he's currently a contributor at Penta, AskMen.com, Field Mag and many others. You can check out more of his work at geoffnudelman.com.
This article, produced in cooperation with the Sustainable Brands editorial team, has been paid for by one of our sponsors.