Diego Tedesco, Director of Commercial, Product and Marketing at Virgin Media O2, explains the importance of supply chain transparency and how to ensure your suppliers keep their side of the bargain.
Over half (54%) of UK consumers base their buying decisions on a company’s commitment to environmental, social and governance (ESG) issues, according to our recent research.
And in response to rising consumer pressure, 88% of businesses now want to accelerate ESG advancements, increasingly incorporating it into their regular business and financial reporting.
It’s clear that ESG has become integral to a company’s reputation. But the delivery of ESG initiatives must be authentic. With ESG at the forefront of consumers’ minds, businesses must recognise the interconnectedness of ESG goals and their impact on their overall reputation. 54% of consumers would stop buying from a company found to be misleading in sustainability claims, a KPMG study revealed.
But for businesses to be authentic about their ESG impact they need absolute clarity on what that impact is. And this becomes more challenging as the footprint of an organisation grows and its supply chain become larger and more complex.
Measuring this supply chain, which in many instances is incredibly large and complicated, can seem like an insurmountable struggle. 69% of UK organisations can’t accurately track the carbon footprint of products from their suppliers, for example, which has a huge knock-on effect on their own reporting. So, what can businesses do about it? How can business leaders ensure that their suppliers are fulfilling their side of the bargain when it comes to making progress on ESG?
Identifying the ESG impact on supply chains
According to the CDP, Scope 3 emissions account for an average of three-quarters of a company’s emissions. Third-party activities, including fuel usage, sourcing raw materials and ensuring employee well-being are intrinsically linked to companies’ plans for ESG, emphasising the importance of their supply chain’s ethical and sustainable practices.
Lack of compliance or transparency in the supply chain poses substantial risks, including alienating eco-conscious customers, risking legal consequences for non-compliance and damaging company reputation.
In 2020, for instance, several major fashion brands encountered significant public criticism following allegations of forced labour by their suppliers.
Maintaining transparency is crucial for setting businesses apart from their competitors and demands an ongoing flow of accurate information about each process within the supply chain.
And having transparency throughout the supply chain also decreases the chances of unexpected disruption within it, giving businesses visibility and insights at every stage so they can understand risks ahead of time, enabling proactive risk management.
Improving the carbon transparency of suppliers
Recent research revealed that many businesses struggle to access accurate information about their carbon footprint, with 51% of senior business respondents reporting gaps or a lack of access to clear information.
This is further compounded by many ESG strategies being impacted by financial constraints and a lack of staff capacity.
To address this, businesses can monitor supplier performance and oversee activities such as stock levels and shipments. Through implementing an organised data collection process, organisations can easily identify any potential issues and help with forecasting and planning.
Instead of allocating excessive time, money, and resources to develop extensive yet unrealistic ESG goals for the year ahead, business leaders should prioritise building a robust culture from the bottom up, ensuring it permeates the entire supply chain.
It is crucial that companies develop a strong layer of trust with their employees and customers, which can be achieved by investing in technology that supports the advancement of these ESG initiatives.
Organisations can also use technology that provides better visibility of stocks and assets throughout their supply chain journey, like carbon calculators that enable real-time data collection, sharing and analysis, improving speed and accuracy of results.
Establishing clear communication channels among all parties in the supply chain is equally crucial for building foundations that positively impact the environment and society.
Another key step to achieving supply train transparency is ensuring employees and partners also see the same value in transparency and understand its significance. Training employees to uphold the right practices and equipping them with a strong understanding of the advantages linked to transparency enables them to make better-informed decisions, contributing to a more streamlined and proficient supply chain.
Taking meaningful action on ESG
Supply chain transparency is not merely a corporate responsibility but an imperative one for many organisations striving to meet ESG objectives. The future of supply chain transparency and ESG involves the integration of emerging technologies, an evolving regulatory landscape and the increasing role of consumers in driving demand for reduced carbon emissions.
As businesses navigate these trends, it’s important to prioritise and invest in transparent supply chain practices. Using available tools and technology will help cater to the evolving expectations of consumers and ensure communication is consistent and open at every step of the chain.
The intersection of technology, communication and consumer demand offers a pathway for business leaders to not only fulfil ESG goals but also to thrive in an era where sustainability is a defining factor in business success.
