Sustainable supply chains have come to the top of the agenda for many business leaders, says Jessica McGoverne, Director of Policy and Corporate Affairs at Sedex.
This is due to growing legislation around business sustainability, investors’ increased focus on environmental, social and governance (ESG) issues, as well as the rising climate crisis. Covid-19, inflation and the ongoing conflict in Ukraine have also exposed the vulnerabilities of today’s global supply chains.
Consumers too have become far more knowledgeable about unethical practices. Deloitte reveals that 29% of all UK consumers have stopped purchasing from certain brands because they had sustainability-related concerns about them. Investors are far more conscious of the reputational and financial risks associated with unsustainable practices. Lawmakers recognise investors’ and consumers’ demands for accurate information on business sustainability – the UK’s Financial Conduct Authority (FCA) recently launched a new paper to help investors make more informed ESG investment decisions, and help consumers navigate brands’ sustainability claims.
Situations within supply chains can also change quickly. Many activities associated with improving sustainability can help companies respond to these changes. For instance, employing technology to map complex global supply chains in greater detail is essential for making more sustainable decisions, and helps businesses anticipate how their supply chains would be affected by disruption – allowing them to respond accordingly.
Having a sustainable supply chain is no longer a nice to have – it’s a critical requirement. Data and technology play an essential role in enabling businesses to achieve this.
Sustainability in supply chains
A sustainable supply chain uses environmentally and socially sustainable practices at every stage, to protect the people and ecosystems across the whole chain. This means a company needs to consider the environmental and social standards across both their own operations and those of their suppliers.
Environmental issues include soil degradation, deforestation, greenhouse gas emissions, air pollution, and water security. Social concerns consider areas such as working conditions, forced labour, employment terms, and health and safety. A truly sustainable supply chain considers all of these issues and more.
Integrating social and environmental concerns
Climate change is a high-profile issue, and more than eight in 10 people say they are concerned about climate change. The ability to monitor and measure many environmental issues also means that the environmental impact of supply chains can be easier to focus on than social. However, social issues are equally critical and inextricably linked to environmental concerns.
For example, when the impacts of climate change, such as flash floods and droughts, cause people to leave local areas, these displaced individuals become more vulnerable to forms of exploitation such as forced labour. This is because migrant workers are more vulnerable to mistreatment than other groups of people. Similarly, businesses need to consider how more environmentally friendly solutions might affect workers and communities. Green initiatives should never be implemented at the expense of people’s rights.
Companies need to understand their suppliers’ locations, operations, the people who work for them, and their working conditions in order to manage both social and environmental issues in their supply chains. With supply networks often spanning numerous countries and industries, it is incredibly difficult to obtain this knowledge. Only by having data-led insights about their supply chain can companies gain a truly holistic view of how their business decisions and activities affect people and environments.
Utilising the power of data
With the right data, businesses can build greater visibility into their supply chain. Sophisticated technologies exist that enable companies to gather, store, analyse and report on this information. Armed with this insight, organisations can prioritise where they act to drive positive change and minimise negative impacts.
For example, data-led risk assessment tools enable businesses to conduct a sustainability risk assessment of themselves and their supply chains, by country, sector and site, efficiently on a global scale. Supply chain mapping – gathering data to map how products and services are produced, where, and by whom, is also essential. Some countries have higher rates of exploitative practices like child labour and are therefore considered higher risk for those issues. Knowing where suppliers are located helps to understand the magnitude of the risks and take action accordingly.
With site-level data, companies can analyse and compare not only supplier risks but also the risks at individual facilities, informed by data on areas such as worker demographics, how natural resources are used, and management processes.
This insight brings numerous benefits to a business that go far beyond building visibility. Detailed knowledge of a supply chain is also essential for complying with certain laws relating to business activities, such as Germany’s recent Supply Chain Due Diligence Act, Norway’s Transparency Act, and modern slavery legislation across the globe.
Supply chains: A missing link for sustainability
Stakeholders are demanding greater transparency from companies on how they address social and environmental risks. This is only possible if a business has a thorough understanding of their supply chain and the operations, people, and communities within it.
With the correct data tools and technology, companies can take effective action to build a more sustainable supply chain, demonstrate tangible progress to stakeholders, and enjoy numerous additional benefits – reduced negative environmental and social impact, better continuity in a crisis, and ultimately a more robust, efficient supply chain.
