How to Overcome the ESG Risks in the Supply Chain: Why More Crucial Than Ever
Environmental, social, and corporate governance risks play a major role in the supply chain strategy. But companies must remain agile to stay ahead.
According to Allianz, “Corporate supply chains have become more complex, and Environmental, Social and Governance (ESG) issues can carry significant reputational and operational risks.” An estimated 80% of global trade now passes through supply chains.
But bigger doesn’t always mean better. Complicated and larger supply chains are prone to risks. Attorneys Sara Orr and Jacqueline Yap in Law360, say the Russian invasion of Ukraine, the Covid-19 pandemic and climate change have kept supply chain risks top of mind for companies.
Why You Need ESG in Your Supply Chain Strategy
The pandemic has disrupted all facets of business, none more visible than the supply chain crisis. The Washington Business Journal says focusing on the ESG factors of supply chain management is no longer just a communications strategy but a strategic necessity, and a coming regulatory requirement for business to thrive in our rapidly changing and increasingly transparent global economy.
ESG Risks in Supply Chains
Traditional key considerations in supply chains include technical quality, cost effectiveness, speed of delivery and reliability. But Allianz says sustainability factors are increasingly gaining importance. Examples include:
- Environmental pollution
- Shortages of raw material and natural resources
- Workforce health and safety incidents
- Labor disputes
- Corruption and bribery
- Geopolitical considerations
There is no one size fits all approach to ESG risk mitigation, but according to the Washington Business Journal these are some approaches that work:
- Traceability: find efficiencies and actively shift toward stronger ESG Metrics
- Transparency: identifying and tracking to a set of milestones
- Environmental: map the environmental impact of your company’s supply chain not only on emissions but also water, air, and nature-based solutions from agriculture and forestry
- Governance: developing effective governance structures to comply with ESG criteria makes companies more attractive to investors
Managing ESG issues throughout the supply chain offers benefits. Next to managing the company’s reputation, the risk of supply chain disruption due to ESG issues is reduced. Better working conditions, for instance, can decrease turnover and improve quality. Furthermore, compliance and regulatory risk is reduced by taking a proactive stance on management of ESG risks. Having a sustainable supply chain may also uncover potential for innovation and market differentiation.
Learn More About Overcoming ESG risks in the Supply Chain
Want to learn more about to overcome the ESG risks in the Supply chain, and what leading organizations are doing to stay ahead of the curve? Come to one of our events! GDS Summits are tailored 3-day virtual event conferences that bring together business leaders and solution providers to accelerate sales cycles, industry conversations and outcomes. Regarding the CIO Summits 88% of Delegates said the overall experience of Digital Summit they attended was either Above Average or Excellent whilst 92% of Delegates said the Digital Summit provided them with actionable outcomes to support their current initiatives.
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