Corporates Must Address ESG Risks In Their Supply Chains For Business Resiliency

Corporates Must Address ESG Risks In Their Supply Chains For Business Resiliency

Organizations cannot achieve sustainability targets without a more rigorous ESG approach in their value chains. Verdantix’ latest report; Strategic Focus: Building Resilience Through Supply Chain Sustainability, addresses the relevance of embedding supply chain risk in sustainability strategies, and highlights key steps for firms to leverage supply chain management to generate brand differentiation, market competitiveness and trust. 

A new wave of regulations, such as the EU Corporate Sustainability Due Diligence Directive and Germany’s Supply Chain Act, pressures firms to ensure supply chain sustainability. However, ESG data collection is not an easy task. Firms usually face significant difficulties in accessing accurate and complete information, as some firms even don’t know their suppliers’ suppliers. Also, supply chain data management is still a heavily manual procedure, with a high number of firms rely on qualitative surveys and spreadsheets to collect data from an extensive supplier network. Moreover, under the current socio-economic pressure, organizations might be tempted to underestimate the value of sustainability, moving towards a cost-reduction mindset that overlooks ESG initiatives. 

However, supply chain complexities and the overall pressing global economy cannot lead to a step back on sustainability commitments. On the contrary, firms must recognize the value of sustainable supply chains to enhance business resilience in a complex and competitive environment. To do so, Verdantix research propose 3 key steps: 

First, leverage software solutions for data collection throughout their supplier network, not just Tier 1 suppliers. ESG software functionalities can greatly improve visibility into suppliers’ performance, helping corporate define better ESG strategies. 

Second, firms should engage stakeholders in their sustainability commitments, to move both sides forward having sustainability as the common goal in mind. 

Finally, executives must embed supply chain sustainability risk management in their business strategy plans, leveraging sustainability to face and prove public demands for credibility, consistency and adaptability. 

To learn more about supply chain sustainability and the key software vendors, please see Verdantix Buyer’s Guide 2022: Supply Chain Sustainability Software.