Smarten up your supply chain ESG performance

supply chain ESG

Reliable and consistent supply chain ESG data is essential but it can be complicated to collect and manage, especially for larger organisations.

A recent assessment of the regulatory landscape across organisations identified over 600 sustainability reporting requirements across over 80 countries. Making confident supply chain ESG commitments is one thing but if you can’t prove you’ve met your targets there can be trouble ahead, not least in terms of damage to the standing of a business.

For example, more than half of FTSE100 companies have made net zero pledges but quantifying progress towards that goal can be tricky, especially if there are multiple ESG frameworks at play. And with reduced carbon emissions being a topic with reputational ramifications, any slip ups can be costly, especially as ‘green’ business activities are constantly under the spotlight from regulators, investors, customers and the media.

IBM’s ‘CEO Study 2022’ gives detailed insights into how these concerns are playing out in the board room. It found that 37 per cent more CEOs in 2022 rated sustainability as a top priority, compared with 2021, and 83 per cent expected sustainability investments to produce improved business results over the next five years. It’s not just a regulatory requirement, or about being a responsible organisation – ESG clearly needs to be heavily embedded in any company’s business strategy.

But it’s not just the operation of the individual business that are under scrutiny; there’s an increasing examination of supply chains, too. Up to 85 per cent of environmental, social and governance (ESG) related impacts occur in the supply chain – including more than 90 per cent of the emissions associated with providing an enterprise’s products and services. Put simply, without a supply chain makeover there can be no sustainability transformation.

“The World Economic Forum has defined a sustainable supply chain as one where ESG considerations are embedded from raw material production through to the delivery of the product to the end customer,” said Adam Thompson, global sustainable finance and ESG offering leader, IBM Consulting. “However, a growing number of organisations are taking this definition further to encompass post-purchase processes, such as product returns and disposals. The concept of a circular economy – where products and materials are reused and re-cycled rather than thrown away – is therefore key to supply chain sustainability.”

However, a sustainable supply chain can be easier to describe than achieve. Businesses often encounter difficulties including: access to data – unavailable or fragmented supply chain data makes it difficult to take the right actions; inventory visibility – lack of key inventory data can lead to over ordering which drives up costs, creates more waste and contributes to GHG emissions; insight into product provenance – the number of touchpoints in your supply chain makes it difficult to ensure that products and materials are responsibly sourced and all supply chain players adhere to set ESG standards and high customer expectations – customers expect their orders to be fulfilled rapidly, even the same day, but this can lead to environmentally undesirable logistics, packaging and transportation options.

“IBM’s Envizi sustainability performance management suite helps organisations to automate data capture and centralise it,” said Thompson. “As a result, all the required responses across multiple internationally recognised frameworks, such as SASB and Global Reporting Initiative (GRI), can be centrally associated in a library with one data set and one repository of information. The upshot: auditable, trustworthy, uniform ESG insights that can be used to calculate and benchmark emissions data, sustainability initiatives and bolster ESG reporting.”

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