May 15, 2023 | Supply Chain Strategy
Environmental, Social, and Governance (ESG) targets are no longer optional. They have become an integral part of business strategies and it has become critical for organizations to have a 360-degree view of ESG performance across the entire supply chain.
Because supply chains are at the heart of any business operation. They encompass everything from sourcing raw materials to delivering finished goods or services. By integrating ESG targets into supply chain operations, companies can significantly reduce their environmental footprint, foster social responsibility and enhance governance practices.
However, embedding ESG considerations into supply chain operations requires a holistic approach. Let's delve deeper into key areas where you need visibility to meet your ESG performance goals.
The future of reporting will inevitably include scope 3 emissions. The journey to trace, view and report these emissions can be broken down into five steps: educate your organization, prepare a cross-functional team to set a baseline and automate reporting, track and engage with suppliers, expand your suppliers list based on their scope 3 reporting, and finally, set targets.
Knowing how environmentally friendly your goods, services and input materials are is a critical starting point for ESG reporting. The provenance and safety of materials are non-negotiable when it comes to supplier compliance.
In the wake of social injustices and inequalities, companies are actively addressing the lack of diversity and ethnic tolerance through supplier diversity programs. This promotes healthy competition and boosts the brand’s image.
To ensure comprehensive ESG governance across the supply chain, consider factors beyond scope 3 emissions, materials and supplier diversity. For instance, GRI reporting standards, specifically GRI 308 and GRI 404, have a specific metric on environmental and social screening assessment of suppliers.
Scope 3 emissions go beyond suppliers and include downstream emissions – distribution, storage, usage and disposal/end-of-life of the product. Achieving visibility in this area aligns with the GHG (Greenhouse Gas) Protocol and helps meet ESG goals.
Understanding the environmental impact of product usage and disposal, from GHG emissions to waste generation, is crucial. Gaining visibility on these concerns can encourage smarter consumption practices and optimize the product lifecycle.
A true circular product begins with design, with the technical and biological aspects at its core. Circularity aims to optimize waste, planning for the entire lifecycle of the materials of goods and services. This includes upstream input materials, efficient production levels and downstream lifecycle extension.
Human rights compliance must be covered end-to-end. Full visibility of suppliers and downstream partners is crucial to ensure your product doesn't end up with entities sanctioned for human rights violations.
We are at an inflection point where half-hearted measures and selective ESG target reporting will no longer suffice. Companies must gain visibility into relevant ESG performance metrics, align them with the right market standards and deploy fit-for-purpose technological solutions.
ESG goals are not mere checkboxes on a corporate to-do list. They are a commitment to sustainable business practices, social responsibility and ethical governance. By gaining visibility across key areas in the supply chain, companies can meet their ESG targets and turn suppliers and consumers into allies for the greater good of the planet.
Aligning the supply chain with ESG targets is not just good business sense; it's imperative for the future of our planet.
Know more about the topic in our white paper How to Drive ESG Visibility and Traceability Across Your Supply Chain