Environmental, social, and governance (ESG) issues concern governments, society, and all companies. On the environmental side, they aim to protect ecosystems, produce low carbon emissions, and consciously use water and energy. On the social front, they include respect for privacy and data security, consumer activism, increasing the risk of labor problems, and the fight against modern slavery. And governance deals with business ethics, fighting corruption, and corporate culture.


ESG originated as a term from the investment community in search of sustainable investments. But the acronym has invaded consumer expectations and corporate conduct. It is in the greater public awareness of where companies source raw materials, the environmental impact of industries, transparency about labor relations and human capital.

In recent years, some of the major standard-setters, such as the Treadway Commission's National Committee on Fraud in Financial Reporting (COSO), have issued guidance to help companies implement ESG efforts. ISO 20400, the international standard that guides sustainable procurement, emphasizes the importance of establishing a due diligence process, especially in the area of human rights, in order to avoid and mitigate risks.

How can organizations manage ESG in their supply chains?

Efficiency targets implemented for third-party suppliers, such as carriers, impact the environmental and social footprint of a supply chain. Large retailers set non-negotiable fleet efficiency targets for the carriers of their products.

It is important to remember that supplier audits, which analyze working conditions and environmental impact, meet ESG goals and also protect companies against risks in their supply chains.

A first step is to achieve internal goals for improving efficiency and sustainability. In this way, it is possible to show value to the entire supply chain.

How can ESG initiatives be sustainable?

It is critical to look at all stakeholders, see what the risks to the business are, and monitor changes in regulations around the environment and labor. Europe leads the way with strict privacy and data security laws. Other ESG regulations include the Paris Agreement on Climate Change targets and the UK's Modern Slavery Act, for example. The ability to respond to changing consumer preferences, especially with the risk of negative publicity damaging reputation, should be a key component of an organization's risk management program. In addition, geopolitical and third-party risk management in your supply chain has proven essential in the face of the covid-19 pandemic and global crisis.

So it is clear that ESG is here to stay! It cannot be a marketing, branding, or HR initiative. ESG must be driven by the company's top executives and integrated into strategic plans for your company to build a legacy and reach further and further.

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