For years, efficiency was the focus of global supply chains. But the COVID-19 pandemic has proven that it is no longer enough today. Supply chains are under increasing scrutiny by companies, consumers, shareholders, and governments. The opportunity arises to improve company systems and goals. These goals include ESG - good environmental, social, and governance practices.

Thus, as companies seek to improve their ESG criteria it is essential to address the impact of the supply chain on ESG. These partners and suppliers may also expose companies to hidden, uncontrollable risks such as natural resource depletion, human rights abuses, corruption, etc.

So how to adapt supply chains to meet ESG goals? 

It all starts with supply chain mapping. Each company has to know its suppliers and identify where the company is vulnerable.

Mapping seeks to answer the question "Who is in our supply chain?" Thus, suppliers are divided into:

LEVEL 1 (Direct);

LEVEL 2 (Suppliers of suppliers);

LEVEL 3 (Suppliers of suppliers of suppliers).

ESG Supply Chain Metrics

There is a huge demand from consumers for green and ethical products. This means that companies must ensure that suppliers meet ESG targets on both environmental impact and labor rights.

Effective integration of ESG goals into supply chain operations requires strong and frequent communication. It is important to set high expectations and track them with measurable metrics.

Contracts are fundamental

Well-written supplier contracts can be essential tools for strengthening the supply chain and meeting ESG goals. They should set clear expectations for both parties and inform how disputes can be resolved.

With this in mind, consolidated and meaningful ESG metrics can be implemented in supply contracts as part of Key Performance Metrics (KPI). KPI data can be linked to performance incentives and benefits.

Remember: ESG considerations are not going away. Whether driven by federal regulation or consumer / shareholder demand, companies will continue to feel pressure to meet environmental, social, and governance standards. The most successful companies will integrate these changes into their supply chains, working with suppliers to find solutions that meet business needs and the survival of life on Earth.

You too can create a supply chain committed to sustainability. Want to know how?

SB SUSTAINABLE BUSINESS SOLUTIONS is an ESG Tech. Today recognized as the only automated, data-driven solution for external risk monitoring and materiality analysis to serve your company and your supply chain.

With ESG DATA INTELLIGENCE, we capture data that becomes information for decision making as well as monitoring for the financial market with audited evidence.

We have a team of professionals that encompasses the areas of Auditing, Consulting, Risk Advisory, ESG Performance Procurement, Value Chain and specialists from various industries and sectors with extensive experience and business knowledge!