Environmental, social and governance (ESG) pillars are becoming increasingly embedded in supply management practices. Yet their underlying mission can be easily lost in boardroom discussions about the spend, labor and training needed to adopt and hone such practices.
“Reporting is everything,” Krystal Cameron, operations vice president — product management for Assent, said during a September 13 webinar. “Spotting risks and taking the right action today and tomorrow” are essential to maintain compliance and garner success. You want, she added, “real depth and sustainable growth.”
Designating the right spend to mitigate human rights and environmental risks across the end-to-end supply chain is not a one-size-fits-all process, Cameron said.
Data tells its own story but must be verifiable; without that, the missteps can be daunting. Jared Connors, regulatory expert for Assent, said, “Ninety percent of ESG risk to complex manufacturers lies in their external supply chain.” Mining and metal ore businesses, for example, carry immense risk as their worldwide supply chain tiers often contain differing ideologies about child labor laws and environmental hazards, he noted.
ESG compliance equates to reliable disclosure; however, implementing the changes necessary to reach that goal can unhinge the balance between meeting broader market expectations and investor pressures.
In a recent survey by Assent, an Ottawa-based supply chain sustainability management solutions provider, respondents shared their top concerns implementing ESG into their supply operations: (1) reputational pressure, (2) CEO vision and (3) customer pressure. Webinar speakers concurred that many of today’s manufacturers built their business on the proximity of needed materials and suppliers, not sustainability, and therein lies the dichotomy.
Reporting, risk management and supplier engagement must be part of a cohesive tier-to-tier process, and software can help, said Kim Knickle, research director, ESG and sustainability at Verdantix, Ltd., a London-based research, development and advisory firm. It’s also important to distill information and create an action plan to further mitigate risk, Cameron said.
Risk and relevancy assessments; supplier development, risk and maturity assessments; data analyses and evidence reviews can enable organizations to develop recommended corrective actions and sustainability reports that provide a detailed and verifiable ESG story, panelists said.
Other dynamics worth tracking include Scope-3 greenhouse-gas (GHG) emissions, labor practices and violations, carbon emissions and conflict mineral regulations, Cameron said.
Data, metrics and sourcing matter because the supply management profession will be ranked and rated on ESG performance, said Echo Bell, director of product management at Assent.
As companies invest in ESG software and applications, there is an inherent learning curve, but the results are better agility, customization and results. As the profession moves toward more transparency and cooperation, today’s ESG foresight can provide a window to tomorrow’s innovation.