Guest Post: ESG Risks in the Supply Chain and Identifying Weaknesses
By: David Picton, SVP of Sustainability at Alcumus
When it comes to the integrity of your ESG programme and achieving your objectives, access to data is a key priority. Without ‘one true view’ of ESG risk, your business is less likely to be able to connect remote workers, supply chains and your day-to-day operations which help to identify weaknesses or make improvements.
While many organisations have made strides with their own ESG reporting and collecting data, a major challenge is monitoring suppliers. This is highlighted in Alcumus global research, which found that two in five companies have found it difficult to collect and gain access to data from their supply chain.
No longer are spreadsheets, notebooks, and pen and paper reliable sources if your business wants to connect people, processes and data. Why? Because each are susceptible to gaps, inconsistencies and mistakes.
To limit your risks, there is a growing need to identify and control what goes on in not only your business but in your suppliers too. As supply chains become more extended than ever, businesses face complex challenges whilst also recognising that legal requirements are evolving and customer, employee and investor expectations now have a clear focus on your business being able to identify blind spots across supply chains.
To help avoid issues that may impact your brand, climate, and operations, having a competitive advantage can be gained through supply chain visibility so you don’t compromise on safety, sustainability, or ethics
The challenges in ESG reporting
If your business is not able to identify where issues or gaps occur in the supply chain, you can expect to cover the cost from increased operational expenses, delays, or even reputational damage. To be able to make more intelligently informed decisions, C-Suite need access to data to track critical areas such as modern slavery, carbon footprint and employee health and wellbeing, helping to drive positive actions and make constructive change a reality.
So, what is the issue? Typically, verification has mainly been restricted to the larger Tier 1 suppliers, rather than looking deeper into the visibility of suppliers further in the supply chain in tiers two, three and four.
Helen Jones, the COO of the Enterprise division at Alcumus, suggests that while “visibility through the full supply chain is key to combat rising greenwashing, the ability to manage these risks will determine which companies will have customers, investors and employees in the future.”
How technology can influence ESG performance and outcomes
Challenges in recent years, and one of the outcomes of the COVID pandemic, has meant that businesses recognise the need to have the capability to deliver real-time risk insights. To be more effective in doing so, the use of technology has grown to help record and influence ESG performance and outcomes. The ability to digitise processes and track, manage, report on ESG, is now being achieved through technology to improve sustainable outcomes.
But while this shift is a step in the right direction, it’s less evident how it actually translates into actual practice. In our 2021 research, only a small amount of respondents were found to use a third-party data visibility and tracking system for ESG, or have future plans to use one.
At the same time, two-thirds of businesses who took part in research we conducted in 2020 said they were not realising the full potential of digital technology even though 64% said it could be valuable, but it wasn’t used much.
Using technology for better outcomes is not something that suppliers are fully embracing either. Our recent research found that 46% of suppliers do not report on performance data and just less than half (42%) have no system in the business to organise data collection.
Technology to provide One True View of risk
The focus on ESG and responsible business is only going to grow further as regulation changes or external pressures increase. To be able to meet ESG goals, those who will be the most successful will do so by increasing their efforts across the full supply chain and find solutions that meet both operational needs and responsible practices.
With a continuous improvement programme, organisations that use technology will be better able to demonstrate a more compelling story and deliver better results. The opportunity is here right now, where businesses can build sustainable supply chains of the future and become stronger and more resilient than ever before.
Find out how our ESG solution can work for your business
About the author:
David Picton is SVP of ESG and Sustainability at Alcumus. Now working with customers across multiple sectors and specialist organisations, he is a former Chief Sustainability Officer and was an original Board member of the Supply Chain Sustainability School. David also achieved the Queen’s Enterprise Award for Sustainable Development, and presented on the benefits of responsible business to the UN’s Conference on Trade and Development.
 Online survey with a sample of 621 businesses (207 in each of US, Canada and UK) conducted between 28 September and 11 October 2021 among senior managers working a role which demands knowledge of ESG or Sustainability requirements or processes for the business