How can sustainability reporting reduce supply chain risks?

By having a framework in place to track sustainability metrics across the supply chain, companies are better positioned to identify and mitigate risks. Sustainability reporting is especially valuable in the context of evolving regulations that increasingly extend across the entire supply chain (such as the incoming EU Deforestation Regulation). As these types of regulations become more comprehensive companies utilising sustainability reporting gain a distinct advantage in managing supply chain risks.

While introducing sustainability framework for its supply chain, OEMs can increase capacity building of their suppliers in terms of ESG factors. The whole process improves the maturity of the suppliers interms of ESG KPIs and make overall supply chain more resilient and sustainable.

In my experience I see that the increasing focus and pressure that sustainability reporting standards put on companies are encouraging them to engage with their supply chain, which has been usually quite transparent to many companies. By knowing and tracking the ESG performances of their own supply chain, companies are bound to scrutinize the ESG risks and opportunities of such companies, which give a complementary picture of their resilience and robustness. Moreover companies' efforts towards more sustainable business models get multiplied in the market when engaging with their supply chain.

Among all the benefits listed, a sustainability program for supply chain management provides opportunities to address potential risks by working directly with suppliers and building their capacity to plan for sustainability and set up processes that will support sustainability KPIs. This allow for a diffusion of sustainability practices and new regulatory requirements throughout the value chain while minimizing the risk of disruption. Supplier engagement programs are a great first step for managing sustainability risks in complex supply chains.

Concordo plenamente. Quando uma empresa possui indicadores para avaliar os programas, metas e ações executadas, toda a cadeia de suprimentos está amparada em KPIs válidos de eficácia e eficiência de seu desempenho. E é aí que entram os relatórios de sustentabilidade: independente do framework utilizado, a organização terá informações precisas quanto as àreas de ESG da empresa, a partir de métricas. Assim, a cadeia de suprimentos terá menos riscos na sua atividade.

Sustainability reporting strengthens supply chains by addressing ESG risks, fostering supplier accountability, and building stakeholder trust. Yet, challenges like data accuracy, lack of standardization, and resource intensity exist. Overcoming these hurdles demands strategic investments in data systems and collaborative industry efforts. Successfully navigating these challenges not only enhances supply chain resilience but positions organizations for sustained success in a dynamic global landscape.

Sustainability reporting is vital for addressing supply chain risks, but our decentralized model presents unique complexities. Our supply chain is diverse, making data collection a challenge, and implementing reporting systems at the local level is resource-intensive. Additionally, inconsistent reporting standardization further complicates alignment with stakeholders' expectations. My company is in the business of energy conservation. So, while our operating model comes with a large carbon footprint to grapple with, we're working every day to find ways to define objectives and streamline operations and reporting. The more accurate we can make our reporting, the more impactful (and less prone to risk) we can make our ESG-focused actions.

Esto es cierto, puesto que en motivo de la nueva directiva europea en materia de sostenibilidad y a pesar del desarrollo de unos estándares únicos, uno de los principales desafíos a los que se enfrentan las empresas es la integración de la cadena de valor en sus informes, no sólo aguas arriba con los proveedores, sino también aguas abajo con los consumidores y clientes. Si a menudo ya es difícil obtener determinada información dentro de las operaciones propias o controlabas por las mismas empresas, lo es todavía más para aquello que se encuentra fuera.

The challenge is that very often, the majority of supply chain risk, especially for multinationals, lies in their supply chains in emerging markets. These supply chains can be quite opaque and are much harder to measure, control, audit and engage. There is the additional lens of economic reality. If you are sourcing raw materials from an emerging market, assurance of ethical sourcing is an inexact science at the best of times. Likewise for critical minerals - these supply chains then constitute a risk, but one that organisations continue to overlook… because where else would they go? So the reporting is then done on assumptions of best intent, rather than knowledge of actual practice throughout the supply chain.