Introduction to Sustainable Supply Chains

What is a supply chain?

The term describes the chain of businesses supplying and trading goods and services. Supply chains encompass the supply of commissioned products, raw materials, packaging, logistics and transportation needed to get the product to customers. However, they can technically also encompass professional services such as external lawyers and accountants. This all contributes to business, economic and investment growth.

What does the ‘E’ in ESG supply chains encompass?

Supply chain environmental issues commonly looked into include water use or pollution, waste pollution, materials usage and air emissions. Businesses both impact and cause climate change problems. Therefore seeing them moving towards zero emissions is crucial for ethical and stewardship reasons. Very few companies have their own factories, so supply chains can be absolutely crucial to business to be able to deliver products and generate revenues. This has been made apparent with the COVID-19 and Brexit supply chain disruptions.

What does the ‘S’ in ESG supply chains encompass?

On the social side, supply chain issues are focused on working conditions. Sweatshops, factories, warehouses, logistics, farming can have serious risks for businesses and robust due diligence is vital. 

Many ESG ratings agencies fail to rate some companies properly for their poor human rights due diligence, including the exploitation of supply chain workers and even some cases of alleged modern slavery. It seems ESG ratings firms misunderstood a companies reliance on their supply chains and how they should execute supply chain ESG human rights due diligence. 

What does the ‘G’ in ESG supply chains encompass?

For governance, much of it is monitored in legal assessments. For example, efforts to deal with legally registered business partners, and anti-bribery and corruption efforts. Getting governance right creates a fair playing field and frameworks under which business success can sustainably be delivered.