Supply chain, even on a global scale, is often complex and mostly lacks transparency. This is why it is the responsibility of any business to work extra hard to ensure that they move towards achieving or, better still, improving their social responsibility (ESG factors: Environment, Social and Governance).
Table of contents
- Areas of ESG
- Various ESG Applications in Supply-Chain Processes
Estimated reading time: 5 minutes
Furthermore, many businesses infinitely believe that things could never be any worse, even when there is enough evidence to back things up. In most cases, some of the ills could have been going on for the longest time, but they don’t want to do anything about it, especially in the supply chain. The result is things becoming too large to contain.
It is important to keep in mind that ESG factors in the supply-chain is the starting towards financial freedom, especially through the coordination of information flow along the supply-chain. In this post, therefore, you will get deeper insights on the aspect of ESG-factors in the supply-chain, its importance and any other underlying considerations. In Germany a supply chain law (Lieferkettengesetz) has been established in 2021. Read on to learn more.
Areas of ESG
Supply-chain is a series of distinct and interconnected activities and functions. Therefore, to break things down, these are some of the core areas businesses should understand why they are responsible for their supply-chain.
1. Organisational practices
A business should be in a position to determine the responsibility goals for the purchasing function. Also, they have to ensure that they define roles of the human resource aspect, especially in relation to social responsibility in logistics. Other practices include:
- Ensuring ample training in ESG to their suppliers
- Sharing all practices and activities with all shareholders
- Come up with a mechanism to ensure feedback receipt from stakeholders concerning ESG-factors
2. Environmental Practices
As a business, it is your responsibility to ensure that you are aware of the environmental impact of your suppliers. Some of the important supplier practices to consider are:
- Ensuring that your suppliers purchase and use recycled materials, especially when it comes to the packaging of their goods
- Encouraging and supporting your suppliers in the endeavours to reduce waste. Mostly hazardous waste
- Especially emphasising on your suppliers to produce recyclable goods and reversible materials in design and production
- Ensuring that your suppliers meet environmental protection standards, especially in lifecycle management, storing, packaging and other core processes
- Encouraging suppliers to establish processes that are crucial in ensuring sustainable environmental protection
3. Working conditions and human rights
It is your responsibility to be aware of the working conditions of your suppliers. Some of the core practices to keep an eye out in this regard are:
- Being aware that your suppliers put special emphasis on procedure and mechanisms to monitor the providence of equal working opportunities to all employees
- Your suppliers should assure that their psychological and physical working conditions are in compliance with the set rules and regulations
- Ensuring that your suppliers implement the appropriate systems to ensure that employees benefit from their legal rights. At the same time, ensuring that they work in line with the set local, national and international standards
4. Occupational health and safety
Your suppliers need to ensure that they put in place frameworks that assure working conditions that do not jeopardise their employee’s health and overall safety. Furthermore, they should put themselves in a position where they can assure all safety and protection measures. Also, they need to put in place procedures that ensure any delicate or sensitive items are appropriately stored under the right conditions.
Various ESG Applications in Supply-Chain Processes
For socially responsible supply-chains to work, they should implement the practices in the different steps in the entire process. CERES has prepared a Self Assessment Questionnaire for ESG-supply chain criteria. This is right from when your suppliers procure raw materials up to the time they deliver the goods or services to you. Here are some great examples.
1. Responsibility in procurement and purchasing
Essentially, this involves carrying out every activity related to purchases but in accordance with ESG principles. This involves buying recyclable materials, employing technologies that ensure that there is low energy consumption, which guarantees minimal waste.
Therefore, holistically speaking, the choice of a supplier who applies ESG-factors in their processes while complying with relevant regulations will go a long way in easing your procurement process. This only means that you should verify that your supplier adapts to these responsibilities before initiating any transactions.
2. Environmental practices in production
This applies in forward and reverse supply-chain practices. The production aspect includes the product design phase, which should consider all the ESG principles that don’t harm or damage the environment.
It is important to keep in mind that among the most critical long-term goals for any suppliers should be the aspect of implementing an environmental-friendly production process. This can only be possible by implementing mechanisms to reduce the amount of waste reduction while disposing of waste without harming the environment.
In distribution and transportation
Responsibility in this regard pertains to the development of the required capabilities in transportation and distribution but simultaneously enhancing or maintaining social and economic sustainability.
Responsibility in transportation focuses on the economic and environmental aspects of a sustainable process. Some of the most common effects include emissions that are detrimental to the ozone layer, greenhouse gas emissions, and hazardous discharges during transportation and distribution.
Therefore, for your suppliers to be socially responsible, they should carefully follow traffic rules and regulations, establish mechanisms to increase safety and security performance and offering transport deals to local transportation businesses, among others.
Considering the ever-increasing globalisation, competition, market position sustainability and communication and information technologies, you will notice that most businesses are now gearing their efforts towards corporate social responsibility practices and reporting.
Therefore, it is vital to ensure that your supplier companies adopt social and environmental activities to help reap economic benefits via the reduction of costs, boosting profits, increasing productivity and improving business image and reputation. At the same time, the suppliers should be able to boost their awareness in terms of responsibility and remain obliged to comply with national and international standards. Contact us to choose the right supplier for your business.