How to Build a Responsible Supply Chain

How to Build a Responsible Supply Chain

By improving environmental, social and governance and performance throughout the supply chain, companies can enhance processes, reduce costs, increase productivity, innovate, differentiate and improve societal outcomes.

Despite stakeholder pressure, most companies still do not have a comprehensive understanding of the performance, risks and sustainability impacts of their supply chains, according to a report recently released by EY.

EY Climate Change and Sustainability Services collaborated with the UN Global Compact on the report, entitled “The State of Sustainable Supply Chains”  in an effort to better understand how companies are managing their supply chains in ways that support the objectives of the United Nations 2030 Agenda and Sustainable Development Goals. 

Overall, the study indicates that by improving environmental, social and governance  performance throughout the supply chain, companies can enhance processes, reduce costs, increase productivity, innovate, differentiate and improve societal outcomes.   

Conclusions from the report include:

  • Companies are on a continuum from managing risks through creating shared value with stakeholders to achieving differentiation for their products or services;
  • Leaders are achieving competitive advantage in the supply chain through increased collaboration, technology innovation, greater efficiency and supplier diversity;
  • Mature supply chain models integrate buying and sourcing practices with product design and development to enhance sustainability results tied to their manufacturing and service delivery;
  • Currently, only a small percentage of companies have achieved leadership maturity levels that can lead to shared value with suppliers, enable suppliers to operate as an extension of the business and engage in meaningful, collaborative dialogue. 

Actions companies can take to further embed sustainability in their supply chains:

  • Assess materiality, to focus on the most pressing issues, taking UN Global Compact principles into consideration
  • Align resources, structures and processes to focus on supply chain sustainability across the organization
  • Train management and suppliers on market practices
  • Invest in diverse and inclusive supply chain partners
  • Stretch existing sustainability goals beyond direct operations, to include tiers of the supply chain
  • Deploy technology to increase accountability and transparency
  • Leverage buying power and influence to trigger shifts toward supply chain sustainability
  • Disclose supply chain information, beyond stand-alone sustainability reporting mechanisms
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