Monitoring of ESG objectives throughout the supply chain

Companies are increasingly realizing the impact environmental, social and governance (ESG) initiatives can have on their operational and financial performance.

Corporate leaders look to their supply chains for opportunities to work towards ESG goals. To meet the demand for action, they must embed sustainability at all points in the supply chain, starting with procurement.

An organization’s supply chain can represent more than 90% of their greenhouse gas emissions. Considering that most of these emissions are generated through sourcing, spend management is one of the most effective levers organizations have to drive supply chain sustainability.

This procurement element can influence sustainability and broader ESG commitments by strategically sourcing partners and products that contain lower emissions footprints as well as better human rights records.

However, if supply chain stakeholders are unable to gain a transparent view of their supply chains, they will lack vital information needed to assess and assess progress towards ESG goals.

This lack of visibility can lead to increased risk, from ignoring forced labor at any point in the supply chain to absorbing elevated levels of greenhouse gas emissions from suppliers. As more companies face the challenge of reporting on ESG metrics, it may be impossible to track without proper visibility into trading partner and supplier operations.

With deep visibility down to n levels of their supply chain, companies are in a much better position to not only avoid risk, but also establish a clear path to tracking and meeting ESG goals. The best way to achieve this is to adopt technology that provides such information, in other words, a business network.

For example, synthesizing supply chain activities on a real-time dashboard allows companies to incorporate supplier management and determine suppliers at risk. Within a network, this can be expanded to provide purchasing with a real-time view of supplier capabilities and automate the sourcing function to meet set requirements. This same foundation can support sustainable and ethical sourcing initiatives, enabling visibility that can also be built into product lifecycle design. This enables transparency in sustainable material sourcing, manufacturing and shipping processes throughout the product lifecycle.

Technology as an enabler

Smart spending and enterprise network technology have a role to play in bringing sustainability initiatives to life. As ESG continues to be a priority, transparency, reporting, compliance and auditing requirements will make digitization necessary to scale resources and results across the organization.

IDC Research on key trends in sustainability and ESG compares the earnings and revenue performance of 680 manufacturing organizations to their sustainability and digital transformation track records. The study found that in both revenue and profit, digitally mature manufacturers that emphasized sustainability outperformed their non-digital, non-sustainability focused counterparts.

With the right technology in place to gain partner visibility and collaboration, organizations can begin to achieve these results. Network-enabled insights can enable leaders to integrate the sharing of carbon tracking data and intelligence between trading partners and into core business operations and strategic decision-making, as well as assess opportunities for circularity in cycle design. of product life.

A guided sourcing and buying tool applies artificial intelligence as a means to promote ESG efforts more efficiently and with greater transparency. Additionally, using a business network system containing a business partner directory allows companies to conduct a targeted search by specific criteria, in this case sustainability metrics, to identify the best suppliers for a given organization.

This networking process is just as valuable to buying organizations as it is to trading partners, who can create a single, standardized profile that contains all of their certifications and qualifications just once, instead of filling in the information multiple times in different formats. This makes background information more readily available to purchasing organizations when searching for suppliers, ensuring they choose the right partners to keep up with sustainability goals. And, in the event of a disruption, organizations are in a better position to quickly find alternate sources of supply while maintaining compliance.

Transforming for a sustainable future

Increasingly, carbon is seen as a global and universal currency that can be managed, traded, tracked and also reduced. Gaining visibility into the n-tier supply chain is critical to understanding where an organization is on its sustainability journey.

Viewing sustainability through the lens of procurement can help organizations establish a clear path towards ESG goals. When equipped with these key insights, companies have greater insights into how to reduce their carbon emissions in their supply chains, while enabling data sharing and collaboration among customers, suppliers, and other business partners.

Ultimately, organizations that invest in supply chain maturity will experience greater visibility, transparency, and traceability among their supply chain partners. There is also the opportunity to gain a competitive advantage by addressing the increasing sustainability expectations of customers and consumers. Ideally, when companies can simultaneously generate economic returns and achieve social impacts in their supply chains, they increase the likelihood of acquiring additional stakeholders who will want to deliver the same results.

muhammad alam is president and chief product officer at SAP’s Smart Expense Management Business Network.

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