5 Ways ESG Affects Your Supply Chain Performance
In recent years, the concept of Environmental, Social and Governance (ESG) has become increasingly important when it comes to procurement – and for good reason. Here’s five great reasons for you to consider
1. ESG drives up efficiency.
In addition to being an important part of your company’s overall value, ESG can also help you increase supply chain efficiency. In general, the more sustainable your operations are – and the better they align with common ESG goals like reducing waste and water usage – the more efficient they are likely to be.
There are several ways that ESG improves supply chain efficiency, including:
● It reduces costs by reducing waste, energy use and pollution
● It helps companies meet regulatory requirements, e.g., reducing CO2 emissions
Anglian Water saw a 38% reduction in scope 1, 2 and mandatory scope 3 carbon emissions since their base year and a 63% reduction in capital carbon since 2010 using Achilles Carbon Reduce.
2. ESG can help you elevate your supply chain visibility and transformation efforts.
ESG data can help you understand where your supply chain is performing well and where it needs improvement. With this information, you can make strategic decisions about how to improve your performance. For example, if a particular supplier isn’t meeting its commitments in terms of quality and delivery times, you might consider switching to another supplier who does meet these commitments.
It also allows companies to benchmark their performance against competitors or industry standards. This can help companies identify areas where they may have an advantage over competitors and identify areas where improvements need to be made relative to the market at large, as well as preventing risk.
3. Embracing ESG can help attract top talent (and keep them).
You might think that ESG will only attract the most environmentally conscious workers. However, this isn’t necessarily the case. When a company shows its commitment to social and environmental issues through its supply chain management practices, it sends a message of trustworthiness and integrity to all employees—not just those who care about sustainability. This can help establish your company as an employer of choice among potential employees who are looking for employers that share their values.
4. ESG can improve business reputation and customer relationships.
Embracing ESG can help you attract new customers, new suppliers, and new investors. When consumers buy products or services that align with their values, they feel good about themselves and are more likely to recommend those products to others.
It can also help you retain existing customers. When employees have a positive experience at work because of the company’s commitment to social impact, they are more likely to stay on the job for the long haul and even refer their friends for open positions at your company.
British Land’s Sustainability Manager, Karina Williams, explains: “As a responsible developer, we are able to support other businesses in our supply chain where needed, helping them understand and address the ethical, human resources and safety challenges they face. Working in partnership with Achilles enables us to reach suppliers further down the supply chain and support them where they have challenges.”
5. ESG-related data can inform other areas of your business, including risk mitigation measures and growth strategies.
As a supply chain manager, you need to make sure that you’re doing everything possible to minimise risks associated with suppliers and customers. ESG ratings can help you identify new opportunities for growth by allowing you to focus on companies that are committed to sustainability. When it comes down to it, a company’s reputation is going to be one of the biggest factors in deciding whether or not they’re going to do business with yours—and an established track record in responsible corporate citizenship will go a long way toward impressing potential partners (or customers).
Achilles scoring has enabled ERG to progress further in helping its suppliers adopt increasingly sustainable practices. As Anna Campi, Head of Procurement Planning, Control & Vendor Management, ERG, explains, “The result achieved by our suppliers year on year shows evidence of strong growth among the companies supported by Achilles.”
Creating a sustainable supply chain
As more and more businesses embrace ESG as a key business strategy, it’s safe to say that the benefits of ESG go beyond mere optics: in terms of procurement efficiency and visibility, attracting talent and building business reputation, ESG offers significant advantages for companies serious about staying competitive.
For many organisations, sustainability sits at the top of the commitments list, meaning the market has a lower tolerance for those who put profit before ethics. Whether you’re sourcing components for an oil rig, raw materials for pharmaceuticals, or selecting a team to resurface a road, your supply chain decisions must stand up to scrutiny if your organisation is to prove its commitment to protecting people and the natural world.
So, how can enterprises with complex supply chains adhere to legislative, social, and moral obligations whilst taking care of commercial priorities?
At Achilles, we make this possible by giving the people responsible for supply chain decisions – referred to here as buyers – insights derived from data that has been fully audited and validated with sustainability, performance, and compliance in mind.
Buyer and supplier organisations need to take charge of their supply chains to gain a competitive advantage over their rivals and reduce their risk level at the same time.