ESG Progress Calls for Improved Supply Visibility

Published on:
by KnowESG
KnowESG Resilinc CEO Bindiya Vakil

Resilinc CEO Bindiya Vakil explains the imperative for businesses to enhance supply chain visibility in response to the risk of non-compliance.

The recent acceptance of the EU's Deforestation Regulation (EUDR) by the Council of the EU underscores the importance of environmental, social, and corporate governance (ESG) in ensuring supply chain resiliency.

Non-compliance issues such as unethical sourcing, pollution violations, and forced labour can jeopardise supply continuity. Therefore, companies need to bolster their ethical and sustainable practices and meet their ESG obligations.

PwC's 2022 Global Investor Survey reveals that effective corporate governance, greenhouse gas emissions reduction, and responsible supply chain practices have become paramount for investors when choosing businesses to support. Thus, a robust and positive ESG strategy is not only crucial for maintaining supply chain integrity but also for instilling confidence in your company.

Enhancing sustainability efforts allows businesses to improve supply chain visibility, minimising the risk of ESG non-compliance. A comprehensive overview of your supply network is essential to identifying potential ESG violations and achieving maximum sustainability.

Recent data from the US highlights the enforcement of the Uyghur Forced Labor Prevention Act (UFLPA), indicating that 13% of shipments were detained by the US Customs and Border Protection (CBP) and denied entry, with China accounting for the highest percentage (27%).

The significance of legislation's impact on supply chains is emphasised by the collective value of shipments stopped by the CBP between Q3 2022 and Q2 2023, amounting to US$1,024 million. The electronics, apparel (including footwear and textiles), and industrial and manufacturing materials industries were the most affected.

Businesses relying on Chinese supply chains must ensure adequate visibility to ensure compliance because the electronics sector makes up 48% of all shipments stopped by the CBP.

A manufacturer of toilet paper has warned that the EUDR will have a significant impact on the industry's supply availability, demonstrating how the regulation may affect the UK's supply chains.

The ability to assess, monitor, and report on supply chain sustainability and ethicality has become a highly sought-after capability. Deep visibility and tracking of suppliers for sustainable and ethical practices should be integrated into a company's corporate social responsibility (CSR) and/or ESG programme.

To be effective, the process of identifying and monitoring supply chain partners should go beyond tier-one suppliers since 80% of supply chain disruptions originate from sub-tier suppliers.

Achieving supply chain sustainability and managing ESG risks requires comprehensive visibility and knowledge. Leveraging advanced technologies such as artificial intelligence (AI), cloud computing, and enterprise networks can enable precise mapping and monitoring of supply chains, providing businesses with a competitive edge in advancing sustainability and avoiding supply disruptions.

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Source: Sustainability

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