Sustainable Supply Chain Management

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Spotlight on Sustainability in the Supply Chain

Managing sustainability risks along a company’s supply chain is increasingly on the radar of good corporate sustainability management. The complexity of a company’s supply chain leads to multiple challenges:

- There are numerous areas in the supply chain where social and environmental deficits exist that potentially do not meet the expectations of important stakeholders.

- Risks are more likely to be found in the activities of second tier suppliers, subcontractors or partners of direct suppliers, over which the company itself has very little direct influence.

- Managing these risks requires considered integration into supply chain management processes.

Risks for the Company – Why Act?

As a result a company is increasingly facing numerous risks in the following areas:

  • operational risks: low quality products, lack of reliability of suppliers
  • reputational risks: negative coverage in the media in cases of scandals, difficulty retaining good talent,
  • market risks: loss of sustainability-aware customers
  • financial risks: increased costs for remedy actions, increased capital costs

The Path to Risk Reduction

Reducing sustainability risks in the supply chain requires a systematic approach:

Module 1: Sustainability Check of the Procurement Portfolio.

This module covers an analysis of the existing suppliers and supply chain based on a risk matrix (social and environmental). Initially the key procurement areas will be identified according to significance criteria. These areas will then be screened to determine their environmental and social risks. The result of Module 1 will be a map of the most important social and environmental topics within the supply chain, as well as a focus on those suppliers with the greatest risk potential.

 

Module 2a: Detailed Analysis of chosen Suppliers with increased Social and/or Environmental Risk.

As a first step, desktop research based on ‘ESG’ ratings of companies and brands will be carried out in order to identify those suppliers with increased risks. These suppliers will then undergo a detailed analysis. As a result of this module, companies will gain information regarding actual sustainability risks in their supply chain.

 

Module 2b: Detailed Analysis of the Procurement Processes.

The environmental and social risk analysis of the procurement processes is oriented towards the Guidelines of the Business Social Compliance Initiative (BSCI) as well as the social norm SA 8000. The results of this module are to pinpoint weaknesses, identify areas for improvement, and make recommendations to improve supplier selection, procurement processes and supplier evaluation.

 

Module 3: Courses of Action and Implementation.

This module covers the development of improvement measures and providing assistance with their implementation, e.g. compiling a sustainable procurement policy, training / workshop, audits; tools such as checklists, supplier questionnaire; and an implementation plan.