The pandemic of covid-19 has exposed our weaknesses. Issues related to health and safety, labor practices and climate risk have become priorities for investors, regulators and consumers. Failure to ensure oversight of supply chains can result in significant financial and reputational losses.
Companies that focus on sustainable supply chains come out ahead with competitive advantages, resilience, and leadership.
Supply Chains must be monitored to conform to good ESG practices. Stay tuned for Harvard Law School's tips on Corporate Governance:
FOCUS ON TRANSPARENCY:
Identify operational weaknesses between second- and third-tier suppliers.
GLOBAL REPORTING INITIATIVE (GRI):
Companies should implement processes that track their supply chain and determine what standards they expect suppliers to meet. This aligns company and supplier policies and provides effective channels for reporting compliance, human rights, labor conditions, data misuse, and corruption issues.
RISKS AND OPPORTUNITIES OF CLIMATE CHANGE:
Reducing carbon footprints, including supply chains, is crucial. Looking ahead, it will be increasingly important for companies to collaborate with their suppliers to adopt renewable energy, reduce waste, and optimize resources.
COLLABORATION:
Climate change already threatens infrastructure and introduces new uncertainties into supply chains. Maintaining a robust and sustainable supply chain will require companies to integrate suppliers into long-term climate risk management plans.
COMPLIANCE:
The shift toward stakeholder capitalism and renewed focus on corporate purpose means that investors and consumers are intolerant of corporate misconduct. The challenge is to align supplier compliance practices with those of the company. These efforts may require investment in training and screening.
REGULATORY RISK:
There is increased regulatory scrutiny of supply chains today. Companies should carefully consider whether their industry may be affected and how they can reconfigure their supply chains to adapt to new policies.
M&A DUE DILIGENCE:
Understanding supply chain risks should also be a priority during M&A (Mergers & Acquisitions) due diligence. This is "due diligence," i.e., taking prudent steps towards a potential investment. It is a process of evaluating information about a company. In certain industries where there are multiple levels of supply chains, it is important to gain access to current and previous suppliers as well as an understanding of risk management and reporting processes.
CONSIDER EMERGING TECHNOLOGIES:
Emerging technologies can be expected to play an increasingly important role in modern, resilient and sustainable supply chains.
ANTICIPATE EMERGING AREAS OF FOCUS:
As investors broaden their focus to the areas of biodiversity, waste, and water use, companies need to tailor their sustainability practices and commitments, risk management assessments from the supply chain.
Forward-thinking companies evaluate their supply networks. It is necessary to know the partners so that we can all grow, without leaving anyone behind.
