More than just preventing disruption - climate readiness, labor and human rights, and ethical considerations are key components for truly resilient supply chains.
By EcoVadis
U.S. President Biden’s 100-day executive order was a prime example of global leaders increasing their active participation in the building of more resilient and sustainable supply chains coming off of a jarring year of disruptions. As we pass the 100-day mark, the administration has now announced their comprehensive strategy for addressing shortages and combating unfair international trade practices with the creation of a supply chain task force.
While Biden’s strategy aims to address value chain vulnerabilities and strengthen operations, there are still several areas the plan falls short in building more resilient supply chains. The strategy has the potential to go deeper in understanding and acknowledging the underlying weaknesses. Subsequently, the plan is missing a clear call to action that empowers companies to mitigate climate change, address human rights and labor violations, and other ethical integrities. These issues continue to pose major threats to the supply chain – and the data is there to prove it. Currently, 80% of suppliers lack supply chain due diligence measures, 57% aren’t monitoring working conditions, and 44% lack health and safety preparedness.
The supply chain cannot be looked at through a single lens – it is made up of many complex layers. And a comprehensive view of each layer is key to building true resilience. Let’s take a closer look at how companies can kick off their quest for building supply chain partnerships that integrate environmental performance and ethical factors into their strategies.
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Climate Readiness - A Look to Scope 3 Emissions
One-fifth of the world’s largest corporations have made the commitment to achieve net-zero emissions. While a positive sign for change, simply setting these lofty goals won’t cut it. Too often these corporate GHG reduction strategies only focus on Scope 1 and 2 emissions. Achieving palpable results in carbon reduction depends on organizations tackling the major source of the problem - Scope 3, or value chain emissions.
More than 80% of a typical company’s emissions can be attributed to its value chain. But the fact is, there is a massive shortfall in supplier carbon reporting and action across the supply chain.
To overcome these hurdles, companies can accelerate investment in supply chain sustainability monitoring, including carbon reduction efforts, as a foundational element for building long-term viability. Companies can also create engagement structures and carbon action targets across the supply chain to set goals in areas like obliging suppliers to set carbon reduction targets; substituting purchased products or materials with lower-emission alternatives; focusing on significant supply chain and emissions hotspots; and developing guidelines to standardize internal carbon pricing methodology and defining minimum pricing levels for achieving the required reductions.
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Focus on Human Rights Management
Risks in the supply chain expand much further than environmental harm. Human rights and labor violations are equally as detrimental. As found by International Labor Organization (ILO), more than 40 million people are victims of modern slavery. Yet while 64% of large corporations have a supplier code of conduct, only 38% of these organizations actually audit their partners to identify these misconducts – and it’s time to change this mentality. This is why the EU is embracing new legislation for supply chain due diligence that encompasses monitoring CSR impacts across the supply chain. Furthermore, take the Investor Alliance for Human Rights – which represents over $30 trillion in global investments - calling on international governments to mandate corporate human rights due diligence. Brands must select their suppliers with human rights in mind as it’s no longer just a good thing to do – it’s good for business.
By including such scrutiny within strategies - from codes of conduct to performance benchmarking monitoring and improvement, to financial incentives – Biden’s executive order could guide companies to protect human rights and create safer work environments for the supply base workforce. This ultimately creates stronger, more sustainable supply chains, promoting more consistent performance monitoring and ongoing improvement. Putting workers’ safety and livelihoods at the forefront helps drive your value chain on the road to more innovative and resilient operations.
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Use Data to Drive Change
Data-centric reporting is the key in opening the door to real change. Stronger data-centric reporting on strategic initiatives, more visibility into supplier risks, and a stronger focus on the supply chain all are crucial. Because the more information you have at your fingertips, the more robust your supply chain will be. And while it may seem like a heavy lift, here are models and strategies that your organization can take to generate stronger, more sustainable operations while amplifying positive impact on a global scale.
Today, Tomorrow, and Beyond
The call has been made for companies to bring sustainability to the helm of their value chain initiatives. And those who fail to answer the call will quickly fall behind as tighter regulations and more rigorous compliance protocols are looming. Real change will be made with the right tools, strategies, and technology in place, leading to a stronger supply chain and a better tomorrow.
Want to learn more? Check out how you can rethink and rebuild your supply chain for a more sustainable future.
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