The Supply Chain Connection with ESG Performance

The Supply Chain Connection with ESG Performance

Sustainability is a critical issue for many businesses, fueled by growing internal and external pressure to measure and strengthen environmental, social, and governance (ESG) practices. As companies seek to improve their ESG performance, supply chain management is also under scrutiny.

ESG issues relate to the supply chain in many ways. For example, companies are vulnerable to risk from the actions of their suppliers involving issues that include child labor, employee safety, and corruption and bribery. Supplier problems in those areas can create reputational damage for companies and even subject them to compliance and legal risks.

The environmental component of ESG is particularly relevant to the supply chain, which typically includes carbon-heavy activities such as transportation and production. The supply chain may drive as much as 90% of a company’s total carbon impact on the environment, according to the EPA. So there’s a lot of room for sustainability-related improvement in supply chains. This is driving a greater focus on companies’ so-called “Scope 3” emissions—those created externally, by other companies outside of the organization. 

But it’s important to recognize that sustainability is no longer just a corporate-responsibility or compliance issue. It’s also a good business practice.

A Window into ESG Vulnerabilities

The key reason why sustainability has become more important to business is because it’s under scrutiny by a growing range of stakeholders. Studies show that U.S. consumers prefer sustainable brands and products, and employees are increasingly likely to say they would prefer to work at companies with strong environmental and social agendas. Institutional investors are also on board, and by 2025, some $53 trillion—about one-third of the dollars under professional management globally—is expected to be in ESG funds, according to Bloomberg Intelligence.

Altogether, this means that sustainability is now playing a big role in meeting customer expectations, attracting and retaining employees, and accessing capital. Improving supply chain sustainability can help ensure that a company finds favor with these stakeholders.

But greater sustainability can also help improve supply chains because it goes hand-in-hand with reduced risk and increased efficiency. Sustainability and efforts to cut carbon emissions typically mean using less raw material, reducing energy and water consumption, and cutting the amount of waste that needs to be processed — actions that help reduce costs and accelerate operations. Tracking ESG data also provides a better window into potential vulnerabilities in the supply chain. And companies that put efforts into supply chain sustainability are likely to find it easier to forge relationships with quality partners who are looking to improve their own supply chain ESG performance.

“Supply chain agility and resilience are inseparable from the drive for sustainability,” a recent report from The Conference Board noted. “Building sustainable practices into supply chains has direct business benefits. It helps companies manage business risks, achieve cost savings through material efficiency gains, enhance brand reputation, create growth opportunities, and manage suppliers more effectively. Harmful environmental practices and inhumane working conditions not only pose reputational risk but also direct disruption risk.”

In the end, supply chain sustainability should not be seen as a burden or peripheral issue. Instead, it’s fast becoming something that is central to sound supply chain management. And it is another area where the supply chain can make a big contribution to competitiveness—and to the health of the planet.

Reflections on the DA4S Conference: ESG, Partnering, and Diversity

DA4S Conference

When the Diversity Alliance for Science held its spring East Coast conference in Newark, New Jersey, several members of the Dynamic Technology Solutions team were in attendance. The following is drawn from their observations during the conference.

For 15 years, the Diversity Alliance for Science (DA4S) has been focusing on bringing greater diversity, in terms of both people and companies, to the life sciences industry. At the recent DA4S East Coast Conference, two aspects of that effort were prominent throughout the event—the need to enhance Environmental, Social, and Governance (ESG) programs, and the forging of partnerships between a variety of companies.

ESG has been around for a while, but as the meeting showed, it is now more important than ever. Today, partners, suppliers, employees, investors, and customers assess the companies that they work with through the lens of ESG. That message came through loud and clear at the meeting, where large pharma companies talked about the ESG attributes they expect to see in their suppliers.

Those pharma companies have good reason to look for those attributes. A few years ago, the McKinsey & Company management consulting firm performed a meta-study of more 2,000 studies examining ESG initiatives and found that 63% reported a positive business impact from those efforts, while only 8% reported a negative impact. So, as discussions at the meeting made clear, ESG is no longer a “do the right thing,” corporate social responsibility initiative—it is a powerful business mandate that can drive real results, now and in the long term. Certainly, suppliers will need to continue to provide value and quality with their products and services, but ESG will need to be in the mix as well.

Meanwhile, the importance of partnerships, captured in the event’s theme of “The Power of Us,” was underscored in several ways. Some discussions, for example, explored how Tier 1, 2, and 3 supplier relationships can bring unique value and innovation to life sciences organizations. A number of supplier showcase presentations (including one by our Vice President of Business Development Tami Schultz) provided insights into a range of solutions available to partners. Roundtable events brought different companies together for mutual education and discussions of possible partnering opportunities. And in the final session of the conference, representatives from various suppliers joined their customer counterparts on stage to talk about the partnering journeys they had taken. Every story was unique, but they all shared a common theme: that partnerships are an important key to building growth and success.

The value of ESG and partnerships—and ultimately, diversity in life sciences—are well understood at Dynamic Technology Solutions. But it was good to have that view reinforced at the meeting, and to have a chance to collaborate with others to explore ways to improve the industry on both fronts.

[Photo Caption]
Dynamic Technology Solutions’ Robert Werner, Tami Schultz, and Dan Wood at the DA4S East Coast Connection in Newark, New Jersey.