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.

Supply Chain, Sustainability, and Workforce Challenges Top of Mind at Women Business Owners Conference

Women’s Business Enterprise National Council Conference

Last week, the Women’s Business Enterprise National Council (WBENC) celebrated 25 years of promoting women-owned businesses at its annual conference in Atlanta, Georgia. Held in person for the first time since 2019, the conference drew 4,000 people, providing incredible opportunities for attendees and suppliers to network and share information about the most pressing topics in the current economic climate, including supply chain struggles and challenges related to employee acquisition and retention.

As a woman-owned company, the Dynamic Technology Solutions team was on-hand to connect with other women entrepreneurs, learn about the challenges facing these business leaders, and meet face-to-face with the large OEMs serving this audience. Our representatives held many one-on-one meetings with medical device and pharma OEMs that included supplier diversity, procurement, and IT business members.

During the conference, we heard directly from suppliers that supply chain resiliency is now an imperative and that sustainability has become a topic of emerging importance.

Speakers and attendees noted that suppliers need to mirror their customers when it comes to adopting an environmental, social, and governance (ESG) perspective. Though there’s no specific road map to follow, it’s essential for suppliers to pursue some ESG initiatives and aspirations in order to even get in the door.

A Focus on Workforce Issues

Another recurring message for business owners at the event was that companies need to keep focused on workforce issues—not only in terms of how to attract new employees but also on how to keep them.

Employers focused on hiring and retention should keep in mind that since the start of the pandemic, workforce demographics have changed considerably. In contrast to members of older generations, young professionals are more likely to seek and value work-life balance, team environment, technology, sustainability, and alignment with company purpose when making decisions about employers.

As reported during the conference, close to 50% of young people polled entering the job market said that they would not join a company unless that company matched their values. This generational shift in mindset has become a real challenge in attracting and hiring talent from an increasingly tight pool of candidates.

One conference speaker offered a possible solution to address the shortage of qualified employees. Accenture CEO, North America, James Etheredge has initiated an 18-month professional apprenticeship program at the company to fill a significant need for skilled workers. The company hopes to fill 20% of its entry-level roles from the apprenticeship program in the U.S. by 2022.

Participating in the WBENC conference and other industry events is just one of the ways the Dynamic team stays informed and connected to the issues and challenges facing businesses today, helping them solve problems and deliver solutions for clients.

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Session at 2022 Women’s Business Enterprise National Council Conference. Source: WBENC