3 actions for Supply chain planning best practice and ESG

Best practice: Supply chain and its role within ESG

Now, more than ever, organisations are expected to not only deliver strong financial performance but also a positive social and environmental impact. As ESG reporting is a cross-functional undertaking, it is best practice that all data is housed on a single platform, to support planning, different internal reports as well as any external reporting requirements.

ESG and supply chain are inextricably linked and far more involved, as many organisations cannot truly understand their own ESG position without including the impact of their suppliers. For many industries, the majority of the ESG footprint hides deep within the supply chain, not as a result of the organisation’s own direct operations.

A “shallow approach” to ESG is no longer sufficient. Best practice supply chain ESG accounts for the entire footprint of the operations. It requires looking deep into the supply chain to understand where materials come from, as well as the journey they take from around the world to reach processing at the organisation’s own sites.

There are three actions from a planning and reporting perspective that organisations should build into their ESG processes:

1. Supply chain leaders should take advantage of automation with the goal of carrying out real-time reporting with minimal manual input. By automating the process, it will help them develop parameters against which to measure the milestones, as well as help to identify risks and opportunities, including financial statement impacts.
2. With a comprehensive view into the supply chain, as well as a clear understanding of the various challenges that could affect the organisation and its reputation, supply chain leaders can mitigate risks and create substantive ESG programs that are proactive and transparent.
3. Finally, finance need to ensure that any supply chain strategy is supported by sufficient budgeting to implement the required initiatives and plans. Supply chain and finance teams have an opportunity to collaborate to build value and identify risks, as well as new business opportunities.

Traditional supply chains were set up to deliver stability and minimise costs. Most businesses use a combination of systems to manage their supply chain operations, including an ERP system and spreadsheets, but that can be a costly mistake.

This fast-paced, fragmented, consumer-centric world that we live in today requires a different sort of supply chain. The new priorities of resilience, agility and sustainability cannot be tacked onto existing supply chain set ups.

The supply chain of the future is much more dynamic – it’s able to predict and respond to rapidly evolving demand, continually changing product/channel mix as well as navigate business disruptions, while remaining sustainable. A successful, efficient supply chain relies on access to real-time data and analytics to ensure data-driven decision-making to enable swift responses when necessary.

Technologies such as analytics tools and machine learning will play a major role, but to be truly effective they must be supported by new processes, talent, and governance. It also requires a change of mindset, from the top, with risk, agility, and sustainability KPIs considered alongside the traditional measures of cost, capital usage, service, and quality.

ESG in supply chain management is a critical component of operational success, so having a supply chain underpinned by rigorous planning and reporting can drive positive change and build a more sustainable and responsible future.

For further information, including best practice tips for S&OP, supply, and demand planning, download our supply chain planning best practice whitepaper here.