Sustainability and ESG

Supplier Accountability on ESG Goals Elusive

Avetta's survey highlights the importance of integrating ESG considerations into supply chain infrastructure and setting specific goals.

Avetta Marketing
min read

The Covid-19 pandemic expedited the need for companies to adopt more sustainable business practices, and this is increasingly extending down to the supply chain, according to a new survey of 2,400 global executives from the Massachusetts Institute of Technology’s Center for Transportation and Logistics. Indeed, more than a third of respondents said the pandemic drove them to increase their companies’ commitments to supply chain sustainability, especially in areas such as employee health and safety and renewable energy, the survey says. Sources say boards need to ensure that management’s supply chain strategy increasingly includes environmental, social and governance issues as companies focus on supply chain visibility and transparency. However, it is difficult for companies to maintain complete visibility of supply chains and hold suppliers accountable to sustainability-related goals.

In a survey of 45 companies from supply chain risk management software company Avetta in June, 39% of respondents said ESG supply chain issues are “very important” and 59% said overseeing ESG in supply chains is already part of the company’s ESG program. Almost a quarter (24%) said they plan to include the supply chain as part of the ESG program at the company. Yet, the largest segment of respondents (50%) said they have just started integrating ESG considerations into the supply chain infrastructure.

“Boards have done a good job pushing ESG into their own company, but I think what they have to tie together for folks is that it’s about their company plus the supply chain,” said Indy Chakrabarti, chief strategy and marketing officer at Avetta. “For most organizations, they are at a very early stage, like implementing a supplier code of conduct. That’s a good first step, but the next step is specific achievement of goals.” Businesses are first determining the materiality of issues such as carbon footprints and diversity and inclusion, Chakrabarti said.

According to the Avetta survey, companies are also using the United Nations’ Sustainable Development Goals to help craft supply chain targets. From there, they are setting internal targets, adjusting sourcing and procurement policies to align with the company’s ESG policies, engaging with suppliers on ESG performance and joining industry and sector networks to get educated on best practices. However, companies may have thousands of suppliers of different sizes in different locales with different ESG-related mandates, making the goal-setting process more difficult, Chakrabarti added.

View the entire article here: Supplier Accountability on ESG Goals Elusive

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