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Understanding Supply Chains Risks: Sustainability and ESG

By Avetta Marketing
May 02, 2022
4 minutes
Understanding Supply Chains Risks: Sustainability and ESG

Environmental, social and governance (ESG) considerations are at the forefront for investors, stakeholders, consumers, employees, and governments. Up to 90% of an organization’s ESG footprint is in its supply chain. In the past few years, there has been a growing demand behind ESG factors and the drive to greater disclosure and transparency from investors and shareholders.  

What do they want to see? They’re looking for greater corporate disclosure and confirmation of regulatory performance to see how organizations demonstrate their ESG credentials. Because of this, companies face unprecedented risks regarding their approach to ESG and sustainability issues.  

Environmental risk mitigation 

Increasing attention on climate change, company carbon footprints, and resource protection have made environmental risks a primary focus for investors and consumers. How a company manages its environmental risk and regulation is important to assessing risks and building sustainable practices in your business. 

Social risk mitigation 

Social risks include things like human labor violations, employee treatment, or diversity issues. These issues can often impact everyone at the company—from stakeholders to employees to customers to suppliers and local communities. Ultimately, the public’s trust is critical here. 

Governance risk mitigation 

Governance risk occurs when rules or regulations are broken, usually by someone or a group of people at a senior or board level. Companies must navigate compliance and regulations, establish the role board of directors places in overseeing risk management policies, and determine what disclosures need to be made to the public and investors.  

How to reduce ESG risks   

A company that ignores ESG risks or fails to have proper ESG controls can incur significant economic costs and reputational damage. Incorporating an ESG framework into business operations and processes can help safeguard a company’s long-term success by taking steps to mitigate these risks. 

Developing, implementing, and reporting on risk mitigation strategies can be a good starting point for businesses who wish to have better control over their ESG factors. By leveraging the Avetta One platform—the industry’s largest Supply Chain Risk Management (SCRM) platform—companies can measure and remediate ESG compliance issues, besides fulfilling other supplier qualification needs. The platform allows you to:   

  • Access a Centralized Supply Chain Risk Management Hub — Get a holistic supply chain view to manage ESG and sustainability risks and perform diligence check across all supplier tiers.   

  • Leverage Automated and Standardized Evaluation — Qualify suppliers through auto scored ESG evaluations based on a broad spectrum of universal standards. 

  • Get Tailored and Dynamic Evaluation for All Supplier Types — Leverage dynamic evaluations based on supplier classification and specific client requirements.   

  • Evaluate and Improve ESG Maturity — Track your suppliers’ progress over time using incremental evaluations and take suggested actions to grow your suppliers’ ESG scores and sustainability programs.   

  • Make Data-driven Decisions — Leverage detailed analytics to target areas of concern, highlight achievements, and facilitate better corporate reporting and ongoing development of ESG and sustainability performance.   

  • Unified Management of All Supply Chain Risks — Use the same platform across all supplier evaluations, spanning safety, sustainability, liability, financial health, workforce management, cybersecurity, and diversity. 

ESG reporting and data can help companies engage in effective risk management and take a proactive approach, while developing strategy roadmaps that address threats before they happen. 

To learn more about sustainability management visit our website, call 844-633-3801, or email [email protected]

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