The companies are confronted with the difficult job of improving their supply chains to be more sustainable and durable to secure more excellent protection against unanticipated catastrophes like natural disasters, insolvencies of suppliers, or the impact of pandemics. Utilizing ESG data to rank suppliers according to their conformity to the environment and human rights standards or the safety of workers is an essential first step toward building a more resilient supply chain.

New requirements for supply chain management

Traditional supply chain management seeks to achieve a sustainable equilibrium between demand and supply using as few inventories and suppliers as possible. The main advantages of this method are a reduction in operational and logistical complexity, as well as high profit.

However, the devastation of the COVID-19 crisis proved that this method is highly vulnerable to problems. Within a relatively short amount of time, several locations of supply shut down and could not be repaired with quick notice. This resulted in production interruptions due to the lack of supplies.

The vulnerability of prices and inflexibility are additional risky aspects of this method. Costs for shipping an entire shipping container from Shanghai to Rotterdam went from 2,000 USD to $54,000 in just two days of the Russian invasion of Ukraine. Warehouses with no storage space with no other alternatives for alternative options required to pay 2,700 percent more than they had before or stop production changing “just in time” into “just in case.”

However, establishing an efficient supply chain that is robust in the context of ESG standards places more pressure on supply chain management.

The steps listed below offer an overview of the essential aspects of a robust supply chain.

1. Avoid and identify the dangers

What is the likelihood that a supplier will not be able to meet their obligations? What can I do to minimize the risk? What risks is a company willing to take on? The goal is to discover risk, analyze and reduce the risk in the supply chain.

The ability of a company to meet its deadlines depends on many variables. They include geopolitical risks such as currency risks, natural disasters, and pandemics. In addition to the traditional risks, information about ESG performances obtained from Dun & Bradstreet also helps to determine the likelihood of a business’s default about ESG elements. With this information is simple to decide which companies have a low carbon footprint, respect human rights, or put a significant focus on health and safety in the workplace.

“When the ESG data is available centrally on a platform like D&B Risk Analytics, sustainability risks can be reliably determined, prioritised and anchored in the award decisions on the basis of a supplier rating,” Swindell explains. Swindell.

2. Widening the perspective of the pool of suppliers

Due to the volatility in the market for procurement often, companies must constantly monitor their suppliers’ information. This allows them to spot external factors that could affect their supply chain at a very early stage to prevent any disruptions.

Further security is offered by examining broader factors when choosing suppliers. For instance, the most innovative purchasing companies do not select suppliers by price alone. However, they expand the criteria to include other factors like track record of performance and ownership, the risks of sanctions, geographical location and financial stability, as well as the reputation of the industry and governance. This can be achieved with the help of comprehensive and up-to-date information about suppliers and the constant improvement of this data, which adds value.

3. Support partners and suppliers that are vital to business

Resilient supply chains are diversified because having multiple suppliers of services and goods across different regions reduces the chance of interruptions. However, relationships with suppliers are also required to encourage compliance.

In this regard, the sustainability requirements must be outlined in requirements specs and agreements. Information supplied by suppliers on an ad-hoc basis and regular on-site inspections is a good way of finding out what requirements a vendor cannot meet today and what skills training or development could aid in resolving the issue.

4. Find and eliminate any violations

“Fail fast” is a tried and true mantra in quick IT project management and an excellent strategy for ESG risk management in supply chains. In this case, ESG violations must be analyzed with a standardized approach followed by a plan of action that can be tailored to the individual as much as possible.

The goal is to eliminate violations swiftly and enhance supplier ESG efficiency, effectively and effectively to avoid future violations.

“The top priority is to be proactive in helping suppliers develop and thereby ensure observance of human rights and environmental standards throughout the entire supply chain,” says Swindell.

5. Consider resilience management as an investment in the long-term

The resilience of the supply chain is a dynamic and continuous process. The underlying causes, types, and length of interruptions may alter just as rapidly as the requirements of regulatory agencies or customer expectations. Companies are also continually evolving and advancing.

The supply chain and management of it must be agile enough to change with the changing environment. It’s also beneficial when resilience is not implemented as an independent function. It is instead integrated into the supply chain by the supply chain manager and can be autonomous when critical ESG situations occur. This typically involves a gradual alteration of the corporate culture, which includes removing the control structures and embracing flexibility and self-organization as an element of the compliance policy.

The goal here is to develop a framework of risk management that guarantees supply chain stability in crises. ESG information provided by Dun & Bradstreet offers valuable assistance in making the right decision.

The sustainability of a company determines its competitiveness.

Changing supply chains to achieve greater sustainability may seem overwhelming. But, in reality, it’s an opportunity since the company’s ESG performance has become increasingly indicative of its competitiveness and the scope for capital acquisition. “Investors, banks, lenders and stakeholders are all increasingly viewing a lack of commitment to the topic of sustainability as a relevant risk factor,” Swindell says. Swindell.

Being able to stand up for your beliefs regarding ESG subjects also helps keep employees loyal and increases a business’s chance of attracting new talent. Based on the industry and competitive climate and the level of governance, decent working conditions, respect for human rights, and environmental protection could be utilized to justify price increases. Ultimately, the savings in resources made through sustainable purchases will positively affect the cost and ecological balance.