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Multi-tier visibility
Once traceability measures have been established , active risk management can be undertaken to underpin ESG requirements . Traceability systems can be used to identify questionable ESG practices along the extended supply chain , promoting timely investigation and auditing to mitigate risk exposure . It ’ s been estimated by Korse & Curtin that fewer than five percent of all supply chain leaders have significant visibility beyond their Tier 2 suppliers , exposing the business to potential ESG risk from Tier 3 and Tier 4 suppliers and beyond . Risk areas can include natural disasters , which could affect raw material availability , country of origin verification , organic verification , fair trade compliance and animal welfare guarantees , all of which can be validated and tracked through ESG tracking solutions . Following an initial discovery phase , typical solution implementation focusses on risk management ( with a 360-degree view of all product components ), logistic routes , human rights aspects , suppliers , and subcontractor compliance . It is crucial for retailers to constantly monitor all of these aspects to avoid the unknown and not expose themselves to brand damaging supplier practices , associations with unwanted political regimes or unnecessary waste , including carbon emissions .
Having a complete supplier database with multi-tier visibility , helps a brand to drive compliance throughout the extended supply chain , even where they may not have a direct contractual relationship with the supplier . This transparent knowledge exchange and information flow throughout the extended supply chain is key to reducing risk and can help establish business continuity plans to improve resilience . Global supply chain crises have become more prominent , with Covid being a recent example . Business continuity plans are critical to underpin supply chain resilience and , if executed well , can become a point of competitive advantage .
Fewer than five percent of all supply chain leaders have significant visibility beyond their Tier 2 suppliers
Supply chain resilience
To conclude , ESG compliance and reporting is becoming an increasingly important topic , not just for corporate annual reporting , but because it is underpinning brand credibility in the eyes of the customer . As such , it will be a key focus area when seeking to leverage a strong market position , not just because consumers are demanding it , but also because of increasing regulatory requirements .
To avoid the risk of green washing , businesses must improve their understanding and education on the ESG data sitting behind their extended supply chains , beyond Tier 1 suppliers , because the brand risk of adverse
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