A multitude of events over the past two years have caused worldwide disruptions and put supply chains in the spotlight . For a couple of decades , businesses have centered their supply chain design around ‘ just-in-time ’ delivery , but the past few years have forced them to re-evaluate their approach .
Despite ongoing disruptions , this refreshed focus on supply chain networks has provided companies with an opportunity to assess and improve their networks , not only from an efficiency standpoint , but also from an environment , social and governance ( ESG ) perspective .
The rising focus on ESG
Although some leaders may still fail to recognize the term as more than a buzzword to their own detriment , ESG is becoming a vital regulatory requirement and a key business priority – especially for those who are focusing on a purpose beyond generating profits .
It ’ s not only because it ’ s the right thing to do but because of pressure driven by customers and investors . There ’ s also growing regulatory pressure from governments on companies to meet ESG objectives , with the introduction of new laws that push businesses to act on reducing their carbon emissions and prevent environmental degradation or ethical misconduct . This is not only within their operations but also with direct and n-tier suppliers , as well as subcontractors throughout their supply chain . Companies that fail to comply with these regulations will face stiff penalties .
One example of new regulation is Germany ’ s Supply Chain Due Diligence Act . Starting January 2023 , it will require large businesses operating in the country to monitor their supply chain for human rights violations and compliance with environmental standards – otherwise they ’ ll be met with hefty fines . In the US , the Securities and Exchange Commission ( SEC ) has proposed the introduction of ESG reporting rules and requirements . This would also require companies to disclose certain information about climate-related risks and emissions .
However , the regulatory trend shouldn ’ t be viewed as a burden . It ’ s an opportunity for companies to have a positive impact on the world and begin the process of assessing and improving their supply chains – a perfect time to push forward their ESG priorities . Especially as social and governance standards are typically well established in large western companies already , yet their supply chains often generate far greater emissions than the company ’ s direct emissions . For any business that has the goal of achieving ‘ net zero ’, the sustainability of their supply chain is vital .
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