ESG and Supply Chains

As the world faces a significant shift in the social paradigm, many companies are re-evaluating their responsibilities concerning the environment and society.

One area undergoing intense scrutiny is how companies manage their supply chains. If you’re getting into sustainable investing, it’s important to understand how ESG affects the vendors involved in a company's supply chain.

What Is ESG? What Are Supply Chains?

ESG is concerns the environmental, social, and governance issues that affect the long-term sustainability of organizations, be they businesses or countries. In business, ESG encompasses a wide range of topics such as human rights, anti-corruption, bribery, product safety, and environmental impact.

As we all know, supply chains refer to the networks businesses use to source the materials and components they need to create their products or services.

Increasingly, when assessing companies regarding their ESG performance, investors want to assess the risk associated with vendors in a company’s supply chain and how the company manages its relationships with said vendors to ensure they uphold the same environmental and social responsibility standards as the company itself.

How Do These Factors Affect the Company and Its Investors

Now that we know how ESG and supply chains relate, we should investigate how these factors affect the company and its investors.

Most people don't know that the company doesn't always have the full authority to dictate how its vendors operate. This gray area introduces the company's risks of reputational, legal, and financial damages.

Investors are also at risk if vendors in a company’s supply chain pursue behaviors considered unfavorable from an ESG perspective.??These unethical behaviors, like using child or other forms of forced labor, can create significant risk for a company and could cause investors to lose a significant amount of money.?

How ESG Metrics and Analytics Can Help

In an article published by Thomson Reuters, dismissing an ESG-related issue by denying knowledge of the malpractices is no longer an adequate defense. Customers and investors look at the company's accountability in this modern age.

This is where having processes and procedures to monitor vendor performance regarding ESG behaviors can help companies and their investors. By understanding what's happening in the supply chain, companies are in a better position to take corrective measures before any irreparable damage is done.

Moreover, the more companies that put ESG monitoring procedures in place, the more vendors in the supply chain need to act start acting ethically.??Said another way, the ESG revolution will go a long way to forcing suppliers throughout the world to up their ESG game or risk losing valuable business to their competitors.?

ESG Is About Intentional Change To Sustainable Business Practices

As more and more companies are starting to develop their voices and hear the pleas of their customers, "sustainability" is no longer a nice-to-have. It has become a business imperative.

The first step to any journey is taking conscious steps to move in the right direction, and that is what ESG is all about. It's about committing to changing how we do things for the betterment of our planet and its people.

Gain ESG Insights with OWL ESG's Product Suite

If you're looking for a comprehensive and user-friendly product suite that can help you with all things ESG, then OWL ESG has your back.

We offer a wide range of products and services designed to help you collect, track, report, and improve your company's ESG performance. Visit our website today or contact our team to learn more about how we can help your business.