The road to supply chain sustainability
The German Supply Chain Due Diligence Act will come into force in 2023 and the EU Commission is planning to release similar European regulations. Responsible supply chain management ensures that suppliers are following effective environmental, social and economic governance practices, and sustainability should play a central role.
As well as reducing your company's environmental impact, improved supply chain sustainably can help promote overall quality and business resilience, while ensuring compliance with regulations and safety standards. Companies are also under increasing pressure from investors, politicians and consumers to act in a socially and environmentally conscious manner.
Steps to sustainability
Recent research from the TüV Association [1] reveals that many German companies support legal requirements for sustainable supply chains. 56% welcome the upcoming Supply Chain Due Diligence Act, while nearly a third (29%) are against it and 15% do not have an opinion. 47% have also defined sustainability criteria for some suppliers, with 40% having conducted supplier audits and 33% having already integrated sustainability aspects into their supply chains. A third have already realigned their supply chain, paying particular attention to greater transparency and the traceability of products.
However, the research also showed that in practice implementation often fails, mainly due to a lack of human and financial resources. In particular, small and medium-sized companies find it difficult to gain a detailed insight into every element of their entire supply chain - making effective enforcement complex. Obstacles which prevent companies from prioritising supply chain sustainability include a lack of demand from customers and their willingness to pay more for sustainably sourced goods, alongside economic and financial pressures.
More positively, 67% of respondents said that the global Covid 19 pandemic gave them the opportunity to realign their supply chains. The crisis offered them the opportunity to ensure that sustainability plays a central role, alongside economic factors such as security of supply, diversification, or risk minimisation.
Competitive advantage
Nearly all research respondents believe that the Supply Chain Act will have a positive impact (95%). The law not only sets incentives to operate more sustainably, but also creates uniform standards that help to set a level playing field amongst suppliers. Indeed, 83% of respondents said they hoped that the new Supply Chain Act would introduce uniform competitive conditions. However, respondents also fear that high administrative costs and excessive bureaucracy may discriminate against smaller companies which do not have the resources to deal with these additional burdens.
A long-term opportunity
A study from independent strategy boutique, Stern Stewart [2], claims that there is a significant gap between relevance and actual utilisation of company activities regarding sustainable supply chain optimisation.
It also reveals that while sustainability is top of mind for board members and top managers across all industries, in practical terms most companies are behind the sustainability wave. While they realise that there is an urgent need for action, they are still struggling to catch up. This supports the findings of the TüV Association research that in practice more sustainable implementation often fails.
领英推荐
Effective measurement
The Stern Stewart study also highlights the importance of measurable, tangible targets. With 49% of respondents in TüV’s research stating that a lack of measurability on the impact of sustainability efforts in the supply chain was preventing them from paying attention to it.
TüV’s research goes on to reveal that respondents have tried to review the sustainably of their supplier through:
Ensuring supply chain transparency
Ensuring a sustainable supply chain involves assessing your procurement processes through the lens of environmental and social responsibility to identify suppliers’ current compliance status. However, because supply chains stretch across multiple national sites and international borders, the process of ensuring that suppliers are taking environmental responsibility into consideration can be complex. One solution to this issue is highlighted in the Stern Stewart study, which suggests that the initial transparency achieved through assessment according to recognised standards is key to successful sustainability.
TüV Association’s research revealed that a large majority of respondents (86%) cited that the most important measure for the successful implementation of the Supply Chain Act would be the certification of suppliers, with 78% believing that compliance with due diligence should be audited by independent bodies.
TüV SüD partners with corporations worldwide to address responsible supply chain governance . With our portfolio of customised audit services and management system certifications, our experts can help you assess and verify sustainable practices throughout complex and global supply chains.?
[1] A representative Forsa survey commissioned by the TüV Association / Verband among 500 companies with 25 or more employees.
[2] Sustainability - Hype vs. long term opportunity, A Stern Stewart Study, April 2022