Most companies lack visibility into suppliers’ ESG data

Companies suffer from considerable blind spots in their supply chains when it comes to environmental, social and corporate governance (ESG) objectives, which also makes it impossible to achieve them. For example, 73% of companies do not know whether their key supply chain partners comply with their own – let alone other – ESG standards, according to research by the business spend management platform Coupa.

The report, titled ‘How to mitigate ESG risk in your supply chain’, shows that 57% of the companies surveyed believe that they need to improve their ability to assess supplier risk and compliance with standards. However, 6% are completely unable to do this. Furthermore, only 37% of large companies say they have an effective risk management system in place to ensure the environmental and social integrity of their supply chain.

“Even with all the will in the world, no business can fully realize their ESG goals and make a meaningful difference if they do not possess accurate and timely data on which to make decisions,” said Donna Wilczek, Senior Vice President of Product Innovation and Strategy at Coupa.

Main obstacle: lack of data sharing

Half (49%) of the companies surveyed cite a lack of data sharing as the main obstacle to properly assessing suppliers’ ESG actions. Other reasons for the problems include reliance on technology that is not designed for ESG compliance (35%) and non-compliance with ESG by other departments within the company (20%). For example, there are instances in which procurement teams do business with unapproved suppliers.

According to the report, inaccessibility of data is exacerbated by a lack of flexibility in replacing suppliers. Although 95% of the companies surveyed say it is important to be able to quickly replace suppliers that do not align with their ESG values, 42% indicate that replacing them would take several months or more, or might not even be possible at all. Only 16% say they could adapt within a few days.

Supply chain visibility software

Steve Banker, Vice President of Supply Chain Services at ARC Advisory Group, commented: “While many are still early in their journey and marching towards net zero goals, it’s clear that quicker access to supplier information can aid supply chain planning and help businesses better respond when disruption arises. With this type of data collaboration, organizations can confidently make choices that reduce costs and carbon, as well as risk.”

Banker also claimed that if companies really want to operationalize their ESG strategy and corporate purpose, they need supply chain visibility software that allows buyers and suppliers to collaborate and exchange data. The Coupa survey was conducted among 800 executives at companies with 1,000-plus employees in Australia, France, Germany, Singapore, the United Kingdom and the United States.