‘Potential tensions’ in ESG in supply chains

More and more companies are prioritizing environmental, social and governance (ESG) in their supply chains. But while companies recognize the importance of achieving sustainable outcomes, they are less inclined to acknowledge that most of that impact lies in their supply chains, concludes Avetta, a vendor of supply chain risk management software.

Avetta presents its findings in a report titled ‘Extending ESG best practices into the supply chain: A review of leading organization approaches’. The results show that 79% of companies consider employee health and safety ‘very important’, while 63% regard it as ‘very important’ to reduce their carbon footprint.

87% believe that ESG is important in the supply chain, with 39% of them even describing it as ‘very important’. However, 13% regard it as ‘not very important’.

Potential tensions

The researchers conclude that the survey results show ‘potential tensions’ in understanding how supply chain issues are related to ESG. “Employee health and safety, carbon footprint, diversity, inclusion and human rights are all real ESG considerations. And yet a company that considers diversity and inclusion to be ‘very important’ may only regard ESG issues in the supply chain as ‘somewhat important’ or even ‘not important’,” Avetta states.

Integrating sustainability

According to the researchers, this once again indicates that supply chain sustainability should be integrated into a company’s broader ESG architecture rather than being limited to just the supply chain or procurement disciplines. They therefore recommend that companies set out clear goals for the supply chain in reports, contracts and governance structures. The same applies to assessing, managing and monitoring ESG risks in the chain. In addition, the report states that it is critical to improve traceability, transparency and supplier engagement.