One of my favorite supply chain topics is something that does not always come to folks’ minds when they think about supply chain—ESG factors and impacts. Many are probably asking what ESG stands for: Environmental, Social, and Governance. For today, we are going to focus on the environmental considerations supply chain professionals need to monitor.
When we look into the environmental aspects of ESG in supply chain, we are looking at understanding the environmental impacts of a company’s full supply chain. This is not only referring to a company’s carbon footprint, but can also delve into water usage and efficiency of usage. Prior to this larger trend of corporations being held to a higher standard in ESG factors, a company statement nodding toward reducing carbons emissions was enough for the environmental segment. Today, we are able to benchmark companies far more effectively and hold bad actors more accountable as we are able to obtain more and more data and metrics. Regarding carbon emissions, companies are working harder to fully capture their carbon footprint meaning that they need to include the carbon emissions that come from their full supply chain—the pollutants of 2nd, 3rd, and even 4th tier suppliers.
Another trend that we are beginning to see in environmental, which is tougher to measure, is the sustainability of resources and raw materials. Are companies able to obtain raw materials that are not doing great harm to environment? Should companies get out of products that are causing harm to the environment such as oil-based products or carcinogens? These are all important factors to consider when working on sourcing and product reviews.
So what are some of the ways that companies can leverage their supply chain to better achieve their environmental goals? As supply chain professionals, we tend to have a focus on efficiency, and that is one of the key strategies we can implement to contribute to meeting environmental initiatives: