Building a More Sustainable Supply Chain

“Procurement is no longer just about quality, cost and on-time delivery, but also about sustainability. Companies are increasingly recognizing that supply chains can be a key lever for change.”  -Alexander Hellwig

Calls for companies to reduce carbon footprints and contribute positively to a more sustainable future continue to intensify across industries. Demands from employees, customers, regulators and corporate boards have all increased and the supply chain has emerged as a focus area for companies looking to improve their ESG impact.  

Alexander Hellwig, Head of Global Sustainability Content at IntegrityNext, a supply chain sustainability platform driving impact for companies, joined the Greenough team for an informative Lunch and Learn to wrap up our participation in the 2024 Ecomonth Challenge, sharing his insights on the current state of supply chain sustainability in the world. Read on to hear his take on the top three supply chain sustainability challenges facing multinationals and how to overcome them.

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1. Increasing Transparency Across the Value Chain

At the end of 2022, EY conducted a survey about the sustainable supply chain across sectors including retail, consumer packaged goods, health providers, life sciences, government, technology, energy, manufacturing, mobility, and food and agriculture. The research showed that “while many executives have long-term sustainability goals for their supply chains, few have the visibility, technology and comprehensive programs in place to measure their progress.” This is a common challenge Alex and his team still see today.  

When dealing with multiple suppliers, it can be hard to have complete visibility into all those contributing to an enterprise’s supply chain. Often vendors at the Tier 2 through Tier 4 level get missed – and there are many more risks in terms of forced and child labor at lower tiers in supply chains – making it difficult to analyze and mitigate the full spectrum of risks and capitalize on additional sustainability opportunities.  

“Global regulations such as the European Corporate Sustainability Due Diligence Directive (CSDDD) and the Uyghur Forced Labor Prevention Act (UFLPA) in the U.S. don’t stop at Tier 1 or direct suppliers. They are asking companies to go deeper and find and address the risks. This makes comprehensive supply chain mapping and transparency more imperative than ever,” said Hellwig.

2. Fostering Growth Across Markets

Scalability can also be a challenge. As a company grows and enters new markets, additional suppliers are added, bringing in new potential risks and regulatory requirements. To overcome these barriers, IntegrityNext has established a robust database of suppliers – all pre-vetted and monitored constantly.  

“Supplier response fatigue is a real issue. Many vendors are getting numerous requests for ESG information from stakeholders including investors, NGOs, and their direct customers. So by simplifying the self-assessments for suppliers and making their ESG profiles available to all customers, we can ensure a high response rate, accurate data and a smooth process for our customers to onboard easily and make immediate impacts on their supply chain sustainability,” added Hellwig.

As of June 2024, the IntegrityNext platform has nearly two million suppliers under monitoring. “This can ultimately allow companies to enter new markets seamlessly, since many of their new suppliers and their ESG profiles are likely already on our platform.”

3. Driving Change Through Collaboration

There is one global theme that keeps recurring when it comes to achieving supply chain sustainability: companies need to engage in more extensive and targeted collaboration to reach their sustainability goals. However, communication between supply chain partners can often be missed if they come across through a variety of platforms.

IntegrityNext can also help alleviate this burden. Their platform gives a holistic view into suppliers worldwide and their sustainability practices. Companies can implement preventive, corrective and control measures across the supply chain with minimal effort to ensure compliance with regulations and improve their performance.  

“Customers can upload tens of thousands of suppliers to our platform and then communicate and coordinate actions directly through the software. Following up on corrective measures is easily monitored and tracked,” said Hellwig.  

But shared goals and open communication are just one piece of the puzzle when it comes to driving real change and sustainability. Committing to the future of employees and creating sustainable companies beyond the supply chain is crucial for today’s leading enterprises. Cross-functional collaboration across departments such as procurement, sustainability, product, legal, and finance is also critical for enhanced sustainability. Training employees on what’s important – rules, regulations, reporting, tracking financials – is key to successfully implementing a great ESG program across borders.  

Predictions for the Future

With all this in mind, what can we expect in the future from companies who are committed to creating sustainable supply chains? Alex shared a few of his non-negotiables with us for companies who are interested in taking their sustainability initiatives to the next level.  

• First, survey and analyze your emissions. This is a good starting point and a must for any company that wants to ensure meaningful climate action. Scope out your numbers and lean into how you can cut back. Also, it’s never bad to conduct an audit of your suppliers and get all your data in a row to move forward.  
• Remove child and forced labor from supply chains. Make a baseline assessment of your operations and set goals to improve. Work closely with your suppliers and treat them as strategic partners on your journey to a more sustainable business model.
• Don’t forget about your impacts and dependencies on nature. It is time to seriously think about the conservation of our planet.  
• Learn from each other. The U.S. leans heavily into philanthropy, while the EU is heavily dedicated to regulations and reporting. Both have immense advantages and to work together, we can learn from one another.  

IntegrityNext is playing an integral part in the journey for companies looking to shape more progressive and sustainable supply chains. Thanks again to Alex for joining us from Germany and for providing us all with more insight into sustainability efforts across our borders. To learn more, visit https://www.integritynext.com/.