ESG in your own supply chain: reporting problems
According to one study, only 39 % of manufacturing companies surveyed are confident they can accurately and defensibly report on ESG in their own supply chain.
From Assent Inc (Assent), a provider in the area of sustainability and compliance in supply chains, there is a new qualitative study on the implementation of ESG and sustainability strategies in supply chains at companies with complex manufacturing. In it, 152 people in positions of responsibility were asked about barriers, plans and status quo of sustainability programs. The survey, commissioned by Assent from Endeavor Business Intelligence, was conducted in North America and Europe in October 2022. Respondents were primarily from the engineering, automotive, electronics and aerospace sectors.
ESG enjoys high priority
The study shows that 87 % of respondents give ESG and sustainability within their own supply chain a high or medium priority. The majority believe that supply chains pose a greater risk to compliance with ESG standards than their own production. Accordingly, 88 % of respondents plan to base their choice of suppliers within the next five years on their sustainability efforts, among other factors.
In order to be able to do this, 69 % expect their company to expand its investment in sustainability practices in 2023, despite the tense economic situation. Around two-thirds also state that they intend to create additional positions within the next three years to deal specifically with the sustainable design of their own supply chains.
Customers and climate protection are the key drivers to more sustainable supply chains
The study also asked about the most important drivers for the implementation of sustainability and ESG practices. The most frequently cited reasons are climate and environmental protection (39 %) and corresponding feedback and demand from customers (33 %). Improving their own reputation (27 %), more resilient supply chains (27 %) or hoped-for competitive advantages (27 %) were also frequently mentioned.
On the other hand, the study also shows which consequences companies see as the greatest risks if they fail to make their supply chains sustainable. Nearly half (49 %) see a potential loss of customers as the most serious. This is followed by the risk of non-compliance and the associated fines (32 %), potential negative publicity (32 %) and the possible loss of partners or suppliers (25 %).
Confidence in one's own ability to provide information is low
Only 39 % of respondents are confident that their company is accurate and defensible about corporate influence within the report on their own supply chain with regard to ESG can. One of the reasons for this is that 47 % state that they are highly or very highly dependent on their suppliers when implementing sustainability strategies. 59 % think that this dependency will even increase in 2023. Problematically, at the same time only 25 % believe that their partners and suppliers have the capacity to sufficiently support their own sustainability goals.
"Reliable data from your own supply chain is an absolute must for any effort toward true sustainability," says Sue Fortunato-Esbach, Regulatory & Sustainability Expert, Product Sustainability, at Assent. "However, for many manufacturers, it is difficult to access data that is buried deep within their own supply chain. At Assent, we help our clients do this by having our experts gather information about practices at suppliers through a variety of channels. In doing so, we give companies confidence that they are meeting their own ESG goals and are in compliance with current laws."
Budgets and expertise are limited
Furthermore, the study asked about the obstacles that make it difficult for manufacturers to achieve their ESG and sustainability goals as intended. The most frequently cited limiting factors are cost and budget (55 %), followed by continuous changes in requirements and legislation (41 %). Problems managing existing data (34 %), lack of awareness (33 %), lack of technical expertise (32 %), or not being able to engage certain suppliers (32 %) are also cited.
"Access to appropriate expertise to keep up with ongoing regulatory changes is limited. This severely limits many companies in their ESG and sustainability efforts," says Sue Fortunato-Esbach. "Skills shortages, already overburdened departments and limited budgets make it difficult to create such expertise internally to a sufficient degree. In addition, there are problems with data availability, quality and analysis. Especially for complex manufacturers with thousands of suppliers, it is therefore usually the better choice to turn to specialized partners."
