We’ve discussed at length the benefits of having full visibility into your supply chain and building close collaboration with your suppliers. This is foundational to effectively address increasing demands from your customers, employees, and stakeholders. However, these attributes can also play a big part in achieving environmental, social, and governance (ESG) compliance. SourceDay’s direct procurement risk management solution provides real-time visibility for improving supply chain transparency, optimizing operations, and reducing risks associated with non-compliance. This proactive approach can bring your entire supply chain under control, including hazards you know about as well as those you can’t see coming.
Regulations are Not New, but Sustainability Trends are on the Rise
As global regulations evolve and become adapted and localized in different countries, businesses are asked to manage increasingly complex global standards across their operations. Compliance is typically a moving target, requiring organizations to be adaptable to respond quickly to shifts in the regulatory environments in which they operate. This is vital across all industries, but in heavily regulated environments such as aerospace or healthcare, managing this risk can create a significant cost for the organization.
Depending on your industry, your company may already have ESG goals that it’s being asked to adhere to. In a business context, sustainability refers to an organization’s commitment to reduce the potential for negative impact on society and the environment. In many countries, reporting on how a company meets its ESG goals is mandatory, and earlier this year in the US, the SEC adopted new rules to improve and standardize how public companies make climate-related disclosures.
Companies that can’t manage their operations in a way that meets increasing ESG expectations may see their business shrink as their customers go looking for more sustainable alternatives. In addition to customer expectations, as mandatory ESG requirements are adopted worldwide, potential liabilities for non-compliance are expected to increase. This adds pressure to efficiently integrate ESG into business practices and financial reporting.
ESG Compliance Challenges from the Supply Chain
As organizations and governments become more aware of how their supply chains impact the environment, sustainability moves to the forefront of executive and legislative priorities. Finding an approach that allows your organization to rapidly adapt its supply chain will be foundational to growth in an evolving market.
Just as important as being able to show commitment and compliance goals, your regulatory position depends on your complete understanding of your supply chain. Supplier engagement and collaboration can go a long way toward making sure your suppliers meet the same high standards that you do. This enables you to protect your organization from compliance risks that your suppliers could cause and to reduce the costs of manual compliance monitoring. Collaboration can identify and source environmentally friendly materials, support sustainability initiatives, and reduce the carbon footprint of the supply chain through optimized transportation and energy-efficient practices. SourceDay makes it possible to trace the origin of materials and track supplier compliance with environmental and social regulations.
What Should You Do Now?
The two most actionable places to start are through close collaboration with suppliers and achieving as much visibility into your supply chain as possible. AI-powered PO lifecycle management from SourceDay brings together these threads. It allows you to build full visibility into your supply chain and can assist you in identifying and vetting suppliers that meet your ESG compliance and regulatory criteria.
SourceDay also makes it easy to integrate your organization’s sustainability and regulatory requirements into a well-defined procurement process with automated workflows, so flowing them down to your suppliers is not a complex, manual process. SourceDay also integrates with any ERP, streamlining the location and verifying of supplier-provided compliance documents such as certifications and inspection reports. Suppliers and buyers can work together using a single, easy-to-use web platform for real-time collaboration.
You can plan all you want, and planning is imperative. However, employing sound direct procurement risk management practices can make compliance much easier. By providing an easy-to-use digital solution to your suppliers, you can encourage participation from your supply chain, increase ESG compliance, and reduce the cost impact of manual interventions from your supply chain management team.
