Just read a great article by Tinglong Day and Christopher S. Tang you can find linked to this post below.
https://www.fastcompany.com/90698724/esg-investing-has-a-sustainability-blind-spot-supply-chains
Why did I decide to post about it?
I think that this article poses some very interesting questions that if answered and acted upon, can help improve supply chains and reduce risk to environments, consumers, and investors on a global scales.
The article lays out what ESG is so I’ll give a very quick overview however, for a more in depth explanation please check it out yourself.
What’s ESG and how does it relate to supply chain?
ESG stands for environmental, social, and governance of a companies business practices. It’s mainly used by investors and fund managers to rate companies in set metrics that fall within these three categories.
Why is it used and considered important?
ESG ratings are used for investors or money managers to make decisions on whether they should add companies to their funds portfolios and if those companies are being responsible and ethical when it comes to operations and business practices. What is it important? For example, It would be bad to invest in a company and then find out they are violating some labor or environmental laws.
Is it working well?
It works well to a point however, when it comes supply chains, ESG ratings don’t always accurately or thoroughly assess a companies supply chain partners.
Also, the ESG rating criteria that is used by organizations and in different country’s isn’t standardized so ESG measurements on a similar company operating in different countries could be different.
How do we improve ESG measurement?
Suggestions on how to improve the ESG rating and decrease risk to the environment, consumers, and investors:
- Standardizing the measurements used in ESG ratings along with reporting standards.
- Make supply chain operations a measurement where applicable.
- Standardize the depth of supply chain partners that should be assessed based on the industry.
- Add supply chain
What are the benefits of improving ESG measurements?
Reduced utilization of bad suppliers.
Increased adherence to environmental regulations and policies.
Better confidence in company social responsibility.
Reduced supply chain disruptor risk associated with operational efficiencies.
Check out the article and let me know what your improvement suggestions are and what the benefits would be.
