Businesses are “suffering from major blindspots in their supply chains” that make it “impossible” to achieve ESG goals, according to a report.
Almost three-quarters of businesses (73%) cannot tell if their closest supply chain partners meet any kind of ESG standards – including their own, research by business spend management platform Coupa found.
The report, How to mitigate ESG risk in your supply chain, found of these businesses, 57% believed their ability to assess supplier risk and compliance needed to be improved, while 6% had no ability to do this at all.
Furthermore, only 37% of large enterprises said they had an effective risk management system in place to ensure the environmental and social integrity of their supply chains.
Donna Wilczek, senior vice president of product innovation and strategy at Coupa, said: “Even with all the will in the world, no business can fully realise their ESG goals and make a meaningful difference if they do not possess accurate and timely data on which to make decisions.”
Half of businesses (49%) said a lack of data sharing was the top factor preventing businesses from accurately assessing suppliers’ ESG actions.
Further reasons included businesses relying on technology not designed for complying with ESG standards (35%) and dealing with non-compliance in other company departments (20%), including instances where purchasing teams were buying from suppliers who hadn't been approved.
The survey involved 800 business leaders in organisations with over 1,000 employees across Australia, France, Germany, Singapore, UK and the US.
The report said the inaccessibility of available data was compounded by a lack of agility when replacing suppliers.
Despite the majority of businesses surveyed (95%) saying it was important to be able to quickly replace suppliers that don't align with their ESG values, 42% said replacing a supplier would take them a couple of months or more – if they were able to do it at all.
Only 16% said they would be able to adapt within a couple of days.
The report said: “This inertia suggests a lack of supply chain resiliency among many large enterprises, which could be addressed through better supply chain design and planning.”
Steve Banker, vice president of supply chain services at ARC Advisory Group, said: “While many are still early in their journey and marching towards net zero goals, it's clear that quicker access to supplier information can aid supply chain planning and help businesses better respond when disruption arises. With this type of data collaboration, organisations can confidently make choices that reduce costs and carbon, as well as risk.
“If businesses truly want to operationalise their ESG strategy and corporate purpose, they need transparency technologies that go beyond mere reporting, and enable buyers and suppliers to collaborate and exchange data as a community for a common cause.”
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