Advanced Risk Assessment

Is Supply Chain Responsibility the difference between CSR & ESG?

OK, so CSR has been around for a while, it’s just been rebranded as ESG, right? Err, no, definitely not.

Supply Chain Responsibility should have been part of CSR from day one – now integral to ESG, businesses can’t afford to ignore it.

CSR, Corporate Social Responsibility, has indeed been around for a while. It began as a buzz word that provided an all encompassing motto for sustainable business practices. CSR represents a company’s efforts to have a positive impact on its employees, consumers, the environment and wider community. It’s a form of self-regulation that most large companies report on annually. I’m sure there were many businesses that embraced all that CSR could be, but now there are clear and definite targets to meet (carbon net 0 by 2050 for example). CSR just doesn’t offer a measurement framework. Worst case, many businesses could shout about CSR, make promises and symbolic gestures, whilst actually doing nothing at all. Was CSR ever used as more than just a marketing strategy? Did Supply Chain Responsibility ever form part of CSR activities?

Organisations promoting change or planetary protection such as the Greta movement or Wasteaid,org now, quite rightly proliferate. Whilst we must all do our little bit at home, the biggest impact will be made by Businesses and thankfully Environmental, Social and Governance, ESG, is the tool to make this happen.

Each of the 3 categories become a ‘silo’ to report upon with each measure being criteria led and quantifiable.

ESG measures these activities to arrive at a more precise assessment of a company’s actions. In particular, ESG looks at how businesses:

  • Respond to climate change
  • Treat their workers
  • Build trust and foster innovation
  • Manage their supply chains

And rather than producing impressive sounding rhetoric, ESG demands metrics.

Once a baseline is established – where are we today – and a destination decided upon – where do we want to get to, the journey to get there becomes achievable. Progress then becomes measurable and more importantly, businesses become accountable. This means we get to see continuous improvement and real change in the world around us. By incorporating ESG strategies into their modus operandi, businesses can report on how many thousands of litres of water they’ve saved, how much carbon has been removed from their business practices or how many tonnes of plastic have been recycled. A report by the ISS EVA titled ‘ESG Matters’ states that 93% of the worlds largest companies (measured by revenue) are now disclosing these kinds of figures – and other businesses will surely follow where the market leaders tread.

Is Supply Chain Responsibility the link between ESG and profitability?

Apart from being the right thing to do, investing in ESG isn’t about making money. Investing in ESG allows a business to consider how ethical it’s practices are. So are businesses putting sustainability and ethical principles above profitability and just accepting these a new cost of doing business? Actually, no. The rise of the savvy consumer that wants to know the how, what, where of their products is shifting their buying habits. Businesses that can demonstrate ethical, responsible and sustainable sourcing – and therefore demonstrate Supply Chain Responsibility – through their supply chains have prospered and bad press surrounds Businesses that get caught out.

So how can businesses begin their ESG journey?

There’s no single straightforward answer – and it’s certainly not an easy process (be cautious of anyone that tells you otherwise!). Every business can look at it’s own immediate, day to day activities & identify improvement opportunities. They can measure where there are today and then create reports and plans. Where it becomes more difficult is the supply chain. How can businesses take a deep dive into their Supply Chain? Can a business confidently state that there is no Modern Slavery in its supply chain? Without the proper tools, it is very difficult.

As part of our Supply Chain expertise, QADEX have released Supply Chain Mapper and STAR-Index to aid this process. Supply Chain Mapper, as the name suggests provides a tool that will enable you to identify every step taken by a raw material from source to your Goods In bay. With full visibility of your entire supply chain you can begin to provide your Customers with clear pictures of the products they purchase – and increase Customer Confidence.

supply chain map

Visibility of the entire raw material supply chain allows you to see where ingredients are being sourced. This could include from regions with elevated risks, such as those that might be employing slave labour; have poor safety standards; a record of fraud and adulteration; or of natural disasters, such as earthquakes, flooding, drought, etc. Armed with this intelligence, you can then take the decision to source from alternative sources if you need to and lower the risk profile of your supply chain.

STAR-Index provides actionable insight on the wider risks across your supply chains and investments. Taking a 4 pillar approach to risk, STAR-Index looks at risk management under the following headings:

  • Sustainability
  • Technical
  • Assets (Natural/Financial/Other)
  • Responsibility

STAR Index™ is a methodology for measuring your supply chain risk profile across four key areas. Developed by QADEX over 12 years, our unique RAG (Red, Amber, Green) rated index measures and benchmarks your business and its supply chain, using a combination of publicly available information, supply chain data and our own expertise.

The rating offers as guidance to identify areas for improvement. The rating can be further enhanced by our consultation process. This makes use of our expertise and that of our partners to develop a set of actions using an algorithm based on insights drawn from your own data, teams and third parties.

By integrating STAR Index™ with your existing audit regimes, you will gain greater insight and clarity into where your highest risks are.