ESG, or ASG, in Portuguese, is the acronym for environmental, social and governance. The initiative was created in 2014 by the UN Global Compact and is now considered a fundamental issue for companies to generate value for consumers and investors.
To get an idea of the growth of ESG in recent years, according to a global survey by the Institute of Business Value (IBV), with the participation of 9 countries, including Brazil, 54% of consumers are willing to pay more for products from responsible brands.
A recent EY study on investors and companies showed that ESG has guided 99% of decisions on investments in Brazil.
Below, check out some supply chain initiatives that can help companies engage with the ESG and SDG agenda (Sustainable Development Goals):
1. Adoption of cloud technology
When adopting a cloud computing solution to manage purchasing processes, the company promotes more transparent business relations and with compliance. In addition, it has an impact on energy consumption, as it does not require IT infrastructure.
2. Efficient and sustainable transport and logistics
The transportation sector is the most polluting, followed by industry. Today, it is possible to opt for vehicles powered by clean energy, optimize routes with the use of technology and reduce travel times. It is also essential to keep the maintenance of the modes up to date.
3. Management of contracts with partners
With a efficient contract managementThe negociações with suppliers become safer, with visibility and control, meeting the compliance and audit requirements of all processes.
4. Supplier management
Managing suppliers, through solutions that automate and optimize steps, such as approval and performance evaluation, helps to reduce the risks related to ESG aspects. In addition, it promotes more collaborative relationships with its partners.
How to promote ESG as an organizational culture?
In the corporate world, the shopping areas is one of the main protagonists of the ESG agenda. And a sustainable purchase goes far beyond the inputs chosen for its production.
It is essential – and very challenging – to ensure that entire production chain does not violate human rights. It is also essential that there is no bribery or corruption in the negotiations.
These and all the others sustainability issues e compliance need to be a priority on the agenda of CPOs – whose mission is to expand discussions within companies.
Despite this, the purchasing area cannot and should not walk alone in sustainable journey. The entire company must act responsibly and commit to ESG aspects.
For sustainability to become a reality, that is, to become a culture, it is necessary for the circular economy, ESG and supplier management to comply more than legal aspects.
Supplier engagement starts in-house
A supplier management and the purchasing area need to walk together on the journey towards sustainability. In companies, sustainability and ESG policies contain the requirements for supply, but unfortunately they are not sufficient to ensure good practices on the part of suppliers.
Despite this, the purchasing department cannot and should not walk alone on the sustainability journey. The entire company must act responsibly and commit to ESG aspects.
And that's where the importance of having supplier management practices, such as approval and evaluation, stages in which fiscal, labor, environmental aspects are verified, ESG engagement, Among others.
In addition to having very well-designed processes, on this journey, it is necessary to see the supplier as strategic partner in terms of sustainability, having a close relationship and, of course, building solutions together to reduce the impacts of their activities.
For all these requirements to be successful and to engage suppliers, it is essential that sustainability actually happens inside out – and not the other way around.
ESG and Procurement: a vision beyond environmental issues
In addition to attention to their own manufacturing, transportation, distribution and procurement activities, companies are increasingly emphasizing the actions of social impact, which encompass diversity and inclusion in hiring practices, whether in the workforce or in hiring suppliers.
And Procurement is part of the process by which organizations can generate value, influencing and developing the supply chain in favor of a more responsible logic for business.
However, while some companies are based on the new economy (conscious capitalism) and have already anticipated the new culture, others still maintain price, level of service and quality as the only parameters for choosing suppliers.
At this point, the ideal is to prioritize a balanced approach. More than just the economic issue, it is necessary to think comprehensively about the social and environmental impacts induced by the purchase.
As sustainability agendas must be linked to risk, efficiency and value creation and innovation. Managing supply risk and its practices is a way to chart a more sustainable path.
See you next time! 😉