Five questions boards should ask to ensure a sustainable supply chain

Global supply chains have been facing major disruptions in recent years. This is due to a number of factors, such as the Covid-19 pandemic, geopolitical risks linked to the conflict in Eastern Europe and the Middle East, as well as the ongoing effects of extreme weather caused by climate change.  These disruptions are largely beyond the control of the organisations that are impacted by them and can be difficult to overcome.  But a focus on supply chain security and resilience can lead to better preparedness and foresight when facing these ongoing and impending challenges.

Flexibility and transparency in the supply chain

Ensuring flexibility and transparency in an organisation’s supply chain is key when facing major geopolitical, environmental, and social challenges. It is also essential when complying with various regulations and disclosure requirements being introduced across Europe (and globally), such as the EU Corporate Sustainability Due Diligence Directive (CSDDD) and the Corporate Sustainability Reporting Directive (CSRD).  These regulations require that an organisation is monitoring its supply chains to identify and mitigate any risks in relation to human rights or environmental challenges, as well as disclose its carbon emissions along the value chain.

The guidance and oversight of the board of directors is integral to building a sustainable and resilient procurement policy.  In turn, sustainable supply chains will aid the overall objectives of boards to create long-term value for its stakeholders and to protect its labour force.  It is imperative that a board understands the disruptions its supply chain faces.  But also then how the organisation is working to overcome these disruptions as this can lead to opportunities beyond sustainability and can support long-term economic growth and competitive advantage.

Sustainable supply chain: Top questions all boards should be asking

For a board to get a thorough understanding of the organisation’s sustainable procurement and supplier management practices, it should focus on the following questions:

• Does the organisation’s procurement policies and procedures align with its overall strategic goals and sustainability objectives?
• How does the organisation monitor the efficiency and success of its sustainable practices across the supply chain and ensure that its suppliers are complying with the organisation’s code of conduct and sustainable policies?
• Is the board receiving sufficient information on a regular basis on how the organisation is managing its supplier risks and the environmental and social standards it is implementing across its supply chain?
• What is the organisation disclosing on its sustainable procurement practices and the Board’s involvement in such practices? Is the organisation prepared to report on upcoming disclosure and due diligence regulations?
• Does the organisation ensure sufficient knowledge of its sustainability practices and procurement polices across its workforce and the workforce of its suppliers?

Incorporating sustainable practices into procurement and supplier management practices ensures a holistic view of the supplier, a key stakeholder to the organisation.  Board engagement on sustainable procurement will aid and enable the management team to ensure a more resilient and responsible supply chain.