Discover why the environmental, social, and governance (ESG) landscape has never been more important in supply chains.

With ever increasing investor and consumer scrutiny, from the board and CEO down, leaders must manage the environmental and social impacts of their end-to-end supply chain or face stark financial consequences.

What is ESG?

ESG is the environmental, social, and governance standards and performance by which investors and consumers judge a firm’s social and environmental conscientiousness. ESG is often incorporated into a business’s risk mitigation, compliance, and investment strategies and includes a wide array of measurements and best practices. A summary of some of the broad opportunities to improve ESG performance are outlined in the figure below.

ESG Performance

Supply Chains: The ESG Front Line

The supply chain’s outsized environmental impact shouldn’t be surprising. For example, the transportation sector generates 29% of greenhouse gas emissions in the U.S. and 14% worldwide. Supply chains have an enormous social responsibility, employing an estimated 450 million people across every corner of our planet. Add in the procurement and manufacturing aspects of the end-to-end supply chain and the impact multiplies exponentially.

Why is ESG in the Supply Chain So Important Now?

Today, ESG is a critical issue, impacting a company’s growth, bottom line, and ability to attract and retain talent. Here is why:

  • 86% of global consumers expect CEOs to lead on societal issues
  • 58% of employees consider a company’s social and environmental commitments when deciding where to work
  • 64% of millennials won’t take a job from a company that doesn’t have strong sustainability practices. Employees are 3 times more likely to stay and 1.4 times more engaged at what they consider to be purpose-driven organizations

The deluge of statistics that confirm sustainability’s importance, coupled with a confluence of recent events, has driven ESG over the tipping point. Taken individually, each of these events was a storm; together, they are a tsunami.

ESG as an Investment, Not a Cost

Investment, as the outlay of money for income or profit, is really just sacrificing some of today’s bounty in the hope of a better tomorrow. ESG fits this definition well, and it helps if leaders conceptualize it like R&D or employee training. Sustainability isn’t just a public demand for more responsible management, but an investment that is unique to each company, depending on its core values and business model. For example, UPS’s ORION route planning software has saved 200 million miles and 10 million gallons of fuel annually – which saves UPS transport time and money and reduces carbon dioxide emissions by 100,000 metric tons.

Companies who build ESG in as an integral part of their value proposition will drive long term positive impact on society, bottom- and top-line growth, and in some cases drive competitive advantage.

Five Practical Steps to Implementing ESG

Here are five practical steps to implementing ESG:

  1. Measure and assess: determine where you are in each component of your ESG strategy
  2. Map out stakeholders: identify who the stakeholders are, and engage them early in the process
  3. Prioritize company values: focus on areas that complement your strategy and drive the biggest impact
  4. Set goals and measurements: defined goals and metrics help guide success
  5. Build momentum: gain financial support to propel future initiatives by demonstrating the win-win aspect of ESG

Optimization of procurement, operations and logistics are just table stakes. Today a coherent ESG strategy and implementation program, with support from top management and clear goals and metrics, has become an imperative to a company’s short, medium and long-term success.

Learn more in the University of Tennessee white paper, sponsored by SGS Maine Pointe.

About SGS

We are SGS – the world’s leading testing, inspection and certification company. We are recognized as the global benchmark for quality and integrity. Our 96,000 employees operate a network of 2,600 offices and laboratories, working together to enable a better, safer and more interconnected world.