ESG in the Supply Chain

The supply chain is, without a doubt, the most important and problematic area in ESG. It affects every company today. More than 70% of emissions are located in the supply chain (also known as scope 3), There are issues in the treatment of workers in the supply chain, bribery and corruption, and the use of harmful chemicals and pesticides.

1/1/20237 min read

ESG Supply Chain

The supply chain is, without a doubt, the most important and problematic area in ESG. It affects every company today. More than 70% of emissions are located in the supply chain (also known as scope 3), There are issues in the treatment of workers in the supply chain, bribery and corruption, and use of harmful chemicals and pesticides, In short – Supply Chain – Scope 3 is a very important area that every company needs to take control of and gain visibility.

Some Issues that affect Operation Supply chain disruption:

· inability to source materials on time, reliably and at a manageable price (WEF: disruptions up 29% since 2012).

· Location of operations or services – ongoing viability challenge given heat, extreme weather events, political instability and other impacts.

· Insurance – reduced ability/increased cost to insure operations and services against extreme weather impacts.

· Employee view – misalignment with employee demands for environmental action leading to reduced ability to attract and retain talent.

· War

Supply chain ESG is an important driver and one of concern for every business. Your biggest customers will insist, if not already, on you meeting the standards. For example, Tesco is set to become the first UK retailer to offer its supply base sustainability-linked supply chain finance, which the retailer hopes will encourage more suppliers to sign up to science-based emissions reduction targets.

An important consideration is the child labour treatment of workers in supply chains.

In 2021, the US Bureau of International Affairs found that there were 146 goods made in 77 countries produced with the help of child labour, including products like coffee, produce, garments, and furniture, In addition, there are issues in shipping, mining, and the production of clothes

The International Labour Organization (ILO) estimates that the number of jobs linked with global supply chains in 40 countries increased from 296 million in 1995 to 453 million in 2013. This represents more than one-fifth of the global workforce. For many workers, jobs in global supply chains mean precarious work, low wages and inhuman working hours. The UN Guiding Principles make it clear that Multi-Nationals (MNCs) are responsible for working conditions in their supply chains. Yet many MNCs claim to have little control, or even knowledge, of how much workers are paid, the hours they work, their health and safety or their employment contracts. But these same companies can make very specific production demands of their suppliers over what materials are used, where those materials come from, production processes, delivery times and so on.

Supply Chain in Food

Amid the spread of the COVID-19 pandemic, the global food supply chains' numerous inefficiencies were realized globally. This has led to the probable opening of opportunities in the mid and long-term technological markets. This has highlighted the need for Global Blockchain in agriculture and food supply chain Market. The adoption of a Blockchain platform offers a repeatable framework for Farming efficiency, food-to-trace enabled solutions, digital ownership certificate management and farmers management guiding him through difficult harvest times. According to the research, blockchain technology is a highly effective solution to cope with the inefficiencies in supply chains surfaced by the pandemic. Alliances were conducted between companies such as Cargill and Agrocrop with Rabobank and other logistics and supplier organizations to pilot blockchain for faster cross-continental commodity trading. The imposition of lockdowns has made it further difficult to track many food products' origin, resulting in more hazardous food. According to the Global Food Safety Initiative (GFSI), food retailers across the world are also demanding certifications of suppliers to ensure food safety for every stakeholder in the value chain. Thus, the spread of the COVID-19 pandemic has led to the increasing use of blockchain in the food sector for traceability and transparency.

The Blog will cover:

· UNSDG Goals & The growing need for ESG in the Supply Chain

• Supply chain and traceability - Farm-to-table traceability with RFID chip A look at Sustainable Supply Chain & Procurement Supply chain sustainability and responsible procurement are critical to making global goals local business by ensuring that the extension of a company’s operations, products and services can support the realities of our planet and better serve markets both today and in the future. However, corporate supply chains are bigger and more complex than ever before. Open markets have enabled companies to source materials and outsource production to suppliers in developing and emerging economies. When done right, a global supply chain can deliver significant benefits to companies through reduced costs and enhanced profitability and shareholder value. It can also contribute to much-needed economic and social development, resulting in higher standards of living for millions of people. When supply chains are done wrong – by not taking into consideration the environmental, social and governance (ESG) performance of suppliers – companies leave themselves open to significant operational and reputational risks. Impacts on people and the environment can be substantial and severe.

Sourced from -

Corporate supply chains have become ever more complex. Today, an estimated 80% of global trade passes through supply chains. Outsourcing production to suppliers in countries with a cost advantage can deliver significant economic benefits. Yet, complex and bigger supply chains are prone to risks. More specifically, environmental, Social and Governance (ESG) issues can carry significant reputational and operational risks.

ESG risks in the supply chain

Traditional key considerations in supply chains include technical quality, cost-effectiveness, speed of delivery and reliability. However, sustainability factors are increasingly gaining importance. Examples include • Environmental pollution • Shortages of raw material and natural resources • Workforce health and safety incidents • Labor disputes • Corruption and bribery • Geopolitical considerations Insufficient management of such risks can seriously impact the operations and disrupt the entire supply chain. Once having breached the trust of consumers and investors, incidents and resulting media impact may also lead to reduced sales and funding as well as be an obstacle to attract talent given the increasing importance of public perception of employers.

ESG & Supply Chain Modern Slavery

According to UN estimates, 25 million people worldwide live in conditions of Modern Slavery. Of these, 16 million work in some of the worst forms of forced labour, including agriculture, domestic servitude, construction, and sex work. One in four slaves is a child, according to global estimations. Co-Founder of ethiXbase, Mike Short, provided clarity on these incidents, stating that: “the issue of modern slavery is of global concern and is not focused on any single country. Companies in the West are certainly not immune from such risks. “Highly complex ‘just in time’ supply chains coupled with the quest for ever more cost-effective sourcing, sometimes mask forced labor and the human misery this entails. Brands associated (however tenuously) with forced labor will face acute reputational damage and a resultant loss in value. This is leading to the adoption of enhanced ESG compliance measures within their supply chains.

RFID Chips – the New Frontier To arrange food waste with supply chain efficiency, you will need to work on several issues. RFID chips have to be installed on food items to trace them from which field, farm, country, and quality data they are. Think your current supply chain traceability system is good enough? Think again. With an increasingly complex supply, chain making product recalls difficult to manage, and putting human lives at risk, the food and beverage industry can’t afford to settle for “good enough.”

One Company Providing this is Optel - OPTEL’s industry-leading traceability technologies give you the tools to digitise, standardise and leverage your supply chain’s valuable data to help your F&B business run better―and safer. Welcome to the Intelligent Supply Chain® (ISC), a sophisticated traceability platform that generates granular data that you can use to measure and optimise your company’s day-to-day performance.

Restore Trust from Traceability and Blockchain By Carlos Rabadán Escudero,

Head of Delivery Movilitas EU

Counterfeit food is rather prevalent in the global marketplace, especially in certain categories such as olive oil, honey and fish. They can contain substitute ingredients, undocumented allergens or non-certified items. Manufacturers suffer a loss of the sale; however, there is also a risk to the brand image when customers purchase an inferior product. Money is not the only consequence; sometimes the food or ingredients can cause allergies, food poisoning or worse. The media continues to highlight the fraud stories, and they drive consumer awareness. After years of exposure and a turn towards healthier eating, the public demands more transparency about where their food came from before it hits their table. Technology and new processes connect all the stakeholders for greater traceability of these goods to reduce the risk of counterfeits reaching consumers. Food Certifications This ability to trace food from origin to destination is also important for religious reasons. You probably know kosher and halal food items from shopping at your local grocery store. For religious followers, it is important to eat these certified foods as there are often strict guidelines.

Discovering that you’ve been eating non-certified food regularly because of fraud could be devastating. Unfortunately, in the past few years, food falsely labeled as halal certified has been found worldwide. Some of the products originated in the Asia Pacific region, such as Malaysia and South Korea. The risk is growing along with the increase in demand for these products. Trust from Traceability If done at all, tracking methods are often manual and rarely available in real-time. This lack of accountability creates a lack of trust in the consumer market. Regulators and companies want to rebuild their confidence by demanding proven and innovative track-and-trace solutions. Extended supply chains create a neutral, multi-modal global network connecting logistics partners, systems and business processes to gain end-to-end visibility. Blockchain is an increasingly popular traceability method because it connects all the stakeholders’ digital records and events in a tamper-resistant format. The information can be accessed at any point from anywhere, yet it cannot be edited or deleted. This chain becomes permanent and public, creating a single version of the truth. When paired with a track & trace solution, companies can use the standardized data to collaborate with all the stakeholders for real-time monitoring of location and quality. The shared information enables the elimination of blind spots, proactive responses to deviations and the ability to discover new opportunities. For consumers, the data creates a level of trust that the product is authentic and safe to consume. One example of this combination is the SAP Logistics Business Network (LBN) and SAP Cloud Platform Blockchain Service. SAP LBN is an open, secure network that connects stakeholders and integrates with logistics processes. All involved gain access to real-time information and situational insights. The Blockchain Service aids this transparency and visibility through authorised networks.