Imposing sufficient accountability measures for corporate environmental, social and governance (ESG) initiatives has historically proved challenging, but intensified global scrutiny is becoming codified into law and advocacy tactics more frequently. This means that companies must take greater responsibility for not only their own products, services and operations but for the conduct of their entire supply chain as well. But a lack of reliable supplier intelligence, fragmented workflows and decentralized information make these newer albeit important ESG standards more difficult than anticipated.
Jenna Rowe, ESG and sustainability consultant, helps break down the UN Global Compact, the international framework within which to understand ESG initiatives, and how to educate and empower your entire supply chain.
In order to better collaborate with your suppliers, make sure your company is not only informed and educated on their ESG commitments, but how those commitments are direct results of UN Global Compact (UNGC) participation and alignment. The UN Global Compact was established in 2000 with the intention of promoting sustainable and socially responsible policies within business and government institutions. With over 19,000 official participants, the compact outlines 17 Sustainable Development Goals (SDGs), or Global Goals - revolving around human rights, environment, labor, and anti-corruption - and those SDGs in turn have Ambition Benchmarks, which more explicitly outline specific goals such as ensuring there is gender balance across all levels of management.
And because official participation comprises national governments, multinational firms and NGOs, numerous corporate and governmental policies have come as a result of commitments to one or more of the SDG benchmarks. However, involvement also includes small and municipality-level entities, and it’s this “glocal” approach that Rowe says is a critically unifying concept that incentives large-scale participation.
“It’s irrelevant to the UN whether you are one person, a small consulting firm or you’re a global company. You can drive measurable impact to this set of goals, or 17 SDGs,” she said. “And because of all of this participation, these 17 goals are being driven into legislation, and that means there’s a compliance factor.”
Extended producer responsibility laws, for example, have become increasingly common in Europe and the US, and they mandate that big firms take full responsibility for the reuse, recycling or disposal of the products they manufacture.
Employees across all levels should understand that their company-level ESG goals are tied to the UNGC Global Goals, as well as which SDGs and benchmarks they’re committing to and their subsequent requirements.
To that end, in addition to the SDG Ambition Benchmarks, the UNGC laid out the scope of each benchmark detailing which part of the business the goal has to include and cover: operations, products and services, and/or the company’s value chain. While some benchmarks may not require the entire value chain to adhere to them, environmental sustainability benchmarks like the science-based emissions reduction cannot be realized unless their suppliers comply as well.
When a company acts on their ESG initiatives, many external stakeholders do not know nor understand that the firm’s policies and programs are aligned with international standards stemming from the UNGC. According to Rowe, this creates a problem, not only because there is a requirement that official participants follow certain marketing and communication guidelines, but each scope also mandates some level of cross-departmental collaboration, cross-company partnership or both.
“Company participants are supposed to market their products and services in line with the global goals. It’s supposed to be linked, but most organizations skip some important criteria, because they’re doing things in a silo and don’t realize that everything has to be integrated,” she said.
In an effort to simplify the SDG implementation and reporting requirements, the UN Global Compact has made the tools publicly available on their website. But for company-specific information, a hub of resources, such as a corporate responsibility report, should be accessible and easy to understand for both employees and external stakeholders, including suppliers. Before diving into the granularity of your ESG initiatives and goals, suppliers and vendors must understand the overarching framework of why they are in place and how they are tied to the UNGC and other related programs or legislation.
“There is a lot of free information, and the UN wants you to use their tools and resources, but it is really hard for people who aren’t involved in this to absorb it on their own,” said Rowe.
Streamlining the onboarding process so that suppliers are educated and empowered at the onset of your relationship will save countless hours and dollars long term. Clearly articulate how your ESG policies will affect them in relevant documentation - such as the contract, code of conduct or both - and ensure that the right points of contact are established for future correspondence.
Depending on the company commitment, benchmarks and scope, suppliers will sometimes need to make certain information publicly available, even if they’re a privately held company. According to Rowe, because that may demand more transparency than private companies are accustomed to, releasing certain data, such as financials or R&D, is overwhelming and confusing at the least, not to mention incredibly burdensome if there wasn’t a system in place to pull the information from the start.
As your supplier relationship develops, communicate why you are requesting certain data points for risk assessments, CDP reports and other surveys when the time comes.
“[Privately held companies] don’t know how to respond to some requests for information nor understand what’s expected, and on top of that, big companies who have large teams send the requests to their sales contact or a team that doesn’t know what to do with it,” said Rowe.
Some questions may be intended to confirm that a particular supplier doesn’t source material from a blacklisted company or an entity accused of human rights violations; however, without a clear explanation, the request simply creates additional hurdles, time lags and ultimately hinders your company’s efforts at getting the information you need the way you need it.
As company ESG metrics are more heavily tracked from legislative, consumer and supply chain entities, developing and optimizing workflows and supplier relationships will make or break the success of your commitments.
“If you’re saying ESG performance is important to you, then you have to actively manage your supply chain. You have to communicate with your suppliers, tell them what you want, and you have to make it clear to them and empower them with tools and resources,” said Rowe.