What is ESG and how the supply chain can help you achieve it

Regardless of the industry, sustainability is in everyone’s agenda. The actions taken today will define the future of our planet. People, businesses and governments must mobilize and adapt their choices and activities to good environmental practices.

The so much talked about ESG focuses on this urgency and helps businesses to keep an eye on the 3 most urgent variables of the future: environment, society and governance.

In this post, we tell more about the acronym and how the supply chain can help organizations in this very important mission.

Sustainability is a matter of urgency

To get a glimpse of the urgent situation, about 30 billion tons of garbage are generated annually in the world. And the average global temperature has risen by 5°C in 10,000 years.

Water waste in Brazil already adds up to 7,000 olympic swimming pools every day. Alarming numbers like these show the actual urgency for the present and future generations.

The supply chain has a vital role in this context. Having a sustainable supply chain means looking for ways to decrease consumption of natural resources, waste of inputs and generated residues, and also promoting transparency both in operations and relationships with suppliers.

ESG: the movement that has changed the business world

ESG is an acronym that stands for Environmental, Social and Governance. The term is used to measure the engagement of companies with regard to initiatives that decrease negative impacts on the environment and promote a fairer society.

It’s also an indicator of sustainable investment that represented more than R$ 2.5 billion in transactions, in 2020 alone.

Such movement appeared for the first time in 2004, in a publication of the Global Compact with the World Bank, called “Who Cares Wins”.

The initiative, created by the then UN Secretary-General, had the purpose to engage 50 CEOs of large-sized companies in the Ten Principles of the Global Compact, related to human rights, labor rights, environment protection and corruption combat, and including the agenda of 17 Sustainable Development Goals (SDGs).

Understand the meaning of each letter of this acronym

E (environmental)

It involves issues related to environment protection and its natural resources, and includes themes such as global warming, carbon emissions, pollution, deforestation, water scarcity and waste disposal, among others.

S (social)

Here the concerns regard society as a whole – from basic issues, such as customer satisfaction, to those of overall importance, such as diversity, privacy & data security, human rights and labor laws.

G (governance)

Last but not least, there are topics related to the conduct of organizations: Audit committee structure, board composition, and relationship with governments and politicians are some examples that encompass governance.

The role of supply chain in ESG development

See below the key practices that the supply chain can adopt to make the company environmentally and socially responsible, and also more valuable in the market:

Adoption of cloud technology

In a post of our blog, we have recently mentioned the benefits of cloud computing for B2B procurement.

By adopting a cloud solution, such as those offered by Mercado Eletrônico, procurement teams will be able to manage processes at any time, place and device. This helps controlling operations, and also promoting more transparent, fair and compliant business relationships.

As to sustainability, the adoption of cloud solutions eliminates IT infrastructures that generate heat and require cooling – which helps to decrease electric power consumption.

Additionally, it helps to reduce electronic waste. In fact, despite recycling possibilities, 53 million tons of electronic equipment are discarded on a yearly basis.

Efficient and sustainable transport & logistics

Transport is the most polluting industry, followed by industrial organizations. But there are ways to decrease the negative impacts caused by logistic activities and cargo transportation.

For this reason, pay attention to your suppliers’ choices, such as vehicles powered by clean energy, route optimization and less travel time.

A supply chain management with strict sustainability rules will be also concerned with details, such as preventive maintenance of vehicles and correct disposal of lubricating oils.

Supplier management

Choosing good business partners – that is, suppliers with socially and environmentally responsible processes throughout the production chain – is crucial to build a more sustainable supply chain.

To promote supplier adequacy to the organization’s goals and guidelines, and to minimize the risks of your supply chain, consider the essential checklist, such as certification, performance evaluation, inspection and third party management. Besides promoting a greener world, a collaborative and transparent supplier management fosters closer relationships and benefits all parties involved in the process.

Mercado Eletrônico has a SRM (Supplier Relationship Management) platform, which manages all suppliers and third parties in a single on-line environment. Do you want to know more? Request a free demo of the solution here.

Contract management

Managing contracts means analyzing and controlling all business agreements with suppliers and third parties – which is vital to reduce financial risks and losses in businesses.

Mercado Eletrônico’s CLM (Contract Lifecycle Management) platform consolidates and automates the life cycle management of contracts with suppliers and third parties.

With an efficient contract management, your negotiations will be safer, with visibility and control, meeting the compliance and audit requirements of all processes.

We have seen above that corporate sustainability is being widely discussed in the world, and the supply chain cannot evade this responsibility.

Get some inspiration by the tips we listed in this post, to start or strengthen your sustainable journey. Together, we will be able to create a better society for everyone.

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