ESG in the Supply Chain
During my SIT speaker session, I have been asked how ESG is integrated in traditional Supply chain.
To answer that, let us understand ESG key factors first.
Environmental Factor will Primarily focus on Climate actions, Water & waste management, Biodiversity loss basically Scope 1 & Scope 2 of Emission.
With Social initiatives, workplace health & safety, child labor & community rights are being monitored.
And the Governance will audit the breaches in business ethics (corruption & bribery). The misleading information in the ESG report can cause companies a huge financial penalty as well as face value loss in the market. One, such example in recent time is ‘BNY Mellon was sued 1.5mn after SEC pleaded concerned about BNY’s ESG disclosure’.
So, Companies are seeking an integrated ESG reporting solutions which will track down the actual data and operational impacted since the source itself.
SAP has been diligently working in this area. SAP advocates
- Zero Emissions with Climate Action
- Zero Waste with Circular Economy
- Zero Inequality with Social Responsibility
SAP has identified one the major area is Supply chain which has 41% of ESG impact in business value chain. If supply chain is divided in 2 main categories, the below solutioning by SAP ease business pain and make process more transparent to report actual data.
The Product should be sustainable when it comes to designing the product. It is advisable to offer consumers a product which is reusable as well as recyclable. Thus, reducing a major part of the negative environmental impact. The current sap solution in this area is SAP Responsible Design and Production. Additionally, SAP offers Product Compliance & Stewardship | SAP whether the product compliance are checked via an automated & transparent way.
In planning phase, the focus is the procurement of the material is measure wtf co2 generation. Hence, a supplied who eco business ESG goal as well as share their ESG goal is a preferred vendor. This process can be tracked by using Ariba Network: Business Network for Buyers and Suppliers | SAP Ariba. The new name of the product is SAP business Network for procurement.
While procuring the material ethically, business needs to ensure the co2 generation is also tracked. Thus, entire product life cycle management in an optimized process can be done using SAP Product Footprint Management | Sustainability.
SAP Business Networks for Logistics helps business creating a shared value chain of upstream and downstream. The raw material sourcing process should eliminate forced labor and abide by the trade regulations. It be well efficiently check by SAP Ariba Supplier Risk Management: Risk is everywhere you are. Here’s how you manage it.
It is the process to have the finished goods produced which involves labor, machines, usage of power, water & raw materials. Hence, labor health & safety is utmost important in that given environment. SAP offers SAP Environment, Health, and Safety Management | EHS Software.
GreenToken – Introduction (sap.com) Enables business to check Co2 footprint in inventory at any point.
- Deliver and Return
The most busy part of business is store, deliver and return the products. With Transportation Management and Logistics System | TMS | SAP, business can reduce Co2 footprint with improved milage management. An optimized and renewable energy equipped warehouse helps business to meet their net zero goals. The most promising offering in this area by sap is SAP Extended Warehouse Management | WMS | SAP
SAP helps businesses to compare their leading and lagging indicators set for the ESG goals.
ESG being the intersection of any functional/ business area, would be the essential check point going forward. However, business or asset managers should be cognizant to continuously monitor these indicators to achieve their ESG goals.
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Here’s recent post on how mid size companies can adapt to ESG practices in SCM