When it comes to ensuring any business is fully invested in a sustainable path, it is important there is focus on the complete product journey. This is being driven by investors, analysts and ultimately the final consumer.
However, sustainability credentials can quickly fall over.
While a retailer may well be operating from a shop made from recycled timber, handing out re-usable bags instead of plastic and issuing electronic receipts, where the products they’re selling are supplied by businesses cutting down rainforests to make them, the sustainability credentials quickly fall over.
Understanding the Environmental, Social and Governance compliance of your supply chain is vital when it comes to ensuring sustainability goals of your business are not undermined by the failure of others.
When it comes to making decisions on who to buy supplies from and how to find the right people to work with, the international law firm Allens Linklaters team offer a few handy tips.
For this firm, which develops countless contracts between organisations and their suppliers every year, the number one tip: is to ensure you have access to supply chain data to include in your own reporting.
Pointing to the release of draft sustainability disclosure standards by the International Sustainability Standards Board (the ISSB) – which requires companies to “disclose information about significant sustainability and climate-related risks and opportunities to which they are exposed” – it’s suggested you should assess whether the reporting obligations and audit rights under their existing contracts are able to be used to access ESG compliance data from suppliers.
For example, the case of Heineken went as far as to use blockchain technology to follow the journey of five hop varieties from their sourcing origins to measure the exact water and fuel consumption.
Data gathered from this was showcased as an environmental journey, shared with consumers via a QR code on their beer bottle!
Other tips to ensure you are choosing supplies with the same sustainability morals as yourself include:
- Expanding adoption of ‘soft-law’ modern slavery obligations.
Take a stance and expand your contract obligations to capture the ESG commitments you want the business to stand for.
- Using standards to address subcontractor performance.
Make it clear that any sub-contractors your suppliers use, should also meet a set of ESG standard
Leveraging contractual remedies for ESG compliance.
- Adjust benchmarking rights, continuous improvement obligations and termination trigger clauses to include adherence to ESG commitments.
- Undertaking supply chain due diligence.
Ensure your ESG requirements are front and centre as part of any assessment of possible suppliers.
As the push towards greater transparency and visibility of business sustainability practices continues throughout the world, doesn’t it make sense for companies to be aware of how all elements contributing to their business stack up?
To learn more about how Datamine is working to minimise their impact on the environment, contact us here.
Reference: Allens Linklater – https://www.allens.com.au/insights-news/insights/2022/05/Sustainable-procurement-five-tips-to-manage-ESG-risk-in-your-supply-chain-contracts/