As volatility reshapes modern supply chains, procurement leaders face unprecedented challenges and opportunities. Compounded by mounting ESG regulations, the pressure on procurement is set to intensify in 2024. Companies will fundamentally overhaul their business structures, and ESG issues will transition from being optional extras to integral elements of corporate strategy, essential for generating sustained value.
Beyond volatility: how ESG regulations are forcing a procurement revolution in 2024
The year 2024 marks a pivotal moment for businesses across the globe. It’s a time when companies are not merely adapting to change but fundamentally overhauling their business structures to align with new realities. Among these shifting paradigms are ESG issues, which are swiftly transitioning from optional considerations to integral elements of corporate strategy.
From the European Union’s Sustainable Finance Disclosure Regulation (SFDR) to the U.S. Uyghur Forced Labor Prevention Act, jurisdictions across the globe are implementing regulations and frameworks to incentivize sustainable business practices and hold companies accountable for their ESG performance.
On March 15, EU member states in the European Council announced that they had reached an agreement on the Corporate Sustainability Due Diligence Directive (CSDDD), a key piece of legislation establishing mandatory obligations for companies to address their negative impacts on human rights and the environment.
The CSDDD is expected to drive a significant shift toward more sustainable and ethical supply chains by obligating companies to identify and remedy impacts on people and planet in their upstream supply chain and some downstream activities.
Supply chains face added pressure from new ESG regulations and stakeholder expectations
The CSDDD is only the latest in a long line of ESG regulations passed worldwide. Germany has taken a leading role with its pioneering Supply Chain Due Diligence Act, which came into effect in 2023.
This law requires certain German companies to take steps to prevent human rights and environmental violations within their supply chains. Following suit, Canada introduced its own proposed legislation – the “Canada Supply Chain Act,” which is currently under review.
Similar to the German law, this act would require Canadian companies above a certain size to identify, prevent and address human rights violations and environmental harm in their global operations and supply chains.
Public and private companies need to pay attention to evolving ESG regulations to satisfy investors
Even without formal regulations, investors and other stakeholders are increasingly demanding transparency on ESG issues. And consumers are interested in the ethical and environmental impacts of the products they buy.
So, many companies are now under pressure to report on their environmental performance and demonstrate their commitment to climate action and sustainability, and this pressure extends to their supply chains. ESG standards are being used to measure performance, mitigate risk and increase transparency in companies and their supply chains.
To prepare for this increased scrutiny, businesses must: 1) map their supply chains to understand who their suppliers are; 2) implement due diligence processes to assess and mitigate ESG risks within their supply chains; and 3) partner with sustainable suppliers by building relationships with suppliers who share their commitment to ESG principles.
Negative ESG practices within a supply chain can lead to public backlash and brand damage
While these changes present challenges, they also represent an opportunity. Companies that embrace ESG practices can build stronger reputations, attract new customers and investors and ultimately create a more sustainable future.
Conversely, failure to comply with ESG regulations can also result in hefty fines, further impacting a company’s bottom line and attractiveness to investors. In recent years, asset managers have become increasingly focused on ESG goals, and many S&P 500 companies now tie executive compensation to ESG performance.
At some companies, employees have raised their concerns in efforts to push their companies toward policies they consider more responsible. Yet, the ultimate test of ESG’s value is in the consumer market.
According to an analysis of 150 million purchases made by American households between 2008 and 2019, purchasing changed most notably when negative news surfaced regarding social discrimination, corruption and employment discrimination.
Identify and mitigate ESG risks in your supply chain with the Sphera SCRM ESG Bundle
As we look ahead, businesses must prepare to navigate the evolving ESG landscape, staying abreast of new laws, adapting their practices and leveraging technology to meet compliance obligations while embracing the opportunity to make a meaningful impact on society and the environment.
Enter Sphera’s Supply Chain Risk Management ESG Bundle, a powerful tool that harnesses the power of three Sphera solutions to provide everything you need to proactively identify and mitigate ESG risks in your supply chain, craft customizable action plans and collect compliance-ready data to support reporting.
Sphera offers a centralized platform to manage all your ESG data, streamlining compliance reporting for regulations like the Corporate Sustainability Reporting Directive, the California Climate Corporate Data Accountability Act (SB 253) and the recent SEC Climate-Related Disclosure Rules. No more scrambling through disparate systems – Sphera keeps everything organized and accessible.
Automate tedious tasks like data collection and compliance report generation with automated workflows designed to free up your valuable time and resources. Gain actionable insights from your ESG data with powerful analytics tools that help you identify trends, measure progress and make informed decisions toward a more sustainable future.
Sphera also boasts global experience and industry-specific expertise to guide you through a vast array of ESG regulations across different regions. Our team stays up to date on the latest developments, ensuring your compliance strategy is always on point.
The ever-expanding landscape of ESG regulations can feel overwhelming. Ensure your supply chain stays compliant with Sphera’s innovative ESG Bundle solution.
Connect with Sphera’s supply chain experts to learn more about our ESG bundle solution and discover how it can help your organization navigate ESG regulations with confidence. Don’t wait – take the first step toward a sustainable future today.