The Year of Sustainable Progress

EcoVadis provides reliable sustainability indicators on suppliers to help procurement teams monitor CSR/ESG practices. Its Co-CEO, Pierre-Francois Thaler, gives us an overview of how the firm sees supply chain risk evolve in 2018 - this is the first in a short series of supply chain prediction posts from various sectors. 

This past year was without a doubt a year of widespread uncertainty. Rising economic and political instability throughout the world led many companies to scale mitigation techniques and invest in more conservative supply chain practices. From Brexit, President Trump’s promises to renegotiate trade deals, and the unknown outcomes of tension with North Korea, heightened geopolitical risk dominated 2017 and called for a focus on supplier diversity.

This year, the fear of the unknown will persist, and we will likely see increased authority from chief risk, supply chain and procurement officers, especially in Fortune 500 companies, to hedge against these threats. We will also see technological disruption, innovation and consumer demands for transparency drive sweeping, sustainable changes across the supply chain.

Reputational risk will take centre stage

It’s likely the Fortune 500 will rethink how they approach supply chain risk and elevate the importance of sustainability, CSR and worker safety in their endeavors. Mitigating traditional supply chain vulnerabilities, including supply disruptions, product shortages, financial losses and uncertainty, will certainly remain on the executive agenda in 2018. These existing mandates, however, will be placed a distant second to a new priority: preventing reputational and brand damage caused by poor supplier practices.

Technology will play a major role in mitigating reputational risk throughout the supply chain. For example, wearables, including clothing or bracelets that monitor a person’s health and condition in real time, will be used increasingly more in factory settings to track and reduce accidents. Blockchain and remote monitoring technologies will help promote overall supply chain transparency. Taking such approaches protects companies against irresponsible or corrupt sourcing practices that can tarnish brand reputation — especially crucial for consumer companies that face heightened scrutiny from the end-market around sustainability issues. Companies that invest in their value chains and engage with partners to ensure strong transparency and connectivity across operations will be elevated to leadership status.

Investors will demand validated sustainability metrics

Digitisation and artificial intelligence will play a significant role in making supply chain management easier, more efficient and effective in 2018. For sustainability objectives, however, verified key performance indicators based on both human and artificial intelligence will be paramount. Stakeholders and investors will demand third-party verification and human analysis in addition to automated reporting. The output requirements will evolve from static ratings to actionable findings that allow buyers to benchmark performance, identify priority areas for improvement and put corrective actions plans in place.

Machine learning and artificial intelligence will accelerate and augment this human verification and analysis, making it not only faster, but more reliable and scalable. The ultimate trend in 2018 will be taking the customised output of these efforts (e.g. scorecards with feedback) and drive true and tangible improvements in supplier performance.

Collaboration will trump competition

To make a larger impact from both a sustainability and financial perspective, competitors will come together to establish industry standards and benchmarks within each sector. This newfound partnership will create a more engaged supply base and lead to better quality, less risk and improved profitability.

In 2018, companies across all sectors will make sustainability a strategic play for their organisations. Many businesses are realising the role the private sector plays in encouraging responsible behaviour and the positive benefits this generates for the enterprise, including better brand value, lower risk and higher financial gains. We will likely see more concrete metrics that track to this upside, and more companies collaborating and making significant headway in CSR and sustainability programmes across the board.

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