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Supply Chain – The Critical Link To ESG Goals

Written by Al-Azhar Khalfan

With more than 90 per cent of an organization’s greenhouse gas emissions attributable to supply chains, it is key that those supply chains become the core activator for organization-wide sustainability goals and commitments.

More chief sustainability officer (CSO) roles are emerging across forward-thinking organizations, as sustainability becomes an integral part of an enterprise strategic framework. In some cases, such roles are external focused, while in others they are people focused. In a few cases, they are strategy focused.

In any of these cases – collaboration and partnerships (external focused), employee and community (people focused), or innovation and business (strategy focused) – supply chain leaders embody all of those skillsets through what they do each day.

They have experience in collaborating with suppliers and partners, managing teams, establishing diverse community-based business relationships, minimizing costs, and mitigating risks through effective forecasting. This all contributes to sustainability KPIs and reimagining an organization’s ESG goals.

While supply chain is in a unique position to spearhead sustainability goals, supply chain leaders I have spoken with agree that sustainability can no longer be a side project for an organization. It is a mindset and should be embedded into the DNA of an organization through efficient operationalization. As a starting point, it is important to set measurable goals, be they environmental, social, governance-focused or a combination of all of the above. You cannot improve what you cannot measure.

Secondly, those measurable goals or KPIs should be disseminated and communicated effectively across all teams, albeit to some more than others. The goal is to build an organization-wide commitment to sustainability.

However, in a recent poll that SCMAO conducted, approximately 72 per cent of respondents said they don’t believe that sustainability initiatives are effectively communicated and integrated across supply chain teams. This offers an opportunity for those teams to build a business case for a responsible sourcing strategy, supplier diversity program, circular supply chain, supply chain decarbonization and the role these play towards enhancing sustainability metrics.

Supply chain leaders must inculcate a corporate mindset that goes beyond short-term cost savings and focuses on exceeding customer expectations, as well as sales revenue, to elevate themselves to the C-suite. It is clear that ESG initiatives cannot succeed without supply chain drivers.

I recently had a conversation with Carlton Mathias, Chief Legal, ESG and Governance Officer at Ontario Power Generation Inc (OPG). Below is some of what he told me during our discussion.

“It is important that I work closely with our supply chain organization to support the integration of sustainability related considerations into procurement processes. This can have a significant impact as OPG procures in excess of $2.7 billion a year in materials and services for operations, as well as projects.

Recently, OPG has established a supplier diversity program and spend targets, which encourages procurement from diverse vendors and supplier partnerships with businesses owned and operated by equity-seeking group members. We have also developed targets to increase supplier partnerships with Indigenous-owned businesses in line with our Reconciliation Action Plan. These programs represent an important building block in the development of a sustainable and diverse supply chain with direct impact on economic empowerment for marginalized people.”

I see how passionate our community of supply chain professionals are about sustainability initiatives and I genuinely believe that their skill sets are further fuelled by their passion. My advice to all the supply chain leaders would be to give their teams a chance to demonstrate that. Invest in nurturing the right talent, give them a mandate broader than their core supply chain functions, and train them to think strategically in the right direction so that they can build the foundation that sets up your organization for ESG success.

Attend the Leadership Series: Sustainable Supply Chain on Feb 28, 2023, to learn more about the role supply chain plays in driving ESG goals from subject matter experts and industry leaders.

Al-Azhar Khalfan is President and CEO of the National Institute of Supply Chain Leaders (NISCL).

Email: [email protected]