The Author: Tristan Atkins, Chief Product, and Technology Officer, Ethixbase
As threats to supply chains continue to mount and uncertainty surrounding events on the world stage persists, leaders in space are also being forced to reckon with Environmental, Social, and Governance (ESG) concerns. There’s increased pressure to ensure that all third parties up and down a company’s supply chain are aligned on ESG standards and that responsibility requires leaders to shift from a management approach that keeps product moving to a governance-based approach that facilitates management but also the implementation and control of policies.
In the past, only highly mature organizations were able to take control of and improve governance–but today solutions such as those offered by Ethixbase360 allow any company to engage in this critical endeavor. Companies moving to strengthen governance can benefit from a three-pronged approach of Explore, Enhance and Engage to make impacts across their supply chains.
1. Exploring your supply chain
When it comes to your supply chain, you’re only as strong as your weakest third party, and it’s the biggest issue every company has. The first step to shoring up governance is developing a clear picture of your supply chain by performing an overview of your complete list of all current third parties. This list should be built out to include contact information such as names and emails, allowing you to reach out and engage with the third party to communicate about your company’s ESG posture, commitments, and standards now and in the future.
With a full third-party list in hand, you can begin the Exploration phase of action by evaluating your current slate of governance measures. Is there a formal ESG statement that lays out your company’s stance? How specific are your codes of conduct? Do you currently keep up-to-date, centralized records of which vendors have agreed to the codes of conduct? Questions like these establish a baseline by clarifying where your governance is now and help determine what your goals are for the future.
2. Applying Enhanced Due Diligence
While the ultimate goal is to have full insight into every third party, this isn’t feasible for the majority of businesses. Once you have a full list of third parties, you can screen third parties and prioritize them based on the level of risk they introduce from a governance perspective. The next step is to start with enhanced due diligence on the biggest vendors and suppliers, to gain a more in-depth assessment of your biggest. Another is, to begin with, the third parties you have the least information on and contact with. The most appropriate method depends on the size of your supply chain and the specific risks that apply.
Enhanced Due Diligence means taking a magnifying glass to your third-party relationships and ensuring alignment on ESG values and practices, determining the appropriate metrics to collect, creating a plan for collection, and creating policy controls to improve visibility.
3. Engaging Across the Supply Chain Web
When you’ve determined which third parties need further guidance to meet your governance standards, it’s time to Engage them to improve their practices and your business relationship. At this point, it’s key to collaborate with these third parties to understand what they need to change to become a safeguarded point in your supply chain web, whether that’s starting to collect and share emissions metrics or signing off on a policy regarding labor practices. It’s also about gaining further, updated information from the third party via questionnaires and other tools.
Reevaluate and repeat
With expectations for conduct and metric collection set, you’ve ended one cycle of Explore, Enhance and Engage. To ensure progression in governance year over year, those responsible for supply chain management should rinse and repeat periodically and compare results against the previous cycle to close ESG gaps. This governance-based approach is essential in maintaining stable relationships with third parties and making positive impacts on environmental and social practices throughout your supply chain for years to come.
With Enhanced Due Diligence such a critical element to governance management, the Ethixbase360 platform offers a number of tools to make the cycle more visible and more manageable. From cost-effective screening and verification through ESGmetrics to discreet inquiries and continuous monitoring, Ethixbase360 makes it easy to ingrain the Explore, Enhance, Engage cycle into your governance frameworks.
Explore Ethixbase’s Risk-Based Due Diligence Solution Now.
