Supply chains play a crucial role in the functioning of economies and businesses. In February 2022, the European Commission launched the Directive on Corporate Sustainability Due Diligence. CSDDD requires large organisations to undertake due diligence on their own activities and that of their suppliers, and to identify and prevent, end or mitigate any actual or potential adverse impacts of their activities on human rights and on the environment.
Environmental Practices and Sustainability
Environmental sustainability is no longer just a buzzword but a pressing global concern. Consumer pressure is forcing businesses to recognize their role in environmental conservation and the need to mitigate their carbon footprint. It is increasingly understood today that the ecological footprint of an organisation extends far beyond the factory floor or warehouse walls. Through due diligence, companies can assess the environmental impact of their entire supply chain including their upstream and downstream partners. This involves evaluating practices such as resource consumption, waste generation, and emissions. Sustainable supply chains prioritize ethically sourced materials that minimize environmental impact and respect local communities. Organizations need to ensure that their suppliers adhere to responsible extraction practices, such as avoiding deforestation, overfishing, and habitat destruction and thus make informed decisions to engage with partners who align with their sustainability goals.
Duty of Care and Ethical Considerations
Supply chain due diligence also extends beyond environmental issues. Organizations have a duty of care to take reasonable steps to ensure the safety, well-being, and rights of individuals who might be affected by their activities. In the supply chain context, this principle extends not only to employees of partner organizations but also to the communities where these suppliers operate. A robust due diligence process should involve audits, assessments, and ongoing monitoring to guarantee compliance. Due diligence enables companies to identify potential risks, such as labour violations, unsafe working conditions, and human rights abuses. Beyond labour practices, due diligence should also encompass the broader spectrum of human rights and social impact which includes respecting cultural diversity and supporting local communities. By identifying such issues, organizations can take corrective actions, to bring supply chain partners in line or terminate relationships with non-compliant partners
Brand Image and Reputation
We live in an age where social media gives everyone access to instant and constant communication. A company’s brand image can be significantly impacted by the actions of its supply chain partners. Incidents of unethical behaviour or environmental negligence within the supply chain can quickly go viral, tarnishing a company’s reputation. There have been a number of high-profile cases involving global brands in recent years. Due diligence serves as a pre-emptive measure to safeguard against such risks. By ensuring that suppliers uphold high ethical and environmental standards, organizations can maintain their brand’s integrity and the trust of their customers.
Guiding Supply Chain Partners toward Sustainability
Larger organizations hold a unique position of influence within their supply chains. They are in a position to lead by example and often have the resources and market leverage to drive change across their partner network. By setting clear expectations, sharing best practices and, if necessary, offering resources, larger organizations can promote sustainability throughout their supply chain. Collaboration between larger and smaller partners can lead to innovative solutions that benefit both the environment and business operations.
In a world that demands responsible business conduct and environmental stewardship, due diligence in the supply chain is not just a legal requirement, but a moral imperative. By evaluating partners’ environmental practices, upholding the duty of care, protecting brand image, and guiding smaller partners toward sustainability, businesses can contribute to a more ethical and environmentally conscious supply chain. The collective efforts of organizations, regardless of their size, can lead to a more sustainable future for our planet and generations to come.
This article is part of a series of articles by MESGA members and their strategic advisors.