How Supply Chain SMEs Can Master Their ESG Strategies

Companies are under increasing pressure to improve their sustainability efforts, with the supply chain serving as a key focus for social and environmental impact. Developing supply chain and procurement management professionals' environmental, social, and governance capabilities and skills is thus a fail-safe strategy for increasing business productivity and sustainability.

A report by McKinsey & Company shows that up to 90% of consumer companies' environmental impacts like greenhouse gas emissions come from supply chains. As a result, the supply chain has massive potential for accomplishing critical progress in sustainability performance. 
 
Helping SMEs Thrive in an Unpredictable Environment

Sustainable financing markets are evolving to accommodate more parties other than institutional borrowers and governments. A wide range of sustainability and green-linked products can help organizations in different sectors integrate financing policies into ESG plans. Doing so shows their commitment to adopting sustainable practices. Companies can leverage the following principles to enhance their approaches:

Innovation

Financing innovation can cause supply chain disruption. Sustainable supply chain finance (SSCF) programs, in which consumers can provide their suppliers with financing tools and expertise to help them transition, are now available. They compare financing to the ESG efficiency agreed upon between their anchor buyer and themselves. This increases supply chain resilience while strengthening supplier and buyer interdependence.

Collaboration

Credible, consistent, and collective partnerships between various stakeholders like technology providers, businesses, and financial institutions should support the sustainable evolution of supply chains. For example, suppose an organization in the US wants to finance its Europe-based supply chain to support ESG development. Doing so requires knowledge of local regulation, financing, risk mitigation, transparency, ongoing monitoring, and ESG measurement. Such systems require collaboration across public sector firms, banks, and rating agencies. While this may appear to be a daunting task for the US organization, the technologies to connect it in a cost-effective and straightforward manner are rapidly becoming available.

Standardization

Having precise standards will provide transparency on the variations available for SMEs and facilitate the training and skills required to understand green finance better and implement transition plans. When this standardization is incorporated into climate technology, new opportunities emerge while things become easier.

Many companies use sustainability applications that gather, evaluate, and put together the ESG performance of firms they collaborate with. This increases their visibility in various industries, allowing them to make supplier and buyer decisions that can improve their sustainability scores by ensuring long-term business relationships.

Sweet Tips from Ally:

It can be difficult to predict the ESG transformation scale that will emerge in supply chains in the future and formulate it as a challenge to overcome. It is critical to recognize that these industry practices present a significant commercial opportunity for SMEs. New sectors will emerge as old ones are remodeled.