April 21, 2023
The ESG Imperative
Over the past few years, the focus on supply chains has been centered around the disruptions and challenges that companies face in running them efficiently. With port congestion, factory shutdowns, and geopolitical events creating chaos, supply chain leaders realized the urgent need to digitalize and improve their processes for increased agility and resiliency. However, as these challenges continue to persist and become the new norm, the focus has shifted to the impact that supply chains have on the environment and society.
- Organizations' supply chains often account for more than 90% percent of their greenhouse gas emissions1
- 70% of carbon emissions are Scope 3, referring to the indirect emissions that occur throughout a company's value chain2
- New government regulations are accelerating the requirement for greater supply chain transparency (ex. U.S. Uyghur Forced Labor Prevention Act)
As businesses work to reduce their carbon emissions, harmful chemicals, inventory waste, and water waste, and ensure fair labor practices, supply chain leaders must find ways to improve their organization’s ESG performance while still managing costs, working capital, and meeting customer demands.
The Business Challenge
However, there is a stakeholder conundrum. On the one hand, consumers, customers, investors, employees, and countries are driving companies to be more socially and environmentally responsible. But on the other hand, shareholders and CEOs are being asked to cut costs and focus on company performance. In a recent survey of 400 American CEOs, 59% saw ESG taking a back seat due to soaring inflation and a shrinking economy3. This makes it difficult for supply chain leaders to invest in the resources and technologies needed to improve ESG performance while being asked to improve efficiency and profitability.
And when supply chain leaders do want to improve their global supply chains, they face a variety of challenges. First, supply chains are complex. Supply chains are often global and involve multiple partners from LSPs, forwarders, carriers, warehouses, distributors, and multiple tiers of suppliers, making it difficult to obtain visibility and control over supply chain operations, tracking and improving ESG performance targets. Second, many companies lack the end-to-end visibility they need to make impactful decisions. For example, a Deloitte survey found that while companies are prepared to report their Scope 1 or Scope 2 emissions, a vast majority (86%) reported challenges measuring Scope 3 GHG emissions4. And third, organizations don’t directly control the vast amount of their supply chain data. In fact, 80% of supply chain data and processes exist outside the organization with network partners such as manufacturers, tier 1-2-3 suppliers, forwarders, carriers, customers and more.
But it doesn't have to be an either-or trade off. Companies can improve their environmental and societal impact, profitability, and cash flow simultaneously by optimizing their operations and developing a smart supply chain with a multi-enterprise supply chain business network.
How a multi-enterprise supply chain business network can help
A multi-enterprise supply chain business network is a powerful tool for driving ESG progress and achieving greater sustainability in supply chain operations while improving profitability. It does this by connecting partners, streamlining processes, and leveraging advanced technologies. Below are three specific ways that a multi-enterprise supply chain business network can help your organization.
First, by running a smarter supply chain, businesses can reduce inefficiencies and waste. The same supply chain inefficiencies that impact business performance also create waste and other impacts on the environment. Many supply chain functions are still manual and paper-intensive, and the production and shipping of paper itself has a significant environmental impact. Data and process silos create visibility gaps, delaying identification of problems and resulting in increased dwell time, lead-time variability, increased inventory levels and unnecessary expedites to avoid product shortages and late deliveries. Lack of order visibility across partners results in inefficient container utilization and greater carbon emissions. By leveraging a multi-enterprise supply chain business network, companies can optimize their processes and reduce waste, leading to cost savings and a positive impact on the environment.
Second, companies need to track and monitor the impact of their operations. Setting ESG targets for the supply chain network is necessary to track and measure performance. This requires connecting, transacting, and collaborating with network partners to collect data on impact, identify areas of improvement and take action to improve.
Third, by capturing and measuring environmental and social impact, ESG goals can be leveraged in decision making. By incorporating ESG goals into decision making, businesses can create a positive impact on the environment while still achieving business objectives.
Infor Nexus™ and its multi-enterprise supply chain business network
Infor Nexus™ can help you implement a smart supply chain with its multi-enterprise supply chain business network. These are some of the ways that Infor Nexus’ multi-enterprise supply chain business network can help you achieve your business goals:
- Drive Improvement with Supply Chain Visibility: Supply chain visibility is critical for greater agility and velocity, driving on-time in full while reducing expedites and not tying up working capital in excess inventory. Those same benefits also reduce environmental impact including reducing transportation carbon emissions and waste in landfills.
- Optimize Container Utilization: Better container utilization helps cut down carbon emissions. A network view of orders and partners allows for greater consolidation opportunities.
- Track and Monitor Transportation Carbon Emissions: Reducing transportation emissions starts with being able to track and measure your environmental impact. Companies gain better visibility to the emissions impact by carrier, route, and lane, identifying areas to target performance improvement and help them make decisions in planning and executing transportation moves taking into account the environmental impact.
- Manage Supplier ESG Compliance and Risk: Managing supplier ESG compliance and risk drives the need for greater supplier engagement and transparency. Utilizing supplier management solutions can help companies achieve this with proactive alerts while streamlining processes and reducing supplier audit fatigue.
- Improve Supplier Performance with Supply Chain Finance: Through sustainable supply chain finance provided by banks, suppliers receive early payment on their invoices at a discounted rate based on their performance in a buyer’s ESG program. This financing helps provide an incentive for them to improve their ESG performance, improves their cash flow and reduces the supply chain risk of their ability to deliver.
A multi-enterprise supply chain business network provides a multitude of ways for supply chain leaders to tackle the challenges of improving business performance and meeting ESG goals and requirements. By reducing waste, optimizing logistics, incentivizing partner compliance, minimizing carbon footprints, tracking, and monitoring impact, and leveraging ESG in decision making, businesses can achieve a sustainable and profitable supply chain.
The network platform enables businesses to work collaboratively with partners and create a sustainable and responsible supply chain ecosystem that delivers value for everyone involved. By acting together, we can build a more sustainable future and make a positive impact on ESG performance.
Learn more about Infor Nexus by visiting https://www.infor.com/solutions/scm/infor-nexus.
Author: Heidi Benko, VP of Product, Infor Nexus™