An Effective ESG Risk Assessment Framework is Critical to Business Success
In recent months emerging governmental and regulatory disclosure requirements, as well as societal attention to diversity, inclusion and equity, have accelerated the need to successfully incorporate Environmental, Social and Governance (ESG) factors into your Procurement and Third-Party risk assurance programs.
Will simply adding ESG factors to ad-hoc onboarding due diligence and periodic supplier assessments suffice? Whilst a snapshot of “current state” provides an understanding of the current baseline:
- Standards and guidelines are evolving constantly and need to be continually updated,
- Data collected during point-in-time questionnaires or assessments quickly become stale, and
- Policies are too often aspirational and promotional rather than embedded and implemented practices
These shortcomings increase vulnerability to business disruptions and reputational damage, plus leave companies unable to effectively evaluate and mitigate the risks. The right ESG risk monitoring solution must be standards based, continuous and include:
- Comprehensive coverage of enterprise, supply chain and location ESG factors
- A framework based on widely accepted and current ESG standards
- Continuous “always-on” monitoring of ESG risk factors
- Continuously updated, always-current ESG intelligence
- Anytime assessment capability with always-current ESG data
- Alignment with current market conditions and evolving standards
A continuous ESG risk monitoring solution can enable your enterprise to realise the benefits of good corporate citizenship while avoiding disruption and reputational risk issues. Incorporating good ESG Governance into your procurement, resiliency and risk programs enabling all of the benefits of leading ESG practices while effectively mitigating reputation risks.
Companies and investors often lack a common framework for assessing their ESG risks and opportunities so let us share some insights on how you can both assess and monitor the ESG state of your enterprise and your supply chain by leveraging Supply Wisdom’s ESG risk monitoring solution.
Environmental
Here’s a next level view into the E of the Supply Wisdom ESG risk monitoring solution for enterprises and supply chains.
The environmental portion of ESG considers how a company performs as a steward of the physical environment.
This takes into account a company’s utilisation of natural resources and the effect of their operations on the environment, both in their direct operations and across their supply chains.
It should be noted that where we would typically talk about third and fourth parties for the majority of risk domains, from an environmental perspective we use the term “supply chain” as assessment and monitoring frequently need to go back to source. Equally, consideration need to be given to the upstream route as well, in so much as your customers may be utilising your product or service that could have a negative environmental impact.
Companies that neglect to consider the effects of their policies and practices on the environment may be exposed to higher levels of financial risk.
Climate change adds an extra layer of environmental risk. The global regulatory response to the threat of environmental risks has been mixed. We are seeing a large number of businesses begin to advocate their green credentials, or offer green products and services, although it has been reported in several well-known publications that many organisations who offer green products, are not as environmentally sound as they would have you believe. The term “greenwashing” has now been adopted to describe these offerings.
We have also seen a significant change on the cost of money. Borrowings for much more environmentally friend projects and organisations are now being offered at lower interest rates by a number of lenders. Investment firms are revising their portfolio, moving to a greener set of investments. All of which will have a far greater impact on the rate of change than any government policy.
Social
Understanding the realities of your supply chain’s Social policies, processes, and the realities of how that impacts their employees, stakeholders and local communities is coming under increasing focus by customers and governments alike.
Today a supplier diversity, equity and inclusion (DEI) program is more important than ever to minimise serious reputation risks. Careful selection and ongoing efforts to ensure all parties in your supply chain are upholding the standards you (and your customers) demand is becoming an increasingly critical part of a brand’s success or failure as the potential damage from the emergence of harmful and unjust practices employed by downstream vendors and suppliers in the global supply chain cannot be ignored.
But the benefits of a strong Supplier DEI program go beyond reputation enhancement to include improved supply chain resiliency, enhanced revenue, reduced costs and even improved talent recruitment and retention efforts.
Having a transparent view of the Social policies and practices employed in the supply chain the ability to manage and mitigate the impact on commercial operations can clearly become a distinct differentiator and competitive advantage for your organisation.
Governance
Although Environmental and Social in ESG might be getting the most attention in workplace discussions and the media, Governance, although often overlooked, is an equally critical component of ESG. So let’s take a quick look into the Governance metrics of the continuous ESG risk monitoring solution.
Good governance provides adequate oversight to mitigate the risks associated with ESG, while enabling all the possible benefits of a strong ESG program including:
- Reputation enhancement
- Supply-chain resilience
- Enhanced revenue
- Reduced costs
- Improved talent recruitment / retention efforts
Good governance is so critical to the success of your ESG initiatives that without it not only could your reputation risks significantly increase, but also your Environmental & Social initiatives and efforts will fail to achieve their full potential.
Add ESG to your Full-Stack Third-Party Risk Intelligence
With Supply Wisdom ESG, enterprises like yours are able to incorporate these critical ESG criteria into their procurement, resiliency and risk programs enabling all of the benefits of leading ESG practices while avoiding reputation risks.
While you will be able to send questionnaires to your third parties, only continuous monitoring from Supply Wisdom will give you a view of the whole supply chain.
The Supply Wisdom ESG framework is based on UN Global Compact & Sustainable Development Goals, GRI Standards, WEF Stakeholder metrics, ILO, ISO, and TCFD. It includes risk ratings and has more than 55 unique continuously monitored ESG metrics for enterprises, third parties and locations.
The Supply Wisdom full-stack risk intelligence service also covers other risk domains such as Financial, Compliance, Cyber, Operations, Locations and Nth Parties to provide a complete view of your supply chain risk that:
- Continuously identifies, informs, prevents and mitigates third-party exposure for enterprises
- Enables early identification and mitigation of potential cascading risks
- Powers proactive risk mitigation actions to increase resiliency, and
- Increases your internal team’s efficiency and effectiveness from procurement to risk management and operational resilience
You’re Only As Strong As Your Weakest Link
There’s never been a more vital time to ensure the security of your organisation and the cyber supply chain you rely on. DVV Solutions are here to help with a range of managed services and solutions proven to improve your ability to assess, analyse and manage more third-party risk domains at scale.
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