How Do ESG Criteria Impact Your Supply Chain?

Aligning your supply chain with ESG requirements allows you to reduce risks, control costs and make your organization more competitive.

By integrating environmental, social and governance (ESG) criteria into your operations now, you will equip your organization to meet regulatory requirements, market expectations and future scientific trends.

Here are five significant effects on your organization:

Improve regulatory risk management
Broaden access to markets and financing
Reduce your costs
Select suppliers strategically
Remain competitive

1- Improve regulatory risk management

Legal requirements to combat forced labour and imported deforestation and improve supply chain transparency are increasing in number.

In Canada, the Fighting Against Forced Labour and Child Labour in Supply Chains Act already requires large companies to demonstrate that either forced labour or child labour are not used at any step of their supply chains. Organizations must publish an annual report detailing the measures taken to combat these practices.

In Europe, directives outline fines of up to 5% of an organization’s global revenue in the event of non-compliance. Taking action now can allow you to avoid sanctions while also consolidating your company’s position in relation to increasingly demanding clients.

Key takeaway: plan ahead to avoid hefty penalties while simultaneously boosting your reputation among clients and partners.

2- Broaden access to markets and financing

Integrating ESG criteria into procurement practices has become a qualification criterion for certain public procurement contracts and private calls for tenders. For example, the Québec government integrated a green clause into its procurement and construction calls for tenders as of 2023.

In addition, the financial sector now considers the resilience of a company’s ESG criteria integration strategy when determining loan conditions. For example:

Key takeaway: a high ESG score is a pathway to access strategic opportunities and preferred financing rates.

3- Reduce your costs

Adopting sustainable practices can lead to tangible savings. For example:

SMEs in the agri-food and manufacturing sectors that transformed their supply chains reported measurable increases in productivity and efficiency.

Key takeaway: ESG criteria do not increase your costs. They optimize the management of resources and cash flows. Ultimately, you will do better at a lower cost.

4- Select suppliers strategically

The first step in ensuring a sustainable supply chain is a supplier pre-qualification process.

A short questionnaire can identify suppliers that pose a significant ESG risk. Then you can:

User-friendly tools can help you to sort and select partners that share your commitments and avoid greenwashing.

Key takeaway: careful monitoring of your suppliers will allow you to avoid greenwashing and guide you towards those with similar ESG ambitions.

5- Remain competitive

Sustainable supply chain management has a positive domino effect that involves reduced risk, easier access to capital, client and employee loyalty and an improved extra-financial rating (MSCI, Sustainalytics).

Recent trends show the changing context:

Organizations that pivot now will be better prepared to seize opportunities in the future.

Key takeaway: if you plan for upcoming changes, you can boost your organization’s value and guide its future despite economic and climate uncertainty.

Support adapted for Québec’s SMEs

Our Firm offers tailored operational ESG diagnoses, comprehensive emissions mapping, and strategic support when seeking financing.

SMEs that align their supply chain now will create a sustainable competitive advantage. In a world of accelerated transformation, anticipation is a key element to turn this challenge into a growth opportunity.

Call on a team of experts who can support you throughout the process.