The value chain refers to the full range of activities a company engages to design, produce, market, deliver and support its product or service. Value chains have always been critical to operational success but previously operated mainly behind the scenes. However, value chains are under more scrutiny than ever before, particularly from consumers and investors with an interest in sustainable operations.

This means integrating sustainability criteria into an organization’s value chain risk assessment is crucial to its success. Here are three components organizations should include in their process.

1. Education

Environmental, Social and Governance (ESG) education is a critical first step in the development of sustainability goals and initiatives for any organization. Without understanding commonly used terms, the ESG space can be difficult to navigate. With the wide array of sustainability standards and frameworks available — and untold number of potential data points to capture — organizations may have difficulty discerning where to begin and how best to collect data.

Education and best practice sharing opportunities with industry peers and professionals are integral to the continual improvement in companies’ ESG journeys, even for companies in the developing stages. Providing training opportunities from credible organizations, such as the Global Reporting Initiative, ensures everyone understands the impact of accurate ESG reporting. In addition, internal training for employees and value chain partners solidifies the organization’s ESG expectations and outlines what data needs to be collected and reported. Partnering with a risk management company who understands attention to ESG performance throughout the supply chain promotes operational transparency, builds vendor capacity and improves the quality of relationships. Those partners can also help organizations meet their ESG goals through best practice and thought leadership sharing. While in-depth knowledge is not a requirement to start an ESG journey, continuous learning is highly recommended as ESG management systems mature with time.

2. Capturing reliable data

Data continues to be a driving force of business development, strategy and operational decision making. Sustainability and ESG efforts at the corporate level have become a priority for thousands of companies worldwide, but without reliable data, setting targets and disclosing associated performance can be difficult. Although contractor and supplier data can be among the most difficult data to collect due to the complexity of value chains, having the information is critical to achieving targets and creating a holistic picture of how a business affects the environment, its employees, communities and other stakeholders. A truly sustainable business will account for all three pillars and include metrics for data tracking in each.

Although fundamental environmental data tracking starts with simply measuring consumption of resources (fossil fuels, water, energy, etc.), a full environmental monitoring program includes an Environmental Management System (EMS) and extends throughout the value chain. Key components of an EMS generally include organizational environmental goals, programs for monitoring key performance indicators, or KPIs, progress tracking and assurance that employees understand their company’s environmental impacts and obligations.

Social data refers to metrics that capture the risks and opportunities of a company’s interaction with its employees, communities and value chain. Effective management and decision-making reduce risk to employee health and well-being and extend through agreements with partner companies in the business’ network. Occupational health and safety, diversity, equity, inclusion and belonging, forced labor, diverse spending and human rights are just some topics captured in social risks and opportunities. Contractors and suppliers play a pivotal role in the reputation of Hiring Clients, the organizations they work for and who determine the requirements they must meet, and can pose serious risks such as cyber security breaches, workplace injuries and regulatory violations. As a result, many Hiring Clients are taking a deeper dive into their own policies to make appropriate adjustments.

Corporate governance encompasses the policies and practices that ensure integrity and transparency for employees and other stakeholders. All companies, regardless of size, should strive to establish clear expectations of employee behavior at all levels, including executive management as they directly reflect the company’s purpose and culture. Corporate governance covers topics including employee and supplier codes of conduct, gift policies and anti-corruption and anti-bribery efforts. Depending on the size and industry of a company, some may have a robust network of governance policies while others may be simpler. While having policies in place is a key component of corporate governance practices, training over such policies is important and can be included in your governance metrics (recording employee training hours on anti-corruption and anti-bribery practices).

3. Measuring progress

Once ESG goals have been set, companies will need to review data from the vendors that supply their goods and services. It is not just about organizations collecting data but analyzing it to see progress over time from their ESG initiatives.

The ability to show progress in a way that makes sense to stakeholders at the C-suite or board level is imperative. Helping them understand these complex topics through simple visual representations of the data makes it easier for them to discern the key takeaways and learn quickly if the business is meeting its defined goals. Using technology to compile data and create visually approachable slices of the information is a strong way to manage up and provide C-suite or board level stakeholders what they need to know.

Visibility into ESG data across value chains is a complicated, but necessary, piece of a company’s sustainability strategy. When equipped with knowledge, organizations can educate their value chains on the importance of ESG information, capture data to report on ESG metrics and measure progress toward their ESG goals. The insights they gain can inform contractor and supplier management policies to ensure the value chain is contributing to a company’s internal sustainability targets and expectations.

The post "Successfully integrate sustainability into the value chain" appeared first on Green Biz