Analyst Insight: When it comes to supply chain ESG, most companies have a lot of work ahead to achieve the deepest levels of program maturity. But it’s worth the effort — for your company, and for your impact on people and the planet.
ESG in the complex manufacturing industry, and its accompanying supply chains, are fast becoming a topic of conversation for companies around the world striving to make sustainability a priority for their business. But the majority are at the earliest stages of supply chain maturity, and are faced with the challenge of achieving the deep sustainability they need to protect their business from risk and make a positive impact on people and the planet.
In 2023, Assent launched a Supply Chain Sustainability Maturity Assessment to determine where manufacturers from a variety of industries are in their journeys to a mature supply chain program.
The tool measures companies against five levels of supply chain maturity, each defined by its own characteristics and areas for improvement:
0 — Supply Chain Compliance Planning
1 — Basic Compliance
2 — Foundation for Sustainability
3 — Strong Sustainability
4 — Deep Sustainability
Companies that complete the assessment, which takes less than five minutes, gain a better understanding of their program strengths, gaps, and next steps.
Assent’s report, Supply Chain Sustainability in 2023: Evaluating Program Maturity in Complex Manufacturing, spotlights the trends highlighted in the data collected from this tool over the course of eight months, with 322 professionals participating.
Report findings indicate:
Nearly one in five companies (19%), is at Maturity Stage Level 0 or the earliest stages of supply chain compliance planning.
Close to half (49%) were identified as Maturity Stage Level 1, or basic compliance.
Another one in five (20%) ranked at Maturity Stage Level 2, with some sort of foundation for compliance.
Only 8% were identified at Maturity Stage Level 3, or strong sustainability.
A mere 3% identified at Maturity Stage Level 4, or deep supply chain sustainability.
Why do so many companies find themselves in the earlier stages? The journey to deep sustainability is essential, but it’s challenging for companies to even get started, let alone make significant progress. Difficulties can come from all angles, from understanding compliance requirements in a changing landscape to building relationships with their suppliers, and data issues caused by manual or incomplete programs. You need a comprehensive program, with reliable supply chain data and expertise, to achieve the deepest level of maturity.
Following are some best practices for increasing supply chain maturity.
Enforce supplier policies and procedures. Helping your suppliers understand your expectations is key to getting quality information and achieving deeper levels of maturity. Supplier policies and procedures, such as a supplier code of conduct, could include an outline of their obligations and the documentation they’re expected to provide you as their customer. After putting policies and procedures in place, it’s vital that they’re effectively communicated in order to hold your suppliers accountable.
If a supplier doesn’t comply with terms and conditions, then the company could, in theory, leave them and find a new supplier. However, that’s not always possible due to the complexity of the supply chain. Companies could also consider positive encouragement methods, such as preferred supplier status, to get suppliers to meet the terms of their agreement. This is a good example of what’s seen in mature programs, but often it takes a phased approach to implement correctly.
Phases might might include:
Year 1: Developing policies and procedures
Year 2: Building preferred status and other programs into those policies
Year 3: Beginning to audit suppliers to ensure compliance
Design products for compliance. This is the best way to avoid having to redesign them if they fail to meet requirements. Companies in later stages of maturity apply a proactive approach to their compliance requirements to anticipate risks before they occur. This could involve considering current compliance requirements, then planning ahead, with the help of expert guidance, to avoid the need to redesign as regulations change.
Anticipate your risks. Bumps are inevitable, especially when you’re dealing with global supply chains. Every complex manufacturer is faced with supply chain issues at some point, like a bad supply chain actor, challenges with engagement, or changing requirements that make sourcing materials more difficult. Mature-stage programs are better equipped to anticipate these challenges and mitigate the risk when they happen. The best way to get ahead of risk is to proactively source information and expertise you can trust, and equip your business with the knowledge to make informed decisions.
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