*This article is a Japanese translation of a manuscript (in English) written by aiESG's ESG research team and edited into three parts for publication. The English-language manuscript isthis way (direction close to the speaker or towards the speaker)Available from.
Please see the original article in English. HERE..
Table of contents:
Introduction.
ESG-oriented supply chains: necessary steps and challenges.
Technical solutions.
aiESG solutions.
Conclusions and future prospects
Introduction.
This three-part series, 'Sustainable ESG-oriented supply chains: a strategic imperative for modern business', covers the relationship between supply chains and society and the environment, the impact of promoting sustainable supply chains on companies and how to develop action plans to promote them.
So far, the following topics have been introduced on two occasions
Part 2: Sustainable ESG-oriented supply chains: a strategic imperative for modern business.
〜˜ What are the main drivers from three perspectives from academia, business and the public?
In this third edition, the necessary steps companies need to take to promote ESG-oriented supply chains and the challenges they face along the way will be explained. The importance of IT solutions, including AI, in sustainable supply chain management will also be presented, including cutting-edge technologies from aiESG. Finally, a brief overview of recent noteworthy trends in supply chain will be given.
ESG-oriented supply chains: necessary steps and challenges.
.
Many academic studies and experts have stated that companies need to take the following steps to understand and improve the ESG performance of their supply chains
middle dot (typographical symbol used between parallel terms, names in katakana, etc.)Measurement and monitoring (Collect data on ESG performance indicators).
middle dot (typographical symbol used between parallel terms, names in katakana, etc.)Supplier engagement (Communicate expectations of regulatory compliance and ethical and sustainable standards to business partners).
middle dot (typographical symbol used between parallel terms, names in katakana, etc.)Procurement Decision (consider the ESG impact of working conditions, transport methods and transparency of materials used when procuring)
middle dot (typographical symbol used between parallel terms, names in katakana, etc.)Supplier management programmes (regular review of counterparty performance based on indicators).
middle dot (typographical symbol used between parallel terms, names in katakana, etc.)Sustainable supply chain management strategies.(Set effective strategies and targets).
.
There are various recommendations on what measures should be taken, but most follow a simple scheme: gather information → mobilise resources and develop an action plan → implement actions → monitor. The first step that most companies need to focus on first is 'gathering information', and it can be said that many companies are currently struggling with this.According to academic research.The 'information gathering' phase includes the following actions:
Get consulting.
... understanding sustainability and ESG.
...gather facts to understand where changes are needed
...assess the current stage...
... identify the type of change required.
Identify regulatory and compliance requirements
... identify ESG risks.
Identify opportunities
However, due to the complexity of the supply chain and the lack of ESG expertise within companies, it is this 'gathering information' and 'getting the facts' stage that many companies currently struggle with. Companies first need to understand the ESG risks in their supply chain by mapping their supply chain and identifying key risk hotspots*. However, this can be difficult without the necessary expertise and tools.
*Risk hotspots are areas within the supply chain that are particularly vulnerable to disruption due to high exposure to environmental, social, economic or operational risks.
According to the survey.However, purchasing managers feel pressure to understand the need to reduce negative environmental and social impacts throughout the supply chain, but it is not clear how to start addressing them. In addition, companies face challenges such as financial constraints, high costs, confusion caused by many ESG frameworks and standards, lack of skills and lack of external support.
Supply chain professionals are therefore keen to utilise cost-effective IT technology solutions that can help them take the first steps towards ensuring sustainability in their supply chain operations these days.
Technical solutions.
<IT solutions can help companies initiate a response strategy by providing clarity and strategic insight into the complex issue of sustainable supply chain management.
The above issues show that external consulting and IT solutions are essential for companies to assess and improve the ESG performance of their supply chains.According to the experts who conducted the study.Many CEOs agree that it is important to use information technology to improve the sustainability of their supply chains.
Even though the majority of a company's environmental and social impacts stem from its supply chain activities, most companies do not know the scale of their impacts or where the greatest risks lie. In fact, many companies know nothing about their direct suppliers other than their Tier 1 suppliers. Mapping supply chains beyond direct suppliers may seem complex and difficult, but in reality, significant impacts are concentrated on a small number of suppliers with high ESG risks. Companies can therefore prioritise from these high-risk suppliers in order to make their entire supply chain more sustainable.
Therefore, a thorough supply chain analysis is required to identify opportunities for improving sustainability. Sustainable supply chain management requires very detailed attention and the right digital tools and external support are essential to understand the complex structures and relationships.
ESG activities require significant resources, time, money and effort from companies. A comprehensive approach to sustainable supply chains is often perceived as something that can only be implemented by financially rich companies. Many companies use semi-manual tools such as supplier surveys to map and assess ESG risks, which, despite being costly and time-consuming, can only collect information from a small number of direct suppliers who respond to a questionnaire. However, companies usually need to look beyond Tier 1 suppliers to get a complete picture of their supply chain. Without a thorough analysis of ESG impacts throughout the entire lifecycle of their products/services, it is not possible to get a complete picture of the supply chain and where the main ESG risk hotspots are located.
Modern supply chains can have thousands of nodes. In addition, manual management of these data will soon become unfeasible, as companies will have to take into account an increasing number of relevant ESG indicators, such as GHG emissions, water consumption and human rights risks such as child labour.
aiESG solutions.
.
Fortunately, the integration of cutting-edge academic research with big data and AI has led to a new generation of tools to help companies with these challenges. aiESG is proud to be the first product-focused ESG visualisation solution in Japan and the first in the world to help companies assess their ESG impact, whether from raw material sources or throughout the entire product or service life cycle. We are proud to be Japan's first and the world's first product-focused ESG visualisation solution.
The product/service ESG visualisation model built by aiESG's unique know-how enables companies to understand the current status of their product/service supply chain and create a schematic model based on reliable statistical data and a scientific approach, providing visualisation for regulatory compliance and information disclosure. The product and service lifecycle model built by aiESG traces raw materials back to their source, allowing companies to understand their ESG impacts throughout the supply chain. Using this model, companies can use it for a variety of purposes, including:
... By understanding the approximate structure of the supply chain, companies can start to create an extended supply chain map. This enables companies to work with their suppliers (and secondary and tertiary suppliers) to jointly work on improving sustainability performance throughout the value chain.
... by understanding which ESG impacts are greatest and where they lie, companies can improve their risk management. This allows companies to understand the weaknesses in their value chain.
Through engagement with suppliers, companies can implement the optimisation of their supply chain operations by addressing high-risk hotspots or developing new sourcing routes.
These insights enable companies to plan for compliance with increasing regulations. It also enables them to implement disclosures.
In addition to this, companies can use aiESG's expert services in a number of other ways. In short, aiESG offers state-of-the-art solutions to help companies take the first step towards a sustainable supply chain: information gathering. This enables companies to gain valuable insights at low cost, leading to increased corporate value that improves the ESG performance of their supply chains.
Conclusions and future prospects
In this series, we have looked at how the trend towards more sustainable and ESG-oriented supply chain operations is developing, what is driving the trend (e.g. objective pressures, internal company motivations, increased risk of inaction), the steps companies need to take in response and the challenges they face, and a closer look at how modern technological solutions can assist companies. We also touched on how aiESG services are a low-cost and useful solution for companies planning to address supply chain sustainability, especially in the early stages.
Finally, based on aiESG's research, three key future trends for supply chains are briefly described.
First, there will undoubtedly be more public scrutiny and tighter regulation. This will force companies to assess, improve and report on their supply chain performance. Voluntary reporting frameworks will become not just good business practice, but a necessity to remain competitive. Legislation, currently in discussion and testing stages in several developed countries, will become more widespread and cannot be ignored.
Secondly, from a consumer perspective, the market niche of 'ethical products' and 'ethical industries' is expanding due to growing awareness and demand for ethically manufactured products. For example, the 'ethical fashion' and 'sustainable fashion' trends are growing rapidly in the apparel industry.Patagonia(American outdoor clothing retailer) andAvantii.(a Japanese fashion company specialising in organic cotton) and other brands are making great strides in this competitive market.
Finally, social aspects, in particular human rights considerations, are becoming increasingly important. A recent academic review (Truant et al. 2024), the debate in the ESG field is steadily shifting from 'financial performance' and 'environmental sustainability' to 'social disclosure'. Recent legislation in the European Union (German supply chain law.and ... andCorporate Sustainability Due Diligence Directive.and others) require companies to conduct human rights due diligence across their suppliers, and leading companies such as Apple, Fast Retailing (Uniqlo, GU) and Mercedes-Benz Group have already begun pioneering work in this direction.
We have so far presented a three-part series on 'Sustainable ESG-oriented supply chains: a strategic imperative for modern business'. We hope that you, our readers, have gained some useful insights. In the next part of the series, we will present case studies of leading companies on the trend of human rights due diligence in supply chains and explain how aiESG can help companies plan their due diligence processes. Please look out for our next edition.
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aiESG supports ESG analysis at the product and service level, tracing back through the supply chain. We also provide support on everything from basic ESG-related frameworks to the actual disclosure of non-financial information.
Enquiry:https://aiesg.co.jp/contact/
*Related articles*.
Part 1: Sustainable ESG-oriented supply chains: a strategic imperative for modern business.
〜˜ Environmental and social impacts of the supply chain
Part 2: Sustainable ESG-oriented supply chains: a strategic imperative for modern business.
〜˜ What are the main drivers from three perspectives from academia, business and the public?
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