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August 1, 20235 min read

The Importance of Sustainable Supply Chains

This is a summary from the presentation by the same title by Sue Fortunato-Esbach, Regulatory and Sustainability Expert and Stephen Borchuk, Regional Director from Assent, at the Future of Electrification 2023 conference. Watch the full session here:  

Sue Fortunato-Esbach and Stephen Borchuk from Assent centered their discussion on the shift towards new supply chains and the importance of responsible sourcing. This entails identifying ESG (environmental, social and governance) risk in the supply chain and taking action to mitigate identified risks and impacts. Adopting a sustainable supply chain offers numerous benefits for companies. It ensures market access by complying with legal requirements and meeting customer demands for sustainability. Additionally, a sustainable supply chain acts as a value driver, improving product quality and brand reputation while reducing supply chain disruption associated with environmental and social risk. Robust sustainability programs can also lead to financial risk reduction, stakeholder confidence, and access to funding and investment opportunities. Embracing a sustainable supply chain enables companies to enhance their competitiveness, build stronger relationships with stakeholders, and contribute to a greener economy.

Assent suggests that the most logical place to start when it comes to ensuring a sustainable supply chain is by directly engaging with suppliers and asking for signed declarations or industry standard statements to verify the absence of specific hazardous materials and to evaluate a supplier’s level of ESG risk. For example, statements that indicate that the supplier did not source or produce the material in a manner that is associated with human rights risks, such as child labor or forced labour. Stephen notes that monitoring suppliers and cross-checking the information they provide is also important to ensure that they are following policies to minimise environmental and social risk  in their supply chains. Assent takes a few different steps in supplier monitoring, including utilizing a smelter library to identify higher-risk smelters of raw materials, monitoring for adverse media reports, and scrutiny of beneficial ownership. By taking these steps, organizations can effectively assess potential risks and establish a foundation of transparency and accountability with their suppliers. This ensures that suppliers are fully committed to sustainability goals.

Stephen emphasizes that sustainability is an ongoing journey that requires companies to understand their current position, define their future goals, and determine the path to get there. To achieve these shared goals, companies must be willing to actively engage with suppliers. This entails gathering data from the supply chain, exchanging information with industry peers and trade associations, and establishing connections with both direct suppliers and sub-suppliers. By actively collaborating with suppliers, companies can identify and address risks, explore different approaches, and seize opportunities to optimize their sustainable supply chain management. This long-term commitment and effort will eventually yield a positive return on investment and contribute to the overall success of sustainability initiatives.

Sue further advocates for the education of suppliers through Assent’s free learning management platform, along with providing corrective action pathways to enhance sustainability. This investment in supplier education and development helps to cultivate a responsive and knowledgeable supply chain. Assent believes that it is important for organizations to understand their baseline data and set achievable targets that can be achieved through proper education and allocation of resources. By ensuring that suppliers grasp their requirements and the legal obligations associated with addressing environmental, social, and governance (ESG) risks within the supply chain, companies can take appropriate corrective and preventive actions. However, it is important to ensure that suppliers not only understand the issue at hand but also implement the necessary measures. Instead of immediately replacing a high-risk supplier, Assent advises fostering a positive customer-supplier relationship that promotes supplier competence in the long term.

This approach is particularly valuable for suppliers in less developed countries, as it allows for incremental improvement and enables them to operate in a reasonably sustainable manner within their local context. This aligns with the desired trickle-down effect of European Union (EU) sustainability legislation, focusing on due diligence requirements for economic operators at the top of the value chain.

During the presentation, Sue discusses the ongoing advancements in the EU Batteries Regulation during the presentation. This regulation focuses on promoting responsible sourcing practices for minerals utilized in the production of batteries for industrial use and for electric vehicles. Its primary objective is to ensure that manufacturers undertake supply chain due diligence to prevent human rights and environmental violations linked to mineral sourcing. The regulation will introduce mandatory quotas that require the incorporation of recycled minerals like cobalt and lithium in batteries. This strategic move aims to reduce the EU's dependence on mineral extraction from third countries and facilitates the EU’s circular economy.

Despite the substantial carbon footprint associated with battery manufacturing, concerted efforts are being made to mitigate emissions by diversifying mineral sources and enhancing recycling processes. The Batteries Regulation will also introduce mandatory carbon footprint calculation and classification for industrial and electric vehicle batteries. Sue emphasizes the importance of aligning with industry standards and best practices to ensure that suppliers meet the same expectations. By adhering to these guidelines, companies can contribute to sustainable practices throughout the battery supply chain.

Sue and Stephen’s discussion emphasizes the essential elements of sustainable supply chains; direct engagement with suppliers, cross checking and monitoring, and education to foster supplier commitment to sustainability goals. Organizations must adopt a long-term approach to sustainability and collaborate closely with suppliers to achieve common objectives. This collaborative effort contributes to building a more sustainable future and creating positive environmental and societal impacts.

Assent’s insights provide valuable guidance for businesses looking to establish a sustainable supply chain. By taking a holistic approach to supplier screening and engaging directly with suppliers, organizations can ensure responsible sourcing of materials. Additionally, educating suppliers and setting targets that can be achieved through proper education and resource allocation enable organizations to progress towards a more sustainable future. Assent’s recommendations align with the current push towards a greener economy and serve as a reminder that sustainability is an ongoing journey that requires a long-term commitment of all stakeholders involved.