Building Back Ever Better with a More Sustainable Supply Chain

Total Supply Chain Sustainability. Assured.

One of the effects of the COVID-19 pandemic is its impact on the climate change crisis. How we act now is critical to the social and economic recovery of the world.  

In the latest Assurance in Action podcast, Calin Moldovean, Business Assurance and Food Services president and Simona Romanoski, Vice President of Business Assurance Innovation discuss sustainability in the supply chain, the solutions governments and organizations are implementing, and how Intertek can help companies build back ever better.   

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Build Back Ever Better

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Transcript

Speaker 1: 0:12

Hello, and welcome to another episode of assurance in action. The podcast that covers key assurance topics to you by Intertek. My name is Jessica D'Amico and today I am joined by Coleen[inaudible] president of Intertek, business assurance and food services and Simona Romano SK-II vice-president of business assurance innovation. We're here to talk about sustainability in the supply chain. So then pandemic is one of the most severe health crisis of our time affecting all parts of the world. The outbreak has brought also a social and economic crisis, which will have long-term impact on top of already existing climate change crisis. How we act now is critical as we are at a tipping point, learning from the past. We know that times of crisis also bring opportunity for innovation growth and renewed focus and change, uh, clean. Do you want to speak more to that?

Speaker 2: 1:07

Absolutely. Thank you. Um, I think that the build back better means to recover to a healthy, but also more resilient future for people and the planet. Uh, in 2020, there was a drop in emissions as a result of COVID 2019 through to the largest things we've seen since world war two, which showed it is possible collectively to have a positive impact, but also to sustain long-term. There is a need for systemic change, which require a well-managed transition to zero carbon economy. Commitment for climate action is growing fast from various stakeholders. From a government perspective, we've seen the UK, the European union committed to achieve net zero by 2050, South Korea, and Japan recently committed China by no later than 2060. And of course in the U S president Biden has also made some strong commitment as of late, also the net zero pledges by many companies and investors with targets to reach net zero by 2050. Earlier this year into tech was proud to announce that as a corporation we've made a pledge to be carbon neutral by 2050 as well. Lastly, investors also support decarbonization with a rise in sustainable and green bonds in recent years, implementing these commitments brings complex challenges, especially as companies begin to focus on supply chain emissions, which are usually much higher than in their own operations.

Speaker 1: 2:28

Hmm. So supply chain decarbonisation is a huge area of opportunity along with ensuring supply chain resiliency and protecting the rights of workers. What are some key areas of focus in an effort to build back better? Yeah. So, um, let's look first to the opportunity to decarbonize the supply chain. This has been considered by many, a game changer for credible action on climate change. For example, there was a recent study by world economic forum issued earlier this year, where are really deep diving into this topic, but they also provided a guidance for companies on key actions that they can take. And some of the ideas out there, um, that were presented were first of all, as we all know, creating transparency with suppliers is very important. Um, and it's important to also set targets and to report on progress in general, you know, expectations that targets should be aligned with the Paris agreement, 1.5 degrees Celsius, but also to follow science-based targets initiatives to determine how to get to net zero and get the best path to take depending on the industry and sector in which the company operates. Another way to reduce emissions in supply chain is really to look at redesigning products with a sustainability mindset, but also sourcing more strategically companies can work with suppliers to lower environmental impact of their products. For example, using better formulations, using alternative materials, redesigning packaging, focusing on reducing waste, pushing for recycling, um, you know, end of life of the product, uh, and trying to reduce some of the products or supporting organic materials, biodegradable materials. So there are many opportunities to reduce environmental impact of products, um, as well, it's important to engage with suppliers, working with them in partnership to address their emissions, but also to ensure that there is alignment with procurement standards and incentives. Sometimes there is, you know, uh, an unbalance or misalignment between environmental and sustainability initiatives versus what procurement or how procurement decisions are made. Um, lastly companies can engage with, uh, in sector initiatives or different let's say certifications or industry initiatives to increase awareness, but also to increase impact across the sectors and aligning with, um, different stakeholders from the same sector. You know, a good example of this could be the textile exchange initiative, which is a, a main initiative that is pushing for sustainability in the textile sector. Um, and they have also developed and promoted a suite of industry leading standards on the use of recycled materials, organic materials, as well as focused on different, um, you know, commodities like wool, um, Kashmir, leather and, and others, and all of these are important, but the organization has to be also prepared. So setting the right governance framework to align the sustainability strategies with the incentives of, of the management, uh, and also to empower the organization, to be able to, to take action and tackle these, um, this, uh, great initiatives to reduce impact environmentally. Um, however, implementing this in the supply chain is really not sufficient if companies don't work to ensure supply chain resilience, and this has become definitely an increased risk for companies as we've seen, especially from the pandemic last year, there was a recent study by McKinsey. Um, you know, actually that was launched last year in which they surveyed global supply chain leaders. And, uh, turned out that 93% of global supply chain leaders are planning to increase resilience. Um, and 44% of those would consider increasing resilience of their supply chain, even at the expense of, of short term savings. So Colleen, perhaps you can talk a little bit about supply chain resiliency because this is an area of opportunity as well.

Speaker 2: 6:48

Absolutely. Thank you. As Simona, um, as you correctly, state the supply chains are Saudi vote disruptions. I think cyber terrorism, weather pandemics have always been on the list. Uh, COVID-19 was definitely the biggest disruptor anybody ever expected. Um, most companies with disruptive some more, some less, uh, based on the nature of their supply chains and how well they've been able to plan for resiliency. Those were the highest trade intensity and export concentration. Uh, in few countries were more exposed than others. Uh, I think we see examples and communication equipment and computers, electronics, and that continues on with the chip shortages that we will read about, uh, other many labor intensive value chains, such as apparel were also highly exposed. In contrast, you can, you can see that, uh, the food and beverage industry was less exposed on average because they typically are more regionally oriented value chains to build back better. Companies will need to take a more risk management assurance approach in managing supply chains, which means identification and monitoring of risk and critical areas, uh, developing better models to predict risks and developing mitigation strategies to react faster when disruption occurs. Um, but this starts with visibility and mapping, supply chains and having access to the right data and intelligence, uh, companies on average, lack enough visibility across the supply chain network beyond tier one and two, so they can see their risks timely and make the right decisions. Um, also many organizations don't know where the key materials or supplies come from. Whereas the suppliers, the contractors delivering which quickly will generate an imbalance in demand versus capacity when the crisis will hit. Um, so it is critical to know where materials and components are sourced from. Uh, there are many solutions out there using obviously technology visualizations, uh, certifications, and other types of approaches. Uh, for us at Intertech, we, uh, provide, uh, services using a program called Enlive, which is a software as a service program, uh, which is specifically designed for supply chain risk management solutions. And we support organizations to identify and map supply chain relations, uh, to the risk profile of suppliers and therefore, uh, actions could be then mitigated and prioritized as needed.

Speaker 1: 9:22

So I know we talked earlier about supply chain, decarbonization and resiliency, but as the pandemic has shown, um, ensuring people's safety and wellbeing and ensuring the rights of workers has become a top priority or has many dove this, the rise of S in ESG. So if someone wants to talk to that, he has sure I will, I will take that. So indeed we've seen that the COVID-19 crisis has exposed, um, very serious weaknesses, systemic weaknesses, and inequalities in the supply chain. Um, recent benchmark study from the world benchmark Alliance has actually shown that human rights and climate change are often treated in silo by a different organization, but climate change and people are intrinsically linked. Um, and climate change will impact of course, deeply, especially communities and supply chains in the developing world. Um, another study issued this year by the same organization was more focused on the COVID-19, uh, in private sector response. And they highlighted where businesses also have taken steps to ensure that the rights of the workers both within their operations, but also their supply chain, um, uh, during the pandemic. Um, and, you know, according to the study, for example, I will share some key, uh, interesting findings that they noted that more than 60% of the companies describe the steps that they have taken to protect the health and safety of their workers, you know, and that included facilitating, for example, remote working where possible implementing physical distance in protocols, providing personal protective equipment hand-washing facilities. And so on, um, over a third of companies also went a step further and they took some measures to lessen the financial risks and pressures on their suppliers. However, overall, uh, companies with, um, you know, robust due diligence processes in place, we're able to demonstrate that they were better equipped to respond to the crisis while others, and still quite a large group of companies fail to demonstrate that their response to the pandemic was, um, you know, um, adequate, especially when it comes to the supply chains. Um, the health and wellbeing of people is very important for us, uh, at Intercare as well. Um, for example, we launched last year in Italy, a program called kindness, um, which is a personal experience, uh, program, um, offer digitally, which helps each of us to make sure that we do the simple things that help build our own personal strength and resilience, and it's aims to help us reenergize to boost our wellbeing. Um, and we have essentially, you know, different core areas in modules that employees can go through at their own pace and they focus on how to make connections better, how to energize ourselves, to stay positive, how to build resilience, the power of the power of the mind and, and, uh, meditation, you know, and feeling supported in the work that we do. So, you know, we recognize obviously that, uh, people, health and safety it's, it's important for us, as I mentioned within Intertek, but also we focused in terms of new services and innovation that we launched last year. One of them that I want to briefly mention being project ProTech, which is an industry agnostic, safety and wellbeing assurance program, uh, for people workplaces, um, that can be applied in public public spaces as well, and offers audits, training, um, verification and different certifications solutions. It is an industry agnostic program, as I mentioned, which really provides companies the peace of mind that they can return safely to work and that they can open safely. And during this program, we cover, we provide training materials and education, um, really on the key aspects of how to prevent the spread of infection, but also, you know, uh, providing advice on pandemic management, planning, and other, uh, important, um, you know, um, strategies and actions that companies can take. So, as we have seen, we talked, I think about three main themes, um, that we, we see that supply chains, uh, where supply chains, I guess have a, uh, an opportunity to contribute to the larger sustainability goals of organizations and really focusing on resilience, the huge opportunity, uh, to decarbonize the supply chains and to contribute to the environmental impact or reducing, I guess, environmental impact of, of many of the products and services, but also the focus of the health of the workers and everyone involved throughout the value chain.

Speaker 3: 14:11

Thank you both so much for your time. If you're interested in learning more about sustainability and what Intertek offers, please follow the links in the podcast. Don't forget to subscribe and rate us, and also please follow us on LinkedIn and Twitter.