With the advancement of Industry 4.0 technologies, it’s safe to say that supply chain managers are constantly looking for ways to optimise their processes.

Identifying weaknesses, blindspots and bottlenecks are all crucial factors in supply chain risk management, and keeping up with ever-changing technologies and best practices is a challenge. So, how can we manage this overwhelming task in the most efficient way possible?

One way to do so is by looking through the lens of ESG governance. In this article, we’re delving into how ESG monitoring can aid in supply chain risk management, by optimising asset activities and resource consumption, and improving the safety and security of digital and real-life environments for your colleagues, customers, data and products. Read on to find out more.

What is Environmental, Social, Governance (ESG)?

Before you can use ESG as a framework to tackle an operational aspect of your business, it’s important to have a confident understanding of what it refers to. In business, ESG frameworks can be used to track a company’s environmental, social, and ethical governance practices to ensure responsible and sustainable operations both within and beyond the company. Incorporating ESG principles into supply chains is arguably crucial for mitigating risks, strengthening company reputations, and ensuring long-term business sustainability. Here are all the dynamic risk management benefits that your enterprise can experience when investing in ESG monitoring.

How ESG Monitoring Aids in Risk Management for Supply Chains

Optimising Asset Activities

Asset tracking is the bread-and-butter of any profit-conscious company, and a crucial part of supply chain risk management. So the new possibility – indeed, reality – of real-time asset monitoring is revolutionising the way companies are able to track their assets, not just within bound locations, but across branches and between physical and digital spheres. 

For example, tracking energy consumption will ultimately support supply chain managers in pinpointing opportunities for resource optimisation across machinery and other facility equipment. Similarly, predictive maintenance tools can identify potential operational faults feasibly before they even occur, therefore minimising unexpected breakdowns by switching to a focus on improvement and repair, rather than costly replacements. 

Ultimately, maintaining real-time performance data across your company’s assets doesn’t just reduce waste and unnecessary spending – it also ensures better value and efficiency from your current assets by providing full visibility with conclusive, real-time feedback. This added visibility will allow both asset monitoring software and their users to identify patterns and correlations that can be used to further optimise your supply chain. 

Optimising Resource Consumption

Whatever your industry, resource consumption is a component of supply chain management that must be prioritised. To protect the flow of goods and ensure a robust continuity of supply even in the face of unexpected natural, industrial or economic challenges, an ESG method to optimising resource consumption takes a holistic approach.

A focus on raw material efficiency is a good place to start. Effective and sustainable water management, energy consumption and waste recycling are all suitable methods for sustainably cutting costs and streamlining operational processes for smart supply chains. 

Supply chain managers are also being advised to invest in sustainable practices – they may initially be accompanied by some level of cost investment, but can provide robust ROIs after even a few months following implementation. For example, if a natural disaster shuts off power from the grid but your facilities consume energy collected from water tanks or solar panels, your enterprise will face less supply chain disruptions. If you minimise your environmental footprint by reducing and recycling waste, you’ll not only minimise contributions to landfill, but also reduce other expenses, such as packaging.

Improving Site Safety & Air Quality

In worksites, warehouses and factories dense in chemicals, biochemical hazards or other concentrated substances that pose significant health risks, a naturally major component of supply chain risk management is assessing site safety, to ensure employees are able to safely and comfortably complete their work duties. This is a key component of the ‘governance’ making up ESG principles.

Emphasising the need for safe working conditions is an essential part of social and ethical risk management. In most industries, safety standards can be governed by national regulatory bodies, but enterprises are still advised to establish their own robust health and safety protocols to support compliance. 

Thankfully, IIoT technologies can aid in monitoring and reducing air pollutants. Installing smart ventilation and air filtration systems, and conducting regular air quality assessments using these technologies will improve and stabilise worker health and productivity. As these technologies are designed to provide intuitive user interfaces, staff training can also be streamlined, as the learning curve for mastering connected technologies is generally minimal. 

Alongside these technological investments, other foundational measures for improving site safety in supply chain operations naturally includes ensuring staff wear adequate protective clothing, that supervisors facilitate safe equipment handling demonstrations during staff onboarding and training, and that emergency procedure training should also be provided to minimise disruptions and maintain compliance.

Strengthening Digital Infrastructure

Whilst ESG monitoring can aid in physically improving facilities and removing tangible risk hazards, these initiatives can also provide benefits when it comes to optimising your enterprise’s digital infrastructure. As current digital transformation trends veer more towards  embracing advancements in machine learning and AI, companies are seeking methods of investing in these dynamic data tools without overwhelming their staff or systems. 

Optimising data analytics processes promptly can allow supply chain managers to sustainably manage their business data without resulting in unobserved insights and data bloat. Similarly, digital pollution is an often ignored component of sustainable practices. At a surface level, this can mean not only investing in tailored data analytics processes and in-house data specialists for optimal data interpretation, but also implementing energy-efficient IT solutions embedded in supply chains, to reduce both environmental impacts and financial costs of your digital infrastructure.

For guidance on managing the legal aspects of digital infrastructure, consulting an Environmental, Social and Governance Law Firm can help ensure your business remains compliant with constantly changing regulations.

Investing in Cybersecurity

One of the most impactful methods for reducing your company’s digital bloat is simply by investing in cloud computing solutions to store business data. However, cloud computing investments are typically accompanied by concerns for your company’s cybersecurity infrastructure. As business data is stored off-site in cloud servers, your enterprise may experience barriers to monitoring data breaches. 

In many industries, the protection of customer and sensitive data is regulated externally, and mandatory by law. More importantly, having strict data protection protocols and cybersecurity in place will reduce the risk of cybertheft; which can result in financial and reputational damage. For many small businesses, the impact of a targeted cyberattack can be too damaging to recover from, so part of your attention in supply chain risk management should be devoted to minimising access to your digital assets, resources and operations. 

For the benefit of your company and its customers, it’s crucial to invest in adequate, robust cybersecurity measures and data protection that are developed in tandem with cloud solutions and other digital partners. Switching to robust and reputable cloud-based supply chain monitoring solutions is a great way to centralise, secure and stabilise your operations, therefore minimising risk and unwanted access.

ESG Monitoring: The Future Of Supply Chain Risk Management

ESG performance isn’t just a buzzword that businesses should stick over their company branding to stay relevant. It’s a genuinely valuable strategy (and the future) of running many aspects of your business, including supply chain risk management.

As we move towards greater reliance on digital, cloud-based software to track, assess and analyse almost every aspect of business operations, now is a great time to adopt ESG monitoring processes into your supply chain management. Doing so will move your business forward in a sustainable way; for your colleagues, profits, the environment and the new business landscape we are all adjusting to.

So to recap: invest in real-time asset monitoring and thoroughly developed, cloud-based digital security solutions, optimise and improve your natural resource consumption and site safety, and prioritise your company’s impact on the wellbeing of its employees, and the wider environment. Use ESG monitoring to identify your blindspots and aid your supply chain risk management, to save money, time and effort for your business.