By Allen Campbell, JD, MBA
This is another blog post in our series on Value Chain Sustainability.
Businesses need to collaborate to understand and cope with “The Expanding Universe of ESG”. I coined that phrase several years ago to denote the many ways that sustainability/ESG has expanded – conceptually, geographically, legally, and so on. The trend is clear, with no end in sight.
This profusion – of ESG expectations and demands – subjects businesses to high levels of stress. On the one hand, the historical mission of business is to produce goods and services, profits and wealth, and the free market efficiently – some would say, ruthlessly – rewards the profitable while weeding out the unprofitable. So, business owners and managers are primarily judged in terms of economic performance.
On the other hand, they are increasingly also subject to new sustainability/ESG laws and demands. Companies are not only expected to cause their own houses to be compliant, they are increasingly expected to ensure that their supply chains and even their customers – their entire “value chains” — are compliant. We call it “value chain sustainability”. Recognizing that medium-, small- and micro-size suppliers do not have the resources to comply with these new demands, expectations and obligations, big companies are becoming expected to help these smaller players in their value chains. All of this is a lot to ask.
This situation calls out for collaborative education, thinking and doing. We therefore commend the World Wildlife Fund (WWF) and its Markets Institute. (See https://www.worldwildlife.org/pages/markets-institute-change-at-the-speed-of-life.) We agree completely with these words:
“Even the biggest companies, working alone, face substantial challenges meeting these complex, far-reaching compliance standards.
“Manufacturers need to know their entire supply chains, monitor performance for key sustainability issues, and respond appropriately when performance is inadequate. Given the difficulties and often substantial resistance to doing so, collaboration is the key. By joining forces through partnerships, companies and their suppliers can overcome resistance while also pooling resources and expertise to ensure traceability throughout their supply chains. Collaboration can bring together competitors to share better practices, develop common standards and implement joint monitoring programs.
“Sharing information and collaborating on research allows companies to learn the environmental and social impacts of their products and services more quickly. It also enables them to understand the risks associated with their supply chains and how to mitigate them. Monitoring and auditing costs can be reduced by pooling resources and sharing expertise.
“To be sure, climate change could make supply chains more difficult and expensive, and companies that are focused primarily on the near-term bottom line might be less inclined to invest in ESG measures. But policy and regulations can help level the playing field for all and accelerate actions that mitigate the impact of climate change.”
— Corey Norton, New Environmental Laws: Good for the Environment, Complex for Companies (https://www.worldwildlife.org/blogs/sustainability-works/posts/new-environmental-laws-good-for-the-environment-complex-for-companies),
If you are in agreement with us about this need for collaboration, please reach out to us at ContactUs@McAlan.com.