We believe that a corporation can only navigate and thrive in this new scenario if it evaluates its supply chain from the perspective of responsibility. ESG risks not addressed by your suppliers will fall on your business. Corporations cannot say that it is not their problem if a supplier in another country keeps workers on 12-hour shifts without a break, or if he deforests native areas, for example.
Unfortunately, supply chain fulfillment of the ESG agenda is still not on the radar of large companies.
A McKinsey study conducted during the Covid 19 pandemic assessed whether senior executives knew how much the suppliers of core products, logistics and transportation had been affected within end markets.
The result showed that only 50% of the executives knew where they were based and what were the risks of their direct suppliers (tier 1)! And only 2% knew “something” about suppliers in tier 3. Companies that did better during the pandemic had three times more monitoring of their supply chain.