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How to find value in sustainable supply chains

12 actions you can take when optimising your supply chains

We asked 370 business leaders about their supply chain in our latest Business Outlook Tracker. 52% of respondents told us it's harder to operate their business today than it was 12 months ago. With uncertainty as well as known headwinds continuing, you need a resilient and sustainable supply chain that can react with agility.

To help you, we recently hosted a webinar that asked how business leaders can find opportunity in sustainable supply chains.

Here’s 12 actions suggested by our panel that you can work through this year to find and create value as you focus on achieving a sustainable supply chain.

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Understanding your changing supply chain

Oliver Bridge, Head of Operational Consulting

1 Find the opportunities that have the most 'buy-in'

Many will have margin and cost benefits for your business. For example, if your internal ESG strategy isn’t in order your supply chain will not reflect it. You should identify which ESG initiatives also bring business benefits.

2 Create a risk-benefit analysis

Supply chains are changing whether you like it or not. You should create a balanced risk and benefit analysis to prioritise and quantify the value of improvements that can help. Categorise improvements, such as compliance, business risk, opportunities, and cost reduction.

3 Look for practical and simple steps

It will take 18-24 months to make any meaningful changes to your supply chain, depending on the maturity of your supply chain approach, and 12 months at least to put systems in place. Look for simple steps you can action right away, such as measuring and mapping. Many improvements don't need large investments.

4 Begin conversations on the UN Global Compact principles

Ask yourself and stakeholders if your business has already considered its responses to meeting UN Global Compact principles. If these haven’t begun, it’s time to start the conversations with executive leaders and get buy-in.

5 Get visibility of your outward reporting

If the size of your business calls for it, you need to get visibility on your outward reporting, such as modern slavery statements and gender pay gap reporting. Even if your business isn't large enough to be caught by some of the provisions, your customers and suppliers may be, and they're likely to push for details from you.

6 Complete an ethical supply chain review

There are so many areas of challenge, and one in particular is protecting human rights of those in the supply chain. Your supply chain partners need to be able to provide you with assurance that they're operating in line with regulations, your code of conduct and standards, and in an ethical way. As part of your scope 3 reporting, you will need to understand this of your suppliers.

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Energy costs and optimisation

Raj Kumar, Head of Environmental Advisory

7 Educate your business on emissions

Forty-eight percent of businesses told us that they didn't have a good enough understanding of their supply chain to respond quickly to disruption over the last 12 months. You need to make sure that your business understands emissions across the complete organisation (internal and external) and the impact these have on the environment. If you haven’t already, you should begin by measuring your impact in terms of Scope 1, 2, and 3 emissions.

Organisations are dependent on the supply value chain for information related to Scope 3 (15 individual elements) to generate Scope 3 reporting submissions, it's critical that the data is fully captured and accurate to completely represent the impact on the environment.

8 Use data as much as possible

All supply chain activity is underpinned by the growing ESG agenda. You should use data to improve performance, identifying large emissions sources and priorities at large. Lenders and other stakeholders will increasingly look to ESG-reporting and adherence to regulation, having this data ready before they ask will be key.

9 Improve communication across the value chain

Improve communication across the value chain, provide informed investment decisions to gain a competitive advantage, understand the risks and develop mitigation measures. With growing pressure through increasing energy/fuel pricing and carbon tax costs making impacts across the supply chain, these increasing costs affect all entries within it. The increasing costs have a ripple effect on the competitiveness of products and services. To mitigate the risk of energy pricing, a business needs to look at optimising to achieve quick wins and transformation of assets to create long term advantages.

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Reporting, regulation and tax issues

Dan Dickinson, Tax Partner

10 Get visibility of upcoming tax changes in your supply chain

Tax and reporting changes are designed to raise revenue and change behaviours of businesses. You need to keep on top of the direction of travel in the key territories in your supply chain. More taxes on externalities are likely, such as plastic packaging taxes and, most significantly, carbon taxes and pricing mechanisms. These taxes will add significant costs into your supply chains that you may not yet be aware of or scenario-planned – 55% say increasing costs in their supply chain are being passed onto their customers through higher prices for their products/services. Can you pass these on?

11 Understand how tax and reporting-sensitivity scenarios can be built into the data you're already collecting

You'll start to feel pressure from larger customers to adhere to their reporting requirements, perhaps even internationally. TCFD and EU initiatives will play a bigger role – many businesses are not compliant today and need to do more. If you feel you're behind, that's okay as there's time to catch up. Start by reviewing the data you're already collecting for other purposes, identify the gaps in terms of supply chain and ESG and add in tax sensitivities.

12 Ensure your suppliers are doing the same

You need to ensure that suppliers and partners involved in your supply chain from start to finish are transparent, that they’re adhering to legislation, and that you get early visibility of potential costs increases. Legislation is growing in this area and the reputational consequences from not being compliant can be more significant than additional taxes suffered, for example:

  • Corporate criminal offence of facilitating tax evasion
  • Criminal investigations into the seeking of coronavirus support payments and tax deferrals

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