Where mid-market businesses are focusing their efforts for an ethical, sustainable and secure supply chain
Drawn from our ESG snapshot report, our experts analyse the current areas of focus for mid-market businesses when it comes to their supply chain. They also detail clear guidance on how you can achieve a sustainable and secure supply chain from a tax, risk, operational and ethical viewpoint.
The ESG snapshot research asked 800 mid-market business leaders about their ESG strategy and how close they are to achieving their ambitions. We looked across six focus areas, with sustainable, ethical and secure supply chains being a key pillar in achieving a successful ESG agenda.
The research shows that while businesses are showing an ambition to take steps with their ESG strategies, nearly a quarter are still experiencing challenges when trying to do so. Failing to prioritise ESG could mean that people won’t want to work with you or for you, and you could lose access to capital.
When asking what areas of ESG were a priority for businesses, 93% said that a secure and ethical supply chain is important to their stakeholders.
Supply chain sustainability and security are core considerations for organisations, particularly where critical aspects of the supply chain are based overseas.
You need to ensure that suppliers and partners involved in your supply chain are transparent, adhere to good international practice and legislation, and have early visibility of potential cost increases. Legislation is growing and the cost of financial and reputational consequences of not being compliant can be significant.
The focus on the environment is overshadowing social action. This lack of balance puts companies at increased ethical risk around supply chains.
Our latest governance research echoed this which found that only 21% of the FTSE 350 are aware of social risks, while 59% identify environmental and climate risks.
Our ESG snapshot research shows that all these risks are heightened further as the complexity and reach of a supply chain increases. With complex supply chains becoming the norm, the risks across the social and environmental landscape at all levels need to be understood and mitigated correctly.
Jacky Griffiths provides clear guidance around what key areas you should focus on, how to approach ethical risks in the different tiers of a complex supply chain and some of her recommended actions.
“There’s complexity with managing an ethical supply chain and part of understanding that is really understanding the risks across all the different tiers of your supply chain"
Jacky Griffiths, ESG Lead Business Risk Services
A supply chain’s impact on the environment is a concern that all global businesses face today. Understanding your direct impact is a primary focus, but considering all the GHG emissions across scopes 1, 2 and 3, upstream and downstream of your supply chain, is key for taking initiatives to control your carbon footprint and reduce energy and emissions related costs.
Raj Kumar explains how to reduce environmental and emissions related risks across your supply chain, areas you should focus on and guidance on achieving sustainability and security.
“The key challenge we keep seeing with clients is the impact of sustainability and the environment within their supply chain. It's becoming an ever more increasing concern"
Raj Kumar, Environmental and Sustainability Lead
Use our ESG maturity index to understand where to focus your ESG strategy and investment, benchmarking against your industry and peers.
While supply chains are a large part of many businesses, there needs to be more visibility in identifying accurate risks and ensuring they’re managed correctly. Supply chains have become increasingly complex, whether global or UK based, and many businesses are looking to simplify. Therefore, it’s ever more important to have a clear picture of your key risks to help make informed decisions.
Ben Langford discusses what areas of risk you should prioritise, how supply chain risks are evolving, and his key takeaways going forward.
“Supply chain resilience is a recent area of focus, where the pandemic has led to many supply chain disruptions.”
Ben Langford, Director at Grant Thornton UK
Supply chain management and resilience is a key agenda item for many boards, read our insight
Increasing amounts of tax governance and risk legislation have been implemented in the UK which imposes additional compliance requirements for large businesses.
It is therefore essential that a business’s tax strategy aligns with its wider ESG strategy and that the tax strategy cascades through the supply chain. This is a key component within ‘S’ & ‘G’. Within the ‘E’ bucket, it is also necessary when trying to achieve a sustainable and secure supply chain to plan for future potential tax costs within the supply chain, and in particular carbon tax costs, that could arise due to legislative changes.
ESG is becoming an increasingly important metric for businesses, their stakeholders, investors and also international tax authorities. For example, HMRC have recently published a paper on labour tax risks within the supply chain.
It is therefore important that tax strategies align with ESG strategies and that requires businesses to comply with tax rules, whilst understanding the potential cash tax impact of carbon tax policies being introduced, such as the EU’s Carbon Border Adjustment Mechanism.
Paul Atherton discusses where to focus your tax strategy when it comes to ESG, how you can establish a carbon, tax and cost efficient supply chain, and his recommendations for businesses in the future.
“Businesses can often incur accidental corporation tax ‘exit charges’ due to supply chain restructuring, for example from unintentionally transferring goodwill or other intangibles cross-border due to the changing functions of a UK business as a result of ESG strategies, supply chain restructuring or Brexit planning etc.”
Paul Atherton, Director at Grant Thornton UK
