What I’m trying to say is, you hold a lot more influence in the organization than you may know.
ESG criteria help us look far beyond the bottom line. ESG investments are buying decisions deeply rooted in a more holistic view of value and value creation.
EU Disclosure Regulation: Passed in 2019 requires firms in the financial services sector to make strategic business and policy decisions regarding their approach to ESG which must be disclosed on the firm’s website and in pre-contractual and periodic disclosures.
EU Taxonomy: Passed in 2020, provides a toolkit for assessing whether an investment is “environmentally sustainable” to ensure corporate entities in the EU are able to meet the ambitious goals set out in the EU Green Deal.
Liferkettengetz (German Supply Chain Act): Passed in 2021, puts Legal requirements on German companies to take responsibility for their global supply chains with enhanced due diligence, corporate governance, and to have a means for reporting upon violations within various social, environmental and financial criteria.
As the saying goes; You can’t manage what you can’t measure. What you can’t measure you can’t improve upon.
10 Tips to build cool & quantifiable ESG Assessments:
1. Clear CoC, Policies & Expectations
2. Work ESG into Onboarding/Pre qualification
75% of CPOs responded to Procurement Leaders CPO Compass 2022 that one of the top actions they plan to take to address ESG Goals is to work sustainability due diligence into the operational sourcing process.
3. Make Assessments Multiple Choice
Utilizing Multiple-choice methodology as a basis for your assessment questions provides respondents with fixed answers. Providing multiple choice implicitly communicates your expectations to a supplier. Yes/No compliance-based questions can be valuable where it is very clear which requirements are to be met (for example, signing a CoC or uploading an ISO certification). Multiple-choice questions provide an embryo to turning qualitative responses into quantitative intelligence.
4. Adopt a Rating Methodology
- Stop and Investigate.
- Proceed with Caution.
- or Go for it.
Once you’ve determined your KPIs, questions, and response values, it’s time to start assigning weights.
Building a more holistic view of your suppliers by defining and assessing wide criteria of ESG KPIs will help you to spot risks and opportunities faster - especially if these assessments are building instant intelligence with a rating methodology.
With this said, it’s important to have simple mechanisms in place that will help you quickly identify potential ESG risks.
6. Ability to communicate corrections & development
When you do spot a risk or opportunity, it’s good to address it quickly.
The ability to issue actions and reposit communication alongsideresponses & results of a supplier's ESG profile in supplier scorecards is an important feature to make responsible sourcing decisions more process dependent and less person dependent.
7. Supplier Diversity, it’s time to do something!
Supplier diversity starts with a better understanding of your supply chain. You can gain this by implementing simple processes to segment suppliers and leveraging this information to put supplier diversity programs into place to enhance inclusive spend and inspire diversity in your supplier organizations.
10. Separate Compliance from Performance
Kodiak Hub’s solution leverages both ESG compliance & performance to help our users gain a holistic view of their suppliers in an aggregated rating profile but by compartmentalizing these two activities (in self-assessment and performance evaluation) we’re able to offer users more granular analysis on supplier performance as well as levels of compliance.