Threading the Supply Chain Needle

According to a survey of 800 business leaders, conducted by Coupa Software, many business leaders have raised the importance of Environmental, Social, and Governance goals as they make spending decisions. Ninety-four percent of business leaders claim that improved energy efficiency is a top ESG priority, 91% claim cutting greenhouse gas emissions is a top priority, 89% of leaders claim that eliminating modern slavery is a top priority, 89% also claim that improving supply chain diversity is a top priority, and 87% claim that reducing deforestation is a top priority.

Meanwhile, nearly two-thirds of businesses cannot tell if their closest supply chain partners are meeting any kind of ESG standard.

Business Spend is an amount of money spent over a specific period of time by a business to achieve a desired outcome. Spend includes the capital expense and operational costs for a company, including cost of goods sold and other operating expenses, often called selling, general, and administrative (SG&A) expenses.

Within the supply chain, there are four main categories of spend. First are the operational expenses for sourcing, making, and delivering products. The second category of spend is for working capital, which is related to building inventory buffers and safety stock. A third category is capital investments that facilitate growth and expansion, such as investment in new facilities or the expansion of capacity. The final category is MRO (Maintenance, Repair, & Operations) materials and parts needed to support production and distribution activities.

The first barrier, which 48% of business leaders experience, is a lack of data on suppliers' ESG credentials. Second, 40% of respondents claim that limited financial resources prevents them from assessing ESG risk. Third, 36% of business leaders surveyed claim that their reliance on technology that isn't designed for ESG compliance is what keeps them from adequately evaluating their supply chain partners' ESG risk.