Deep Dive: only as strong as the weakest link in the supply chain

Or why what your suppliers do can impact your value.

Before we talk about supply chains - a quick update on some changes to our Sunday Brunch blogs. Going forward they will be sent out directly from our The Sustainable Investor blog website. For us, it reduces the blog admin. The good news for you is that this allows us more flexibility in formatting. They look and read better. And the other good news is that Sunday Brunch remains free.

You don’t need to do anything, we have updated our mailing lists already, so just read and enjoy. And thanks for your support.

Now back to supply chains.

Extensive and often complex supply chains lie at the heart of our current economic system. For some companies these supply chains go beyond just being a part of their raw material sourcing process - they are an intrinsic element of their competitive advantage.

However many companies have limited knowledge of what happens upstream of their direct operations. This is especially problematic for some companies involved in the agricultural/food production sector, but can also be critical in sectors such as pharmaceuticals.

The further one gets outside of an organisation into the value chain both upstream and downstream, the less control and assurance a business naturally has over activities, intermediary products, raw materials and unexpected events.

This is why governance is so important. Having strong policies, procedures and technology in place can help to provide a strong governance environment around a business's supply chain. Change is happening as business leaders become more aware of its importance.

There are three main pressures that are forcing change:

• social demands

• new environmental and human rights legislation

• litigation.

From a social demands perspective, stakeholders are increasingly considering the business as part of the broader ecosystem and are less inclined to absolve a business for 'sins of the connected.' A great example is that of 'scope 3' emissions where the consideration and disclosure by a business of not only its own directly generated GHG emissions but also those of its supply chain are crystallising in law and standards.

New legislation and litigation is something we discussed recently in a recent Quick Insight 👇🏾

Policies and procedures have been, and will continue to be important, but there are also technological innovations that could help. Traceability is a crucial component in guaranteeing provenance and sustainability through a supply chain. Plus, how a business responds when supply chain disruption and issues happen, both operationally and from a communications perspective, can be really important. The impact on value for failure can be material, sometimes terminal.

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