Moving towards a sustainable future: Understanding the resilience in your supply chain by increasing transparency

The call for businesses to become more transparent and prove they’re transitioning towards a more sustainable future is growing louder, only heightened by the pandemic. Heeding this, HSBC recently hosted a webinar with four industry leaders explaining how businesses can increase the transparency of their supply chain in light of new reporting trends, the increasing focus on Environment, Social and Governance (ESG) and the need to build supply chain resilience.

The shift to a more sustainable economy has become increasingly necessary, we’ve seen a corresponding rise in demand for organisations to reduce their climate impact. In recent months this has increasingly shifted beyond the environment and included broader ESG topics, including supply chain resilience. Covid-19 has highlighted it is more important than ever for corporates to understand the resilience of their supply chain, and to consider the potential impacts of unforeseen events.

One way to mitigate the risks is through increased disclosure regulation. In New Zealand, risk-related disclosure will become mandatory from 2023¹. This will include around 200 reporting companies, representing 90% of the assets under management throughout the country². But what about those organisations not mandated to disclose? Do they still need to consider the implications of others moving towards greater transparency?

The short answer to that is yes.

There are growing demands from investors and clients, plus the recent legislation, so it is unsurprising to see many organisations moving towards greater disclosure. Still, knowing how to start that journey isn’t always clear.

Mike Roan, CFO at Meridian Energy, references a 2004, decision made to only generate electricity from renewable sources. Starting with a GRI (Global Reporting Initiative) framework, Meridian have also incorporated integrated reporting, developed and published a Greenhouse Gas Inventory, among other initiatives, to improve their accountability and disclosure to their investors and customers.

Discussing this growing trend of greater disclosure, Brett Tomkins, Partner at Deloitte, specifically points out the shift towards reporting publicly. “It’s about that disclosure in terms of how to move yourself and your organisation along the maturity scale”.

Achieving greater disclosure is key to appeasing investors and clients and improving your supply chain resilience. However, taking a more holistic view of how an organisation operates and successfully embedding ESG practices into your culture is essential if you’re going to fully incorporate and benefit from increased transparency.

Lyndal York, CFO at Fisher & Paykel Healthcare, outlines how sustainable principles are integrated throughout the organisation. “Our primary focus in sustainability is to ensure that we’re producing sustainable and innovative healthcare devices”, she explains, emphasising Care being central to the mission of the company and every decision.

To be effective, decision-making also needs to go beyond just financials. Brett argues organisations should really be looking at outputs such as TFCD (Task Force on Climate-related Financial Disclosures) reports to feel like natural extensions of what they’re already doing. As he explains, “What really matters is the underlying business practices that occur every day across the organisation”.

As with most initiatives that demand change, getting buy-in from the top is essential. Bringing peers and competitors into the fold is one tactic suggested by Brett to try and make headway here, though whatever your method, it’s key to get leadership on-board. “If you haven’t got that”, he explains, “it’s a really challenging move to make (up the maturity scale)”.

Mike also suggests looking beyond your company and investing in 3rd party verification. A reasonable analytical base and view of the various risks need to be formalised internally, but finding external help from those who have been on the same journey offers a valuable additional perspective.

Ultimately, if you want to increase your supply chain resilience and the sustainability of your organisation, you can’t do it alone. You need to take your clients and suppliers on the journey with you, ensuring you support them through the transition.

Jonathan Drew, Managing Director, ESG Solutions, HSBC Asia Pacific, touches on the importance of not simply walking away from clients who are high-carbon emitters, but supporting those who are willing to make changes.

HSBC, for example, supports clients in a number of ways. These include aiding them in lowering carbon emission, prioritising financing and investment that supports customers to transition to lower carbon emissions, increasing our portfolio of transition finance solutions, and applying a climate lens to all of our financing decisions.

After all, if organisations are going to become more sustainable, it’s going to require collaboration, both internally and with external suppliers and clients and we must recognise the journey.

Our own approach to this topic is one of long-term thinking. We’ve committed to prioritise financing and investment that supports the transition to a net zero global economy, and helps to build a thriving resilient future for society and businesses. We have also developed working capital tools to assist business to build transparency in your supply chain.

You can read more about our commitment here.

If you would like to discuss how we can help your business achieve greater supply chain transparency and support your sustainable initiatives, please contact your Relationship Manager or click here to send us an online enquiry.

Read and discover the true benefits of a sustainable business here.