Expert Viewpoint oil and corn, the conflict has deprived glob- al supply chains of much-needed Ukrainian exports. Likewise, global sanctions on Russia have affected important exports like oil, gas, copper and nickel. And while many large or- ganizations have been applauded for taking a stance and suspending operations in Russia as a rebuke of its role in the conflict, the re- ality is that those operations were critical to regional supply chains that are now ruptured. Geopolitical risks add to a critical glob- al economic juncture marked by inflationary pressures, threat of recession both locally and globally, and arguably the largest refu- gee crisis in Europe since the Second World War with over five million Ukrainians having fled to Poland and neighbouring countries. In the midst of all this, similar to 2020 when we battled the sudden and crushing ef- fect of the pandemic, reshoring is not always a viable solution. It is expensive, political- ly controversial and technologically complex. Also, trade is not only impacted globally. Local, regional and national businesses are feeling the brunt of the crisis at home. Supply chain managers, like during the worse days of the pandemic, need to leverage technology to gain visibility of risks across complex inter- connected supply chain networks. Supplier qualification and management are key in this environment. As the entry point to all supplier relations, prequalification is a strategic procurement function that enables organizations to not only identify risks at the onset but also supplier capabilities that complement a buying firm’s strategic goals. Through the use of technology like enterprise prequalification portals, buyers can quickly deploy standardized requirements to a large pool of suppliers and contractors, with the flexibility to add regional requirements and to customize the prequalification criteria to the supplier’s risk profile and the goods and ser- vices provided. Leading-edge solutions are not limited to the technology, though. Deployment and management of a prequalification program requires direct work with suppliers to ensure that they understand the scope of the program, how to gather and submit the information required and to ver- ify it against industry and company-specific parameters. Last, most supply chain risks lie beyond tier one relationships, where the focal company has limited leverage. Therefore, it is crucial for effective supplier prequalification and management programs to extend across the various nodes of the supply chain to tiers two, three and beyond. In large, complex supply chains, risks are not only in terms of supply availability or business continuity. Environmental, social and governance (ESG) issues are front and centre in the assessment of suppliers. Sustainability in Supply Chain – the Era of ESG We live in times of awareness. Awareness of the economic, social and environmen- tal challenges that affect people around the globe, consumers’ increased distrust in governments’ ability to drive meaningful change and expectations that business- es lead in their place and create value not only for their shareholders but rather for all stakeholders: its customers, employees, suppliers and the communities they serve. In this environment, investors are taking a prominent role in driving change, as ev- idenced through the increase in activist shareholder proposals over the past cou- ple of years. Supply chains account for most scope 3 emissions. It is estimated that up to 90 per cent of a manufacturer’s greenhouse gas (GHG) emissions are generated through their value chain. The transportation sector alone generated 29 per cent of GHG emissions in the U.S. and 14 per cent globally. And on the social side, supply chains employ an estimat- ed 450 million people across the globe. Therefore, supplier diversity, carbon im- pact and safety are taking a more prominent place in supplier management, as is root- ing out forced labour, child labour and all forms of modern slavery from interconnect- ed supply chains. Investors have started filing shareholder proposals that punish or threaten action against large organizations with checkered safety performance, unclear commitment to climate action and inconsis- tent disclosure of steps taken to achieve their ESG targets. Human rights shareholder pro- posals alone increased by 40 per cent from 2020 to 2021. In this environment, it is increasing- ly important for organizations to leverage technology to assess their suppliers’ level of readiness to address key sustainability expec- tations. Where complex multi-tier suppliers are involved, traceability is key to understand SUPPLY CHAIN CANADA • ISSUE 2 2022 • 9 exposure, compliance and mitigation of risk on the social and environmental fronts. And communications and training are critical in the launch and execution of sustainable sup- ply chain management programs. Together with its financial impact, lack of skills is one of the main constraints faced by small and medium-sized enterpris- es (SMEs) when addressing sustainability. SMEs represent 98 per cent of Canadian employers and half of global businesses. Therefore, training and knowledge transfer are key ingredients in every supply chain sustainability strategy. When it comes to training, e-learning has picked up over the past years and is ex- pected to continue growing in the years to come. E-learning is significantly more scalable than traditional learning and greener: it carries a lower carbon footprint through reduction of paper waste and trav- el, and it has the potential to reduce overall training time by 40 to 60 per cent. Thus, it represents an opportunity for buying or- ganizations to have a positive impact on their suppliers’ ability to achieve sustain- able outcomes while generating significant productivity and environmental gains in the process. Two years after one of the most disrup- tive events in recent history, supply chain management remains a driver of change: sustainable change supported by technology to create resilience for businesses and lo- cal economies. Denis Sanchez, MS, MA, MCIPS is vice- president, operational excellence at Cognibox, a supply chain compliance, training and risk- management solutions company. He is based in Toronto. www.cognibox.com
