Whether your business is large or small, environmental, social and governance (ESG) factors are crucial, and more than just a framework for financial institutions and investors to report on. Paying attention to ESG means companies can use their resources to build a more sustainable, resilient future.

But what about your supply chain? Perhaps you source components from countries that don’t have a great environmental or human rights record, or you don’t have sight of your suppliers’ suppliers and therefore don’t have the full picture. In a situation like this, how do you ensure your supply chain is 100% sustainable from end to end?

Balancing business and sustainability

‘It is difficult to generalise across sectors,’ says Andrew van Zyl, director and principal consultant of SRK Consulting, a leading mining consultancy. ‘In the mining sector, for instance, a central concern among responsible mining companies is the prioritisation of procurement from local sources.

‘On one level, “local” refers to the South African manufacturing sector, which produces much of the world-class equipment and technology that mines consume. On another level, this refers to extending a mine’s procurement of goods and services from its local community or local economy.

‘The latter is often associated with providing support to small, black-owned or women-owned businesses to promote job creation in communities related to the mining operation. Balancing this with emission-reduction targets may require assisting suppliers to improve their ESG performance, and measure and reduce their carbon footprints.’

Working with suppliers to make your supply chain more sustainable

It boils down to communication. ‘Nine times out of 10, if you have that conversation with your supplier, they will want to work with you,’ says Liesl de Wet, founder of Ecotegrity Consulting and Communications. ‘Climate change is a different conversation now than it was five years ago. The science is overwhelming – it’s there. There isn’t really much debate around whether this is happening or not.

‘Suppliers are realising that they have to do something about it, but a lot of them don’t know how to, or what’s required. Companies need to take responsibility for creating a framework and explaining to their suppliers exactly what they are looking for, instead of leaving them to choose what areas of sustainability they want to focus on.’

And it’s not just about procurement, warns Lebogang Letsoalo, founder of the African Women in Supply Chain Association (AWISCA). ‘A supply chain is made up of both procurement and logistics – it’s an integrated process, and it doesn’t help if your procurement is sustainable but your goods are being transported in trucks with a huge carbon footprint.’

De Wet agrees: ‘Most of the time, when you look at a supply chain, transport would be the biggest part of your carbon footprint. In South Africa, we are constrained in terms of the fuel our transporters use. Our fuel is very closely regulated, and we don’t always have the infrastructure for more responsible fuels, or electric vehicles to support our sustainability goals.’

The importance of measuring and monitoring your footprint

With respect to supplier engagement, Letsoalo says it goes beyond the conversation. ‘You need to vet your suppliers upfront, and ensure you have core agreements in place to manage that,’ she says. ‘It doesn’t help to have the policies without putting those agreements in place. It’s also important to have systems in place to measure all service providers and their sustainability. Remember that not everyone has the necessary technical knowledge or monitoring mechanisms to ensure compliance.’

‘Realistically, there needs to be ongoing interaction between procurement departments, technical departments and the executive team as the process evolves. And trade-offs need to be made between potentially conflicting objectives including carbon footprint, stockholding, delivery time, quality and proportion of local content,’ says Van Zyl.

In essence, you may not be able to make your supply chain 100% sustainable overnight – or even in the long term, depending on your sector. However, you can measure your footprint, understand where the hotspots are, and potentially put a plan in place for the next 10 years. ‘It’s about building a strategy and a plan to slowly move over to a more sustainable way of operating,’ says De Wet.

South Africa also doesn’t have environmental legislation specific to supply chains. Listed companies are required to submit integrated reports that cover ESG areas, but mostly, different initiatives are being undertaken by several sectors.

‘There are various commodities and each one ends up somewhere different,’ adds Letsoalo. ‘And we don’t have control over the laws in other countries where, for example, there might be human rights abuses like child labour. And that’s when you have to make a call from an ethical point of view.’

All three experts agree that the goal of a responsible, sustainable supply chain is a journey, and constraints will be sector-specific. ‘Companies have to consider best practice in their sectors, and explore their own supply chains to find opportunities for advancing their positive impact,’ says Van Zyl.

You will find more interesting reads on South Africa’s business environment in the Business Insights section of our content hub.