Businesses are increasingly recognizing the need to integrate the sustainability standards required by national legislation deep into their international supply chains.
Companies are facing pressure from all sides: governments are enforcing strict corporate sustainability regulations, consumers are demanding transparency, and investors are insisting on reporting on environmental, social and governance (ESG) metrics. Attention extends beyond national borders and headquarters deep into supply chains and raw material hubs.
With this in mind, the global supply chain regulatory landscape is becoming more complex. Companies must comply with new requirements, such as the US Uyghur Forced Labor Prevention Act, the German Due Diligence Supply Chain Act and the new EU Corporate Sustainability Review Directive (CSDDD).
Each of these laws requires a company to identify and address human rights and environmental risks throughout its supply chain – not just its own operations. Failure to comply can result in serious business risks, including fines and confiscation of the product.
As we look to 2025, organizations must prioritize strategies that comply with emerging regulations, positively impact social and environmental outcomes, and navigate supply chain disruptions—all while A competitive global market is flourishing. It may seem difficult, but by recognizing the common needs in these goals and the activities required to achieve them, companies can create an efficient approach that maximizes time and resources.
In ESG frameworks, sustainability goals and supply chain regulations, risk-based prioritization is a fundamental principle. This includes addressing the environmental and ethical risks that are most severe, widespread, or likely to affect business operations.
Creating a broad view of the supply chain is fundamental to this effort. To identify the biggest sustainability risks, companies need to understand their supplier base beyond direct partners, even down to individual supply chain sites. This level of transparency allows them to assess compliance, proactively manage risks, and use these insights to build resilience against potential disruptions. Visibility facilitates a deep understanding of the supply chain and enables companies to take action in critical areas for intervention and improvement.
Mapping out a detailed supply chain can be challenging. Modern technology provides deep data and analytics from global sources so that companies can better understand their supply chain, manage sustainability risks and adapt to the evolving demands of corporate responsibility. These smart tools help prioritize ESG areas, conduct comprehensive risk assessments, allocate resources in line with company goals, and collect accurate data.
To navigate sustainability standards across multiple regions, companies must meet the most stringent requirements applicable to each ESG area. An effective strategy includes the following best practices:
Sustainable supply chain management strategy One that focuses on minimizing risks related to environmental damage and labor violations can help with legal compliance and operational efficiency. Companies that integrate responsible sourcing practices into their procurement decisions can save up to 16 percent. By setting targets for supplier performance, they can obtain valid data that can serve as evidence of meeting multiple sustainability-related requirements.
Measurement and monitoring. A sustainable supply chain strategy starts with collecting data on key environmental and social performance indicators, such as energy consumption, risks of modern slavery, wages and anti-corruption. This data-driven approach identifies risks and opportunities throughout the supply chain. For example, by capturing environmental data from suppliers and implementing ongoing tracking, companies can monitor their Scope 3 emissions and identify opportunities for reduction. This comprehensive monitoring reinforces an overall sustainability strategy and is essential to demonstrate progress towards science-based carbon footprint reduction or net zero emissions goals.
Supplier participation Clear communication and collaboration about compliance expectations and sustainability standards is critical for suppliers. This level of transparency fosters trust between suppliers and buyers and helps develop sustainable solutions that benefit everyone.
Supplier evaluation program This is necessary to improve sustainable practices and monitor compliance with legal labor and environmental standards. This program should include regular review of supplier performance against key metrics identified in a company’s sustainable supply chain strategy. Using an integrated supply chain sustainability platform to store, share, schedule and analyze these assessments can save time and resources.
Conscious procurement Decisions. Consider factors beyond price, such as labor conditions, carbon footprint, and material traceability. Studies show that nearly half of millennial and Gen Z consumers are willing to pay more for environmentally friendly products. Engaging suppliers to develop more sustainable products supports legal compliance and improved ESG performance, while providing quality goods and services at competitive prices.
The journey to more sustainable supply chains is about more than compliance. This requires a commitment to creating future-proof processes that improve both corporate responsibility and operational efficiency.
By adhering to these best practices, businesses can lead the way in creating sustainable supply chains, becoming leaders in the new global economy and ensuring long-term success.
John Hancock is the CEO of Sedex.