Australian businesses and businesses worldwide are seeking more transparency in ESG data, according to a new Coupa study.
And availability and reliability of crucial supply chain data is preventing organisations from operationalising their corporate purpose and meeting their environmental, social, and governance (ESG) goals.
Coupa’s research confirmed Australian businesses want to improve ESG practices and reduce risk exposure, including: reducing greenhouse gas emissions (92%); improving supply chain diversity (89%); improving energy efficiency (88%); reducing deforestation (87%) and eliminating modern slavery (80%).
As PASA reported earlier this year in the forward look for sustainable procurement in 2022, top performing procurement teams were found to assess and audit their suppliers for sustainability compliance.
When it comes to ESG risk, compliance with regulations, proactive identification of potential risk events and avoidance of negative PR are all essential.
Coupa’s research also points to a lack of sufficient visibility into supply chain data and inadequate technology for businesses to fully realise ESG targets.
- Nearly all (94%) Australian respondents agree that accurate ESG data of their suppliers is important to understand supplier risk.
- More than half (60%) said that data on their suppliers’ ESG credentials is only “somewhat” available or “not really” available.
- A third (34%) said they do not have strong enough technology capabilities to assess ESG risk and compliance. More than half (51%) of Australian businesses say they can only assess ESG risk and compliance of Tier 1 (third-party suppliers) to some degree and 10% say they can’t accurately assess at all. As for Tier 2 suppliers (the suppliers of their third-party suppliers) 54% can only assess “to some degree” or not at all.
- Practically all (97%) wish to speed up responses to external disruptive events, yet three in five (60%) lack access to data that enables this type of agility.
- The majority (92%) said it would take weeks, months or longer to find new suppliers that meet their ESG standards.
Donna Wilczek, senior vice president of product innovation and strategy at Coupa, said without data, decision making is near impossible when it comes to assessing ESG.
“Even with all the will in the world, no business can fully realise their ESG goals and make a meaningful difference if they do not possess accurate and timely data on which to make decisions,” said Donna.
Businesses around the world are setting targets and KPIs to advance diversity, equity and inclusion (DE&I) throughout their organisations and value chain. Supplier diversity programs can be part of a company’s efforts to reach/or maintain high moral and ethical standards.
A need for open sharing of ESG data
Coupa say businesses are calling for greater industry-wide data sharing and collaboration:
- All Australian respondents agree that, if key ESG supplier data were shared openly and instantaneously with prospective buyers, it would help them more accurately assess their ESG risk and compliance.
- 96% agree that greater cooperation on key ESG data is needed between businesses and suppliers.
“Organisations are rightly making ESG a priority and have begun to make changes to their supply chains to become more sustainable. While many are still early in their journey and marching towards net zero goals, it’s clear that quicker access to supplier information can aid supply chain planning and help businesses better respond when disruption arises. With this type of data collaboration, organisations can confidently make choices that reduce costs and carbon, as well as risk,” said Steve Banker, vice president of supply chain services at ARC Advisory Group.
Coupa’s research also found more than two-thirds (64%) of businesses globally, and more than half (51%) of Australian organisations, plan to invest in new technology to help them achieve ESG goals, Steve said.
“However, if they truly want to operationalise their ESG strategy and corporate purpose, they need transparency technologies that go beyond mere reporting, and enable buyers and suppliers to collaborate and exchange data as a community for a common cause.”
Some evidence has shown investments with robust ESG credentials have outperformed stock market crashes since the pandemic began, where major indices were extremely volatile, with some plummeting 20 per cent.
Coupa is the cloud-based Business Spend Management (BSM) platform that unifies processes across supply chain, procurement, and finance functions.