Whether transporting hazardous materials or planning a normal route: supply chains harbour both risks and opportunities when it comes to aligning the company with sustainability goals. Four levels of action are decisive in taking advantage of these opportunities in supply chain management and at the same time in preventing reputational damage or liability claims.

Supply Chain Mapping: Visualising the Supply Chain

How are the individual, upstream processes of the supply change designed? Are the responsibilities of all involved stakeholders outlined? Do they support or jeopardize compliance with regulatory requirements or the company's own sustainability standards? A mapping visualises the structure of the supply chain, from the raw material supplier to the delivered product.

Visualising the Supply Chain helps understanding the structure © msg advisors

For this, operations managers should align information from two sources: on the one hand, internal data, KPI, reports on the supplier structure beyond the level of direct suppliers. These can usually be obtained, for example, in purchasing, quality management, R&D or from compliance officers. On the other hand, direct suppliers could also map supply chains themselves and thus contribute valuable information.

Management Notes: Identifying risks throughout the value chain

• In addition to direct business partners, name all stakeholders and their respective activities – from the raw material suppliers to the last miles in logistics.
• Map all key product and service groups and prioritise them according to procurement costs or CO₂ relevance.

Risk Assessment: Assessing the risk situation?

What risks might be hidden in the company's supply chains – whether in terms of environmental impact or for the company on its own (liability, reputation, etc.)? Building on supply chain mapping, risk assessment is a matter of identifying appropriate "danger zones". We recommend a four-step approach:

1. Clarify production conditions by country/region: check whether the manufacturer/supplier is based in a country with low, medium or high risk according to the country risk classification.
2. Identify industry-specific risks and potential weak points: industrial processes can be automated and virtually harmless, even though they are in a high-risk sector. However, industry-related risks should not be underestimated.
3. Assess raw material categories: the origin of raw materials must be clearly traceable and verifiable by official documents.
4. Check certifications: check available certificates and the management systems used by manufacturers/suppliers. Verification must be guaranteed, and only internationally registered and recognised certification bodies should be accepted.

Monitoring: Tracking Successes and Failures

Do suppliers and partners adhere to agreed standards, such as social, safety or environmental regulations? In our experience, the use of the following criteria has proven its efficiency:

1. Sustainability certificates state relevant test criteria and, if they are issued by a third party, have a recognized informational value. Attention: the examiner and the scope of the certificate must be assessed as well!
2. Internal studies such as supplier surveys serve as the basis for further interactions, as they are more detailed than certification systems. Here, one should always ensure that the supplier has understood the questions correctly. In addition, photo and video documentation are extremely helpful.
3. Audits can be carried out by the applying organization - for example, to inspect factories that are not eligible for third-party audits. As an alternative, audits can be carried out by a verified service provider such as SGS, Intertek or TÜV.
4. On-site visits remain the silver bullet for a proper assessment. They should be set up as standard procedures for highly relevant suppliers and are always useful when reliable information cannot be obtained by other sources.

Capacity Building: Developing and Expanding Sustainability Competencies

By successfully passing an audit, suppliers have proven that they meet sustainability requirements. But how can we ensure that the performance is not only maintained after the audit, but also further improved? We recommend the following actions:

1. Manufacturers/suppliers involved in the monitoring process can be supported through capacity building in order to prepare them for an audit or to take corrective measures after an audit.
2. The manufacturers/suppliers should not only be empowered to understand the issue in depth and to be able to achieve higher sustainability standards themselves. It is equally important that they pass on this knowledge in the supply chain.
3. Who collects and coordinates plans for remediations, self-assessments, e-learning and all other content and methods through by knowledge about sustainability passes on in the organisation? This responsibility should be clearly allocated in the operations department.

AI-Assisted Control

Best practice companies in the chemical industry increase the effectiveness of the steps explained above by using technologies that monitor and secure their supply chains in real time. For example, with a platform based on a real-time communication between all involved parties as shippers, suppliers and customers.

With such a "control tower," the route and status of each individual product can be observed and analysed. Based to the concept of a "digital twin", a virtual image is created of the path taken by the product or goods from production through transport to delivery. This provides companies with additional valuable information, enabling them, for example, to reduce their carbon footprint by planning routes that conserve resources.