Sustainable Sourcing & ESG Risk: Managing Risk Beyond Company Walls

Sustainable Sourcing & ESG Risk: Managing Risk Beyond Company Walls
27 July 2023

Sustainable Sourcing and ESG Risk: Managing Risk Beyond Company Walls

Recent studies have underscored a crucial but often overlooked aspect of business risk: the majority of a company’s risk can exist outside its direct control, predominantly within its supply chain and particularly during raw materials production. It’s in this context that sustainable sourcing becomes a paramount consideration.

World Wildlife Fund (WWF), as a forerunner in environmental conservation and sustainability, provides invaluable assistance to companies by enabling them to:

  1. Comprehend the relative risk and opportunity associated with sourcing commodities
  2. Recognize the social, environmental, economic, and supply risks linked with commodity production and procurement
  3. Utilize these insights to formulate action plans aimed at reducing potential negative impacts
  4. Exercise their market influence to promote conservation

Risk management, defined as the process of identifying, assessing, and taking measures to control risks, has grown into a significant global industry. However, conservation organizations like WWF adopt a unique approach, integrating sustainability and environmental consciousness into traditional risk management frameworks.

As part of its innovative strategies, WWF introduced the Supply Risk Analysis tool. This insightful approach serves to examine substantial environmental and social concerns tied to the global production of various commodities and their countries of origin, thereby facilitating a sustainable sourcing process.

By understanding and tackling these issues, companies can ensure that their supply chains not only function efficiently but also contribute positively to the planet. This is not just about mitigating risk; it’s about creating opportunities for positive change. Sustainability in sourcing not only drives financial success, but also fosters a more resilient, equitable, and eco-friendly global economy.

As businesses expand their horizons beyond their own four walls, the call for sustainable sourcing becomes more significant than ever. Embracing this concept allows companies to manage potential risks effectively and leverage opportunities, ultimately ensuring a win-win for both business growth and environmental conservation.