Sustainability both introduces and solves supply chain disruptions; here’s why a holistic view of ESG and product compliance is key.
by Cally Edgren, Director, Regulatory and Sustainability Experts, Assent Inc.
A sustainable supply chain is a reliable supply chain, yet that fact is often left out of the current conversations around manufacturing’s environmental, social, and governance (ESG) management. Product stewardship and supplier health management are fundamental to any manufacturer’s sustainability program, and should be treated with the same importance as topics like carbon footprints or waste emissions. So much hinges on sustainability data from and about your suppliers, including the ability to maintain market access, ensure product compliance, and avoid supply chain disruptions. Thanks to increasing regulatory pressure and shifting market expectations, supply chain sustainability management has emerged as a top priority.
What makes a sustainable supply chain? It’s your supply chain’s ability to resist disruptions caused by the evolving regulatory landscape and shifting market values. It doesn’t mean your supply chain is perfect, but that it has the transparency and agility to respond to changes without halting your production. Supply chain sustainability requires supplier health development that includes:
- Fostering close supplier relationships
- Educating suppliers about compliance and sustainability requirements
- Formalizing processes for exchanging information and evaluating progress
- Setting goals for continuous improvement.
An ESG management program that doesn’t consider supply chain and product environmental impact doesn’t truly represent all of the aspects and impacts of the manufacturer’s operations on their ESG performance. Conversely, product or trade compliance programs which don’t account for ESG requirements put market access at risk. ESG practices are evolving — they are no longer “voluntary” or “best practice,” but are increasingly being mandated by regulators, restricting importation and sales based on a growing number of issues, including forced labor, ethical sourcing, and long-term environmental and health impacts. ESG, product compliance, and trade compliance overlap in numerous, complex ways, with the most vital, yet hardest to control, data coming from deep in your supply chain. That’s why supply chain sustainability management is foundational to all three.
Look no further than the recent U.S. Uyghur Forced Labor Prevention Act (UFLPA), restricting the use of numerous essential materials made using forced labor in the Xinjiang (XUAR) region of China. Essential materials include polysilicon, used in semiconductors, and cotton. Massive supply chain disruptions have resulted, especially in the electronics and solar energy sectors. Manufacturers have had to halt production, endure months-long waits for parts while data and defensible documentation is collected, or rush to find replacement materials. In some cases, replacing parts may trigger additional product redesign and retesting considerations or could impact the manufacturing and delivery schedules for customers. UFLPA is a hybrid of trade compliance and ESG requirements, forcing manufacturers to complete due diligence on both the country of origin of key materials and on supplier social impact and governance behaviors. A siloed trade compliance solution or ESG solution will not give regulators enough data to prove your compliance.
The Restriction of Hazardous Substances (RoHS) Directive is another example of product compliance and ESG overlapping within the supply chain. While RoHS has typically been seen as a checkbox product compliance requirement, its roots are in ESG management. RoHS restricts the use of certain hazardous substances in electrical products based on their long-term environmental impact once they become e-waste.
When it comes to product compliance, being able to trust supplier declarations is key. Most companies rely on supplier information to determine the composition of the materials they purchase, and ultimately to determine the composition of their final product. The IEC 63000 standard used to document compliance to RoHS stipulates that you can only accept supplier certificates of conformance if you have tangible evidence that the supplier is trustworthy. Blind faith in suppliers without due diligence jeopardizes your compliance declarations. Supply chain sustainability management goes deeper than just ESG management: focusing on the supply chain gives you insights into supplier health, resiliency and their product stewardship practices. To protect your supply chain and manufacturing capabilities, the measures of supplier health are now evolving to include responsible sourcing, material transparency, responsiveness to data inquiries, and ESG performance as equally important factors.
It’s vital for engineers, product compliance managers, and procurement managers to claim a seat at the table when their organizations are engaged in sustainability conversations. Their voices are needed to ensure that product stewardship, compliance, and supply chain sustainability do not get overlooked as manufacturers grapple with the diverse demands of ESG management. In order to reach any ESG goals and to be profitable, your business first needs to be able to manufacture and sell products, requiring the protection of market access with a reliable supply chain that both responds to ESG requirements and resists the disruptions that new ESG regulations introduce. Supply chain sustainability management is the foundation for both.
This article is sponsored by Assent Inc.
Cally Edgren is a proven compliance program leader with experience developing, communicating, and executing company goals and strategies to open and protect access to global markets. She is a subject matter expert on product materials compliance as well as market access certifications and has a background in program and process development to support regulatory compliance requirements. Cally possesses 30 years of experience in developing and managing global compliance programs for manufacturing across a diverse range of industries at Rockwell Automation and Kohler Co.
About Assent Inc.
Assent is the supply chain sustainability management solution dedicated to helping complex manufacturers bring responsible products to the world. Because supply chains were never built with sustainability in mind, Assent goes deep: past the suppliers of parts, down to the parts of parts and beyond, to map the entire complex manufacturing genome. Shaped by regulatory experts, customers, and suppliers, Assent is the foundation for cross-enterprise sustainability. Headquartered in Ottawa, Canada, Assent employs more than 1,000 team members dedicated to customers across the globe. Assent reveals what’s hidden, validates what’s good, and helps eliminate unwanted surprises so the world’s forward-thinking complex manufacturing companies can become more sustainable businesses. Learn more about deep sustainability – from product compliance to ESG – at assent.com or join us at Assent Careers.