Supply chains face a myriad of challenges, namely compliance with various sustainability as well as environmental, social, and governance (ESG) frameworks—like the Corporate Sustainability Reporting Directive (CSRD)—and associated risks. Avetta’s software-as-a-service (SaaS) platform provides businesses with the necessary tools to implement sustainability in their supply chains while also enabling risk management.
Katie Martin (KM), Director of Sustainability at Avetta, goes into some details of the current ESG measurement and reporting mechanisms, focusing on the CSRD as one of the most beneficial solutions for supply chain operators.
In-depth knowledge of the CSRD framework
What is CSRD and why is it important to supply chain leaders?
The CSRD is the new and improved version of the Non-Financial Reporting Directive (NFRD)—a regulation implemented by the European Union (EU) to enhance transparency and provide a more unified framework for ESG reporting. Current EU law requires all large companies (more than 500 employees for 2024) and all listed companies to disclose information on their emissions and company success in achieving decarbonisation goals. In compliance with the CSRD, companies must report in accordance with the European Sustainability Reporting Standards (ESRS), which incorporates mandatory and voluntary actions, and comprises 12 standards—ESRS 2 being a mandatory general disclosure for all companies that qualify. Essentially, what this means is, companies need to know what risks their suppliers bring across ESG factors like GHG emissions and forced labour, and what controls are in place to mitigate and manage them.
Supply Chain Due Diligence
The CSRD places increased emphasis on supply chain transparency and due diligence. Organisations will be required to disclose information on their supply chains, including key environmental and social risks and impacts.
Sustainable Procurement Practices
Procurement groups will play a vital role in supporting compliance with the CSRD. They will need to align their sourcing strategies and eventually their Codes of Conduct with sustainability objectives and collaborate with suppliers to ensure adherence to environmental and social standards.
Scope 3 Emission Reporting
CSRD requires organisations to understand their double materiality, how sustainability factors in your supply chain affect the environment and society in general. This includes aspects such as greenhouse gas (GHG) emissions, energy efficiency, environmental footprint results, and forced labour. CSRD requires Scope 3 reporting (supply hain emissions) with a gradual rollout between 2024 and 2028 based on company size
Building the foundations to approach ESG standards with flexibility
In 2025 all companies with more than 250 employees must report, and by 2026 companies with more than 10 employees will be affected.
While CSRD increases data requirements for supply chain reporting, it also consolidates many fragmented global frameworks and standards, helping to better standardise and simplify ESG and sustainability reporting. This will significantly decrease companies’ reporting burden and allow for better prioritising programmes focused on core materiality issues versus regulation/standard pivoting year over year.
In preparation for this new era of reporting, Avetta is supporting many incoming inquiries about how to effectively identify material risks within the supply chain, segment suppliers for different levels of ESG and sustainability review, and then work with high-risk suppliers to put strategies and controls in place to reduce risk and increase compliance.
Delivering scalable transparency and actionable, data-driven ESG scores
How does Avetta simplify supply chain sustainability?
Avetta provides a proprietary ESG & Sustainability risk assessment that synthesises over seven global frameworks and standards into a streamlined supplier questionnaire, which is mapped to the specific material risks of the supplier and limits their reporting burden to only relevant questions.
Following completion of the assessment, suppliers receive an ESG & Sustainability score, as well as context for that score across the global landscape. This allows suppliers to rapidly understand their performance level in what may be an unfamiliar ecosystem, as well as opportunities to not only increase ESG compliance but also guide their efforts to embed sustainability as a core component of their day-to-day.
Up-to-date assessment of supply chains
As regulations evolve and organisations mature in their understanding of ESG & Sustainability, forms update to match new requirements and suppliers can be segmented for differing levels of review in accordance to local, regional, and global needs.
By working with Avetta, partners can rapidly assess their supply chains against relevant frameworks and standards, be assured their supplier assessments reflect the latest regulatory requirements, and have an at-a-glance understanding of additional layers of risk within their supplier and contractor pools.
Avetta’s partners receive baseline data on the ESG maturity and performance of their supply chain, including category and individual supplier levels. Sustainability and supply chain managers can then identify “hot spots” within their supply chain by function and contract, prioritising engagement and risk mitigation education (e.g. decarbonisation strategies) where it will have the most impact on ESG & Sustainability metrics.
Avetta supports clients and partners in the ESG planning phase and implements its code of conduct alongside wider-known standards to keep them on track with its Supplier ESG Index. Once planning and analysis are implemented, execution is key and clients get full guidance from Avetta from initial roll out and messaging to suppliers through the registration and submission process.
Supporting organisations with the CSRD framework
Avetta takes an incremental approach to sustainable supply chain assessment, meeting suppliers where they are and providing resources for increased compliance and programme maturity. The sustainability assessment programme gathers data on ESG requirements relating to global codes of conduct, GHG emissions, the Ethical Trade Initiative Base Code, and the United Nations Global Compact.
Benefits of Avetta’s ESG assessment
- Measure, manage, and report impact
- Targeted supplier engagement and education
- Manage materiality as mapped to the supplier industry
- Supplier code of conduct and sustainable procurement integrations
- Ability to source new suppliers by ESG score
- Free access to GHG calculator to illuminate supplier scope 1 and 2 (the client’s scope 3) for direct data on emissions and protection against greenwashing
Learn how to get started with Avetta’s ESG and sustainability risk assessment HERE.
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