Understanding the Intersection of ESG and Financial Health Risk Before the Next Wave of the Supply Chain Crisis

Supply Chain is top of mind. In the news daily, supply chain risk has gone from a semi-obscure discipline to cocktail party conversation. The Covid-19 pandemic, business interruption, congested ports, labor shortages, inflation and geopolitical instability are all contributing factors to supply chain disruptions that will affect how most businesses are run for years to come.

Wave two of the supply chain crisis will come from suppliers that are profoundly degraded by the challenges of the past two years, where operational, reputational, and financial risks are being introduced to their customers downstream. It will happen when companies cease being able to Band-Aid over problems with cheap and historically easy to access capital. As this second wave approaches, future-proofing the supply chain is critical and companies must design their risk management infrastructures and practices to break out of their siloes and engage their suppliers in a coordinated way.

Understanding ESG-related risk has become a growing area of focus for supply chain professionals and their organizations. Gaining insight into performance on a range of ESG topics is key to understanding an organization’s overall sustainability and how it stacks up against its peers. Other less discussed, but equally important risk areas, include innovation, research and development, and cyber security. While all these domains will shape the future of supply chains, the traditional factors of quality, delivery and, of course, financial health, still provide the framework from which companies must design their strategies.

1.0 hr CE