How to hold supply chains accountable

Charities are creating enormous change through ESG work. ESG stands for environmental, social, and governance, and is used to describe the work that charities do to operate in a more sustainable way.

 

It means reducing the impact an organisation has on the environment, looking at the way it manages relationships with stakeholders, including employees, and improving the way it runs.

 

Examples of this type of work include not investing in fossil fuels, social impact investing, and promoting equality, diversity, and inclusion in the workplace.

 

 

Why ESG is important

 

Donors and funders are now using ESG in their funding criteria. This means it’s important to show them what your organisation is doing to become more sustainable.

 

Helen Olszowska, Managing Director of Seashell Collective, says: “By investing in ESG now, charities can increase the sustainability of their fundraising pipelines, live their values on the inside as well as on the outside and truly sustain the communities they exist to serve.”

 

An ACEVO article adds that charities need to demonstrate impeccable ESG credentials to funders. “Due to the sector’s reliance on public, governmental and corporate funding sources, all of whom must justify [to stakeholders] the ethical credentials of charitable recipients, a case can be made that ESG is even more important for charities than their corporate cousins.”

 

 

Working with suppliers on ESG

 

A survey from the Massachusetts Institute of Technology’s Centre for Transportation and Logistics shows that the COVID-19 pandemic has expedited the need for companies to adopt more sustainable business practices. This is increasingly extending down to the supply chain.

 

Charities can monitor how ESG policies and standards are put into practice across their organisations. But how do they make sure the suppliers they work with place importance on ESG?

 

 

Write your ESG strategy

 

The first thing to do is write an ESG strategy, which includes your objectives and key performance indicators. Once you’re clear on your own position, you’ll be able to work out what you’re looking for from your supply chain.

 

 

Develop policies for working with suppliers

 

Make sure your ESG strategy and policies include information about how you work with suppliers. Share this with your staff so they understand what they need to look out for when reviewing potential and existing suppliers and appointing new ones. Make sure you ask companies to provide their own ESG strategy, policies, and procedures to see if they align with your own.

 

 

Develop supplier evaluation criteria

 

Put together a setlist of standards that you want suppliers to meet. Once you appoint a supplier, make sure you regularly review these criteria with them to check they’re still meeting it.

 

 

Communicate your ESG work

 

From your annual report to your website, charities should talk about their ESG policies and their achievements publicly. You can give your annual report to suppliers and share the link to your website so they understand the work you’re doing.

 

 

Agree ESG targets with suppliers

 

When you’ve selected your supplier, agree key performance indicators, goals and measures. Work together to review progress to see if targets are being reached and where improvements can be made.

 

 

Carry out regular reviews

 

Make sure you communicate regularly with suppliers and have regular meetings to get updates from them. This will help to build more open and trusting relationships.

 

Charities will be able to see the work third parties are doing around ESG.

 

 

Champion transparency

 

When working with suppliers you need to be able to track their work and see what they’re doing at a given point in time. Tools like Oboloo can give charities better visibility and control of their suppliers. It helps charities to communicate and promote the values and causes that are important to them.

 

 

Motivate and compel suppliers

 

An article in OpenDemocracy about business accountability in global supply chains says to use a “source of leverage to induce behavioural change amongst businesses”. This can compel and motivate businesses to meet ESG policies and practices.

 

You can keep your suppliers engaged and interested in your work by allowing them to experience your work first hand. This includes inviting staff to volunteer with your charity for a day, visit projects and go out into the field.

 

It will help to motivate people and build understanding of your work. It will also support suppliers to make changes to ESG policies, procedures and resources.