Usually company executives have followed their first-tier suppliers somewhat closely, but many are still unaware of the full scope of their global supply chain. Since the end of February this year, some international analysts (Bloomberg, Financial Times, Barron’s, etc.) have warned that global supply chains could be seriously affected by the effects of the coronavirus. In fact, by mid-March, supply chains in China and Italy were already disrupted, forcing companies to better understand their supply chain dependencies and generally improve supply chain management. in the future.
According to the data provided by Sustainanalytics, more than 75% of the companies’ practices are currently inefficient at the international level in the management of the supply chain. Only telecommunication service companies achieve 22% of their efficient supply chain management, while information technology companies remain at 12%, and the sectors of basic consumer products, products industrial and other products reach about 20% efficiency.
This places companies in a very delicate position in the face of the current crisis, and in the face of potential future crises that may affect fragile global supply chains. It is evident that the strategic decisions of companies at the highest level and the set-up of realistic performance targets will be key in the coming weeks and months to face the crisis regarding supply chains and their efficiency. But if tools such as ESG are not used to compromise the entire length of the companies’ supply chain, the recovery of activity will not only be slower but much riskier in terms of economic profitability, but also and fundamentally, of social utility.
Faced with a critical situation caused by the pandemic, in which societies in different parts of the world are suffering unprecedented sanitary, economic, social and psychological hardships in their lives; in which the importance of the solidity of the supply chains of a series of basic goods and services is being revealed; and in which the guarantees of the states to maintain essential services well provided is proving key, a use of enormous future economic stimulus efforts without a greater margin of social responsibility objectively measured than what has been developed so far, not would be understood by the population. This could provoke intense social turmoil linked to the loss of legitimacy of the institutionality (public and private) of countries and economic regions, such as the EU.
The sectors that are most stressed during the crisis, those related to: work-from-home, medical devices, emergencies, food, etc. must continue to develop, including, among their short-term strategic objectives, the monitoring and improvement of the responsibility of their supply chains through ESG certification systems with broad social legitimacy. As we are already verifying with our current experience and as the data from Sustainanalytics reflect, the sector of basic products is the one that is in a better position to face the risks related to this crisis (58% of the companies of basic consumer goods have an effective safety and health management system), and this fact should mark the path of your strategic decisions.
It seems that the immediate future, and the social contract that results from this crisis, must be based on the solid foundations that a monitoring system of the impact of economic actors can provide that takes into account objective evaluation, traceability, rigor, assessment of positive externalities, and the operability and efficiency of their supply chains in all their extension.