- cirececo2
- Jan 24
- 3 min read
In today’s interconnected and environmentally conscious world, supply chain due diligence has become a cornerstone of sustainable business practices. From sourcing raw materials to delivering products to consumers, businesses are under growing pressure to ensure their supply chains are ethical, transparent, and aligned with sustainability goals.
Why Supply Chain Due Diligence Matters
According to an analysis by S&P Global Sustainable1, many companies are still in the initial phases of implementing policies and programs to mitigate supplier-related reputational and regulatory risks. The 2023 S&P Global Corporate Sustainability Assessment (CSA) reveals that only 17.2% of evaluated companies have established public processes for screening new suppliers for sustainability-related risks, and less than half (44.5%) have a publicly accessible supplier code of conduct[1].
1. Regulatory Compliance
Governments and international organizations are enacting stricter regulations on supply chain practices. Frameworks such as the European Union’s Corporate Sustainability Due Diligence Directive (CSDDD), the UK's Modern Slavery Act, California's Transparency in Supply Chains Act and the U.S. Uyghur Forced Labor Prevention Act (UFLPA) require companies to identify, mitigate, and report human rights and environmental risks within their supply chains.
In November 2024, Nestlé and Procter & Gamble began investigating their palm oil sourcing after a report from environmental groups linked their supply chains to illegal deforestation in Indonesia's Rawa Singkil Wildlife Reserve. Both companies are reviewing their sustainability practices to ensure compliance and address environmental concerns.[2]. Ignoring such issues could exacerbate biodiversity loss, disrupt critical ecosystems, and contribute significantly to global carbon emissions, undermining efforts to combat climate change and protect endangered species in one of the world's most vital carbon sinks.
2. Meeting Consumer Expectations
Modern consumers increasingly demand transparency and align their purchasing decisions with their values. Companies that fail to showcase sustainable and ethical practices risk losing market share and facing reputational damage.
H&M is facing a class-action lawsuit filed on July 22nd by New York resident Chelsea Commodore, accusing the fast-fashion giant of engaging in deceptive sustainability marketing. The lawsuit alleges that H&M is exploiting the rise of environmentally conscious consumers by implementing a widespread greenwashing campaign to falsely portray its products as eco-friendly, despite evidence to the contrary[3].
3. Managing Risks
Unethical practices, environmental degradation, and human rights violations within supply chains pose significant risks. Proactive due diligence enables companies to identify vulnerabilities and implement mitigation strategies before issues escalate.
In 2024, a report by Fashion Revolution revealed that nearly 25% of the world's largest fashion brands, including DKNY, Tom Ford, and Reebok, lacked public decarbonization plans. This absence of commitment to reducing greenhouse gas emissions highlights significant environmental non-compliance within the industry. The report also noted that only four out of 250 brands analyzed met the United Nations' emissions reduction targets, underscoring the fashion sector's ongoing challenges in addressing its environmental impact[4].
4. Gaining Competitive Advantage
Integrating sustainability into supply chain operations provides businesses with a competitive edge, appealing to conscious consumers and meeting investors’ environmental, social, and governance (ESG) criteria. With growing awareness of the environmental and social impact of their purchases, customers now prioritize organizations that actively demonstrate their commitment to social responsibility through sustainable sourcing.
“Addressing supply chains is essential to advancing overall environmental, social, and governance (ESG) initiatives, as they account for over 90% of an organization’s greenhouse gas emissions and between 50% to 70% of operating costs.[5].”
Strengthening Due Diligence Through Training and Capacity Building
Comprehensive training and capacity building are essential for implementing an effective due diligence strategy. These initiatives empower internal teams and suppliers to understand, adopt, and execute established policies and practices effectively. Key steps in this process include:
Evaluating supplier performance on sustainability metrics and identifying areas for improvement.
Designing customized training programs tailored to supplier needs and operational contexts.
Partnering with suppliers in developing and executing training initiatives.
Offering continuous support, resources, and guidance for sustained improvement.
By adopting these strategies, organizations can build a resilient due diligence framework that not only mitigates risks and ensures regulatory compliance but also fosters a sustainable, ethical, and forward-thinking supply chain. With expertise in sustainability, regulatory compliance, and capacity building, CES Consulting help companies strengthen their supply chain due diligence processes.
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