Supply Chain Management Sustainability.pptx

Supply Chain Management Sustainability

1. Presented by: BSI Courtney Soulsby, Global Director November 2022 Sustainable supply chains Courtney Soulsby Global Director, BSI November 2022 Sustainable Supply Chains

2. Objectives of Webinar - Sustainable supply chains Challenges and Drivers Systems-based approach to sustainable supply chains Data, monitoring and risk management

3. Challenges and Drivers to Sustainable Supply Chains

4. What are challenges to managing a sustainable supply chain?

5. Scale

6. Control

7. Velocity Volatility

8. Variability

9. I produce the end-product. There is a huge increase in unskilled, seasonal workers. I try to control everything, and my middle managers have few skills in H&S I run a textile mill, with potential environmental risks, but a small and loyal workforce. My country was average labor laws, but weak enforcement. I started my business 30 years ago. I treat my workers like family, which is why I try to keep the unions out. I have labor shortages, so I rely on labor brokers to provide foreign workers. I speak a different language than my workforce. That leads to communication issues sometimes. I just started my business 6 months ago! I promote my products as handcrafted, artisanal one-of-a-kind works; so I help rural economies by relying on homeworkers in local villages to make them. I am transitioning from a state-owned business. I have an aging workforce, and am investing in new equipment and technology. I have 10,000 employees at my smallest site! I have difficulty forecasting, and rarely say No to my clients, so my employees work 80 hour weeks, despite having 3 shifts. Variance in Suppliers – their Viewpoint

10. Copyright © 2022 BSI. All rights reserved Key Supply Chain Sustainability Areas Considered

11. Copyright © 2022 BSI. All rights reserved 11 Poll #1 What external drivers lead to increase in investment and focus in sustainable supply chains for your organization? Financial investment community Regulations around supply chain due diligence “the right thing to do” – culture Already embedded in procurement for years

12. Copyright © 2022 BSI. All rights reserved 12 Who’s Interested – Driving Change ?

13. Copyright © 2022 BSI. All rights reserved “ … climate risk is investment risk ...” … making a profound reassessment of risk and asset values.” “…sustainability integral to portfolio construction and risk management …” “ … we will exit investments that present a high sustainability-related risk.” Levers Driving the Low Carbon Economy Capital Markets Pressure from Finance, Shareholders & Insurers Rise of ESG funds Increasing pressure from institutional shareholders for companies to disclose emissions, targets & progress TCFD – Taskforce for Climate-Related Financial Disclosures Cost Of Capital * Fossil Fuels 20% Clean Energy 3-5%

14. Copyright © 2022 BSI. All rights reserved Example - Investor ESG guidance to Pharmaceutical Industry – Supply Chain External Driver The financial investment community has produced a guidance to the biopharmaceutical sector with the request to communicate and report on key Sustainability and Environment, Social, Governance (ESG) initiatives externally. One of the key pillars of this ESG communication requirement is focused on Supply Chain Management and ESG Governance , in addition to Climate Change, Environmental Impacts, and AMR. Used as evidence for Green Bonds from financial investment community towards the pharmaceutical sustainability program activity.

15. Copyright © 2022 BSI. All rights reserved And increasing regulation environment Regulations constantly being added: an increased urgency of establishing sound practices to identify and mitigate the risks associated with dynamic, large-scale supply chains 15 Modern Slavery Act - UK 2015 Law on the Duty of Vigilance - FR Child Labor Due Diligence Law - NL European Conflict Minerals Regulation   2017 2019 Jan 2021 Jun 2021 Germany Due Diligence Act Q4 2021 EU Directive- Supply Chain Act

16. Systems-based approach to sustainable supply chains

17. Copyright © 2022 BSI. All rights reserved ISO 14001 Environmental Management Systems BS 8001 Circular Economy ISO 20400 Sustainable Procurement ISO 14046 Water Footprint ISO 26000 Social Responsibility ISO 37101 Smart Cities & Community Sustainable Development ISO 50001 Energy Management Systems ISO 14064 GHG Reporting & Measurement ISO 45000 Health & Safety Management Systems BSI has worked across industries to convene and define the world’s most respected sustainability management systems standards. These standards enable our clients to get the most value in applying sustainable supply chain best practices to the unique needs of their organizations. Standards to Support

18. Copyright © 2022 BSI. All rights reserved Policy and Strategy Processes Governance End to End Procurement Process A sustainable procurement function – ISO 20400 People and Communication Skills and Training Risk management & Measurement

19. Management Systems Approach – End to End Governance Skills & Training Governance Leadership buy-in & oversight Roles & Responsibilities Incentives Scope Supply Chain Mapping Supplier/Product Segmentation Prioritization & Roadmap Gap Assessment of Current State Design Policy / Supplier Requirements Materiality & Impact Process Strategy Strategy Stakeholder engagement strategy Executive Reporting Incident response Internal Leadership Buyers / Procurement Legal External Suppliers / Vendors / Carriers Customers and Requirements Legal Requirements Govt. Policy & Process Communication Continuous Improvement Measurement Internal Program staff Buyers Leadership External Direct suppliers Carriers/Warehousing Strategic n-tier suppliers Methods Live/Online training Corrective Action dialogue Supplier Improvement Onsite Deep Dive Security audit Root Cause Analysis Post-Incident Investigation Online Supplier self-assessment CAPA dialogue Country Risk Intelligence Strategy KPIs / Annual goals ROI / Business metrics Audit results Management Systems Approach – End to End Governance of Supply Chains

20. Copyright © 2022 BSI. All rights reserved Engagement, Training Leadership buy-in Procurement approach Manage, Monitor, Reduce Improve Declare claim/report A journey towards mature supply chain, supported by sustainability standards Commit Understand your focus and priorities Set realistic targets ISO 20400 ISO 14064-1 ISO 14064-2 ISO 14067 EU ETS ISO 14090 PAS 2050-1 PAS 2050-2 PAS 2070 PAS 2395 EN 15804 ISO 14001 ISO 50001 PAS 2080 PAS 2060 PAS 2060 PAS 2060 ISO 14020 ISO 14016 Assess

21. Copyright © 2022 BSI. All rights reserved Global Trends – Supplier Scorecard Expansion Historical Model Supplier Scorecard 4 Sustainability Quality Capacity / Delivery Cost Future Model Supplier Scorecard Quality Capacity / Delivery Cost How to transform supply chain strategy to begin to incorporate Sustainability as new Fourth Pillar of Supplier Scorecard ?

22. How to Embed Sustainability into Procurement - Multiple Business Risks 22 Quality Operational Efficiency Cost Still Missing – Total Risk of Supplier ? Quality Team HSE Team Sustainability Team Ethics Team Leadership Cut costs ESG in Supply Chain!! Safety is critical in suppliers How do suppliers mitigate bribery risk? Eliminate all quality recalls from suppliers!!

23. Copyright © 2022 BSI. All rights reserved Poll #2 What internal divisions are you engaged with currently to drive sustainable supply chain agenda? Procurement Sustainability Manufacturing / operations R&D Supply chain Commercial All of the above?

24. Data, Monitoring, Risk Management and Improvement

25. Sustainable Supply Chain -End to End Procurement Process Copyright © 2022 BSI. All rights reserved 25

26. Supplier Assessment on Key Sustainability Focus Areas 26

27. Supplier profiling & Risk scoring Copyright © 2022 BSI. All rights reserved 27 Discussion focus: Sustainability risks by category. Calculating an overall risk rating. What are the risk levels represented by the supplier categories for key sustainability issues? D eveloping a methodology to determine an overall risk score (category risk, country risk, the other factors specific) that will determine the subsequent risk mitigation actions (e.g. Annual audit plan, specific engagement actions) Raw Material API Components Packaging Logistics Indirect Materials Labour practices H H H M L M Health and safety H H H E M H Resource efficiencies M H M L L H Anti-bribery and corruption L M L L L L Circular Economy M H H E L H Conflict minerals M E L L L L EXAMPLE

28. Copyright © 2022 BSI. All rights reserved Scope 3 emissions Companies rapidly adopting Science-Based Targets (SBTi) SBTi requires accounting & reporting of Scope 3 (indirect, supplier, etc.) Most companies struggle with Scope 3 due to the indirect nature Recent Scope 3 guidance advocates for Supplier Engagement to gather measurements and drive behavioral changes Supply Chain understanding + GHG data collection is a necessity for driving progress in this area Climate Change and the Supply Chain

29. Copyright © 2022 BSI. All rights reserved Activity Level GHG Intensity X = GHG Impact X = Identify the most significant sources of Scope 3 emissions Determine which have the greatest activity or intensity Develop Climate Footprint Management Plan in line with PAS 2060 to target highest priority opportunities to reduce those emissions Scope 3 sources (from GHG Protocol) Purchased goods and services Capitol Goods Fuel & Energy Upstream transport & distribution Emissions from waste Business travel Employee commuting Upstream leased assets Downstream transport & distribution Processing of sold products Use of sold products Product end-of-life Downstream leased assets Franchises Investments Capitol Goods Supply Chain / Indirect Emissions - Scope 3 GHG Accounting & Reporting Case Study

30. Copyright © 2022 BSI. All rights reserved 30 PAS 2060 – Engage and Capacity Build with Suppliers Engage with suppliers to enable them to embrace the Scope 3 journey for your organization. A course that explains the context for carbon reduction, the carbon reduction journey and practical steps to achieve carbon neutrality, including the key decisions around independent 3rd party verification or validation to PAS 2060 or a similar standard

31. Poll #3 How do you currently gather information / manage risk within supply chain? Self-assessment questionnaires Data gathering surveys On-site audits Tenders / RFPs with suppliers All of the above?

32. Copyright © 2022 BSI. All rights reserved 32 End to End - Supply Chain Sustainability Program