With the new year, companies have to deal with several requirements at the same time. In addition to the new German Supply Chain Act, the preparation for the CSRD, which will come into force in 2024, is starting at the same time. In this interview, Klaus Wiesen, our CEO, answers relevant questions about challenges and solutions for more sustainability in supply chains, the role of the supply chain for the future viability of companies and how the sustainabill cloud platform supports the implementation of sustainability requirements and legal requirements such as the German Supply Chain Act or the CSRD now and in the future.
On average, more than 80 percent of CO2 emissions in the value chain come from the supply chain. The supply chain also plays a key role in terms of complying with human rights and protecting biodiversity. Sustainable companies and sustainable products are only possible with a sustainable supply chain – which makes the supply chain a decisive factor for the future viability of companies.
The obligations are broad. A great deal has happened in the last three months in terms of regulations. With the CSRD (Corporate Sustainability Reporting Directive), for example, companies must report extensively on their sustainability commitment, with the supply chain representing an important component for reporting. In addition, the member states have agreed on the EU Supply Chain Act (European Directive on Corporate Sustainability Due Diligence) and the EU law to stop deforestation has been passed. Last but not least, the German Supply Chain Act, the “Lieferkettensorgfaltspflichtengesetz” (LkSG) came into force on January 1, 2023. All of this ensures that procurement which takes comprehensive account of climate neutrality, environmental protection and compliance with human rights will become mandatory for companies.
The biggest challenge for companies to meet the coming obligations is that a supply chain cannot be made sustainable in the blink of an eye. The transformation to a sustainable supply chain takes time. Accordingly, sustainable procurement cannot be achieved in a one-time project, but the path to it requires new structures in the company and continuously ties up resources. It is important that companies start early enough. Due to the current crises, however, the opposite is often the case: the topic of sustainability is pushed back as long as possible. This will fall on companies later.
In organizational terms, purchasing should always be involved with a central function, especially since purchasing typically maintains the closest contact with suppliers. It is therefore important to build up sustainability competencies in purchasing – in addition to close coordination with the CSR department, if this already exists in the company. For purchasing, this is an opportunity to position itself strategically in the company in a completely new way.
In addition, transparency is required in the supply chain: Where are the suppliers’ operating sites located and who is the right contact person for sustainability at suppliers? What sustainability standards do the suppliers meet? And do their own suppliers in turn source from sustainable sources? In most cases, companies today do not have the answers to these questions.
A key to transparency is collaboration with suppliers. It is no longer only information relating to price or quality that needs to be collected from suppliers. Sustainability information is also required. And not just on a one-time basis regarding the question of how exposed to risk suppliers are. There is a need for continuous evaluation and development of suppliers in terms of sustainability. Many companies shy away from the effort required to collect the data – for fear of high expenses and negative reactions from suppliers. However, at sustainabill, we see on a daily basis that the effort required to collect data via our cloud platform is minimal – for both our customers and suppliers – and the feedback from suppliers is positive.
sustainabilll provides support at various levels: For companies, it is very challenging to define the scope of the required information in view of the many regulatory requirements. In addition, the requirements are dynamic, with new laws and standards being added on an ongoing basis. Sustainability standards are currently still in the very beginning stages. Thus, the scope of data retrieval must be continuously supplemented or adapted. The sustainabill cloud platform receives standardized self-reports on all relevant sustainability requirements. The questionnaires are sent automatically, data is collected and evaluated. In addition to information on which sustainability requirements a company fulfills, sustainabill also helps create transparency in the upstream supply chain. This is where the risks are sometimes greatest. If the company purchases high-risk raw materials, it is essential to create transparency for the supply chains of the raw materials.
First of all, companies that are not covered by the German Supply Chain Act will most likely have to fulfill reporting obligations according to the CSRD, which also applies to capital market-oriented SMEs. And the European Supply Chain Act also applies to more companies than the German Supply Chain Act, because it applies to 500 or more employees – in high-risk sectors even to 250 or more employees. But quite apart from whether companies are affected by regulation or not, there are many reasons for sustainable supply chain management: I currently see the greatest opportunity in differentiating oneself from the competition – precisely because corporate customers as well as consumers are increasingly paying attention to this. In addition, the crisis has shown that companies with sustainable procurement are more resilient, i.e. they have had fewer supply failures. And with rising CO2 prices and the planned carbon border tax, companies that are already implementing climate targets for the supply chain will be affected by significantly lower cost increases.
Our promise to our customers is that all sustainability requirements for the supply chain can be covered with sustainabill now and in the future. Today, the sustainabill cloud platform already covers the topic of due diligence as required by the LkSG as well as the topic of climate protection and capturing CO2 footprints, biodiversity or simply the question of where certain raw materials come from. Thus, the platform offers the optimal starting point to also fulfill the reporting requirements of the CSRD, the EU supply chain law or the EU law to stop deforestation. And, of course, to go beyond regulatory requirements and differentiate from competitors.
You have further questions or want to learn more? Please contact us.