GLOBAL - Responsible supply chain management is seen as a significant factor in reducing business risk and improving the attractiveness of an investment opportunity, according to the European Sustainable Investment Forum (Eurosif).
In its 'Procurement Report', in collaboration with Swiss private bank Sarasin, Eurosif examines the trends and factors used in assessing corporate supply chains.
It notes that procurement functions in companies have moved away from the simple purchase of raw materials and finished goods towards a comprehensive supply-chain management - often with outsourced production processes and sites - that includes risk assessments of quality, financial and extra-financial factors and monitoring of suppliers and sub-suppliers.
François Passant, executive director at Eurosif, said: "As supply chains are getting more and more complex, investors are increasingly scrutinising how companies manage the risks related to the different tiers of suppliers.
"A particular focus should be placed on environmental and social risks, as these can have direct reputational and financial impacts.
"The strength of supply-chain monitoring varies considerably - even in the same sector, such as clothing, where luxury brands have a very different supply-chain risk profile to the mass market retailers. Therefore, investors should seek to develop robust approaches to supply-chain risk assessment."
The report identifies some examples of best practice in risk assessment in terms of sustainability.
Factors included in a supply-chain audit include assessing the extent of outsourcing and locations of suppliers, corporate policies and standards, effective monitoring procedures, capacity building along the supply chain and active collaboration with competitors and stakeholders, as well as clear product labelling.
The report is mainly concerned with the textile and electronics sectors, though the impact of supply-chain management, especially regarding environmental issues, is cross-sector.