Growing Into Governance: Moving Beyond Supply Chain Management
There’s no doubt that supply chain management is a more complex challenge than ever.
Two years of continuous upheaval have unravelled previously successful strategies, and the need for diversification has shaken up many supply chains beyond recognition. If you’ve managed to leap the unexpected hurdles and keep your supply chain running, it’s time to consider how you can stop moving laterally for survival and take steps forward into a governance model for future growth.
Management vs. Governance
Most executives are familiar with governance from a Governance, Risk and Compliance (GRC) perspective, in which it is a more nebulous concept concerned mainly with the c-suite. However, as the G in GRC has developed significant overlap with the G in Environmental, Social and Governance (ESG), it’s clear that governance needs to be embedded in every area of a business–your supply chain included. The first step is distinguishing management from comprehensive governance within this context.
Supply chain management as we know it is concerned with just the nuts and bolts of operations. It’s how you make sure every component delivery dovetails properly with production schedules to keep your product delivery on schedule so your bottom line remains steady. It’s checking the boxes for the bare minimum.
Supply chain governance is more than just covering the bases, it’s a process of coordination to ensure policies you’ve developed are implemented and controlled with the intention of positively influencing partner relationships.
A critical element of risk management
Supply chains are a massive risk area for any business large or small. Opting to remain in supply chain management mode keeps blinders on that can allow all manner of risks to slip by undetected–until those risks become a reality.
Governance creates full visibility into each link in your supply chain and provides a framework for crucial decision-making. Leaning into governance means working collaboratively with third parties to plan, communicate and implement policies, and ensure there is a defined method for assessing performance. It also means assessing multiple types of risk and establishing compliance procedures that facilitate self-correction for suppliers. Quality governance creates a mutual responsibility for compliance with your third parties, which is both beneficial for relationship-building and a key hedge against risk.
The ESG angle
Within the realm of risk, Environmental, Social and Governance (ESG) has become a leading concern–and one that places intense scrutiny on supply chains. With “governance” right in the name, it’s clear that leaders who want to stay ahead of the ESG curve must up-level supply chain strategy from mere management. Strong governance and carefully outlined relationships with third parties can reveal points in the supply chain that are ESG risks, as well as opportunities to become more competitive in environmental and social progress.
From ensuring fair labor practices to sourcing renewable and sustainable materials, visibility and defined relationships resulting from a strong governance framework will allow your business to make ESG impacts that ripple down the supply chain. Not only is this a significant step toward minimizing risks, but it’s also a smart way to enhance trust and make the business more appealing to consumers and investors who are increasingly concerned with ESG as a core commitment.
Making a move toward governance
Plenty of leaders are voicing concern over the shift toward governance, as supply chain management is already a taxing and resource-intensive job. However, shifting to a governance approach will ultimately simplify operations management if you take the right approach.
When shoring up your supply chain governance, you must ensure all participants in the third-party relationship fully understand their role in demand fulfilment, and agree to follow a set of clear company policies. Additionally, activity and compliance must be monitored, and risks must be quantified and addressed.
This means auditing your current third parties for risks and offering them a framework for meeting your governance requirements if they don’t currently measure up, as well as creating a system for evaluating and onboarding new suppliers. It also means implementing a system for reporting on ESG and other risks.
The ethiXbase360 platform makes it easy to build governance strategy with tools for third-party management, monitoring and reporting – all of which bring visibility into your supply chain. Tools like these are quickly becoming crucial for companies that want to simplify compliance and capitalize on ESG.
Discover how ethiXbase can help your organization gain strategic advantage through supply chain governance tools.