Companies can now benchmark the resilience and sustainability of their supply chains, based on comparisons with peers across regions and sectors, using a sustainable supply chain benchmarking tool developed by Standard Chartered.
The Supply Chain Performance Indicator allows companies to do a 'health check' on their operations and highlights which areas they need to focus on to achieve their aspirations. The assessment is based on five indicators:
- Environmental soundness and transparency of direct suppliers.
- Environmental soundness and transparency of indirect or deep-tier suppliers.
- Financial robustness.
- Flexibility and adaptability.
- Collaboration and connectedness throughout the ecosystem.
The bank says that clients can use the results to identify their areas of weakness and seek advice and solutions to help achieve their goals.
Establishing the benchmark
The issues exposed by COVID-19 have prompted companies to rethink their supply chains, as the world looks to build back a more sustainable global economy. The tool is developed based on insights from 'Critical indicators of sustainable supply chains', the bank’s report that surveyed close to 1,000 global companies, and looked at the resilience and sustainability of supply chains across regions and sectors based on the same five indicators. It also offers actionable insights for companies.
While 90% of the respondents said sustainability and resilience are strategic imperatives, the survey revealed a significant gap: nearly two thirds of companies said their actual performance lags the importance they place on meeting each of the indicators.
The survey also found that environmental and social practices in the supply chain may potentially be a major source of risk. Only 40% of those surveyed indicated confidence that they perform highly when understanding and monitoring environmental standards and labour practices.
Indirect or deep-tier suppliers appear to be the weakest link. Only 43% of companies view environmental soundness and transparency of indirect suppliers as highly important. Financial resilience of supply chains is uncertain, as only two in five companies view providing finance to indirect suppliers as highly important. Around 80% of companies are deploying technology solutions to address supply chain challenges.
While the findings show that there is much to be done, the report also highlighted a strong willingness among respondents to work with their financial institutions to address the gaps. They will need to expand their approach to supply chain management beyond operational efficiency, to improve their flexibility and financial robustness, while also managing ESG-related risks. This includes enhancing access to finance for more financially resilient supply chains, particularly for lower tier suppliers who often do not get adequate financing; by making trade finance transactions more transparent and secure for better supply chain visibility; and by driving the adoption of sustainable practices across entire supply chains.
"As we try to build back to a more sustainable economy, we can help our clients with tools and solutions to make their supply chains more sustainable, more resilient and future-proof," said Simon Cooper, CEO of Corporate, Commercial and Institutional Banking & CEO, Europe & Americas at Standard Chartered. "Sustainable trade finance products are one way to ensure that complex supply chains adhere to sustainable best practices, and help companies achieve their sustainability goals as they grow their businesses."
Sustainable trade finance
The new benchmarking tool follows the launch of Standard Chartered’s Sustainable Trade Finance proposition in March, which was aimed at strengthening its ability to help companies implement more sustainable practices and build more resilient supply chains. The solutions were launched across Asia, Africa and the Middle East, Europe and the Americas.
The Sustainable Trade Finance Proposition builds the Loan Market Association’s Green and Sustainability-linked Loan Principles into Standard Chartered’s trade financing framework, encouraging clients to improve disclosure, reporting and definition of use, while meeting their ESG goals. The initial focus of the proposition was on supply chain finance, invoice financing, receivables services, bonds and guarantees and letters of credit, with the product set to be expanded in due course. The bank said that these products will help global supply chain activities - estimated at US$19 trillion by the World Trade Organisation - become more sustainable.
In addition to a growing suite of sustainable trade finance products, the bank also offers trade finance at cost to companies that meet the criteria of its US$1bn COVID-19 financing commitment, launched in March 2020.
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