Addressing Social Risks in Supply Chains Must Not Be Overlooked

While the primary narrative around environmental, social, and governance (ESG) has focused on reporting frameworks, climate impacts, and diversity, equity, and inclusion (DEI), social risks are also important.

In an article for PracticalESG.com, Catherine Tyson, managing consultant at Guidehouse, explains what companies can do to identify and manage social risks.

“Social risks in supply chains are anything that could impede human rights, welfare and safety, or community development,” Tyson said. “They can vary greatly between industries and suppliers, and it can be challenging to know how to identify and effectively manage these risks.”

The article explains that identifying these risks involves incorporating industry and material-specific risks into supplier due diligence, expanding supply chain traceability beyond Tier One suppliers, and reviewing current supply chains for the presence of social risks regularly. To manage social risks, companies must not only require social and human rights compliance by their suppliers but also require suppliers to monitor their own supply chains.

“Building long-term relationships with suppliers is critical for providing the business case that they need to comply with social requirements,” Tyson said. “Companies should also engage in public-private partnerships or multi-stakeholder initiatives that harness collective attention and resources to grapple with these broader challenges to industry.”