Assess Context

Assess key socio-ecological systems

To ensure the resilience of your value chain, you need to understand key environmental and social trends in the contexts where your value chain partners operate. Begin by recognising the relevant systems like communities, ecosystems, or watersheds. Then build an understanding of each system’s current conditions and its stability thresholds (for a backgrounder on thresholds see here). Threshold examples include the points at which water withdrawal in a catchment area leads to water scarcity, wealth inequality may spark community unrest, or social conditions may enable forced labour or slavery.¹ To identify such thresholds, draw on internal and external insights, local community knowledge, scientific research, and third-party data. Having a clear scope, key indicators, and reliable data will help you spot trends and risks, allowing you to take action proactively.²

EXAMPLE: How Apple identifies supply chain water risk

Apple uses tools like the World Wildlife Fund (WWF) Risk Filter and WRI's Water Risk Atlas to deliver detailed, location-specific profiles of water consumption and related risks, helping to formulate effective strategies for areas identified as high water risk, which account for roughly 46% of Apple's corporate water use.³

EXAMPLE: SABMiller studies water scarcity in its barley supply chain

SABMiller studied barley farming's environmental and social impacts on the context of water scarcity in Rajasthan, India. The findings highlighted the intertwined nature of water, food, and energy security. This insight guided the company towards a more comprehensive approach to assisting farmers in its barley program.⁴

Monitor emerging sustainability regulations and guidance

The advancement of sustainability regulations will likely impact your value chain. Here is how to stay ahead of them. First, establish a team to monitor legislative trends.⁵ Consider also using regulatory tracking software or joining industry groups to stay informed.^{6, 7} Additionally, keep an eye on evolving industry practices and voluntary agreements that may not be legislated but are becoming the norm. For example, agreements that exclude the use of particular chemicals.⁸

To better understand the implications of new legislation, you may want to consult legal experts for clarification and proactively engage regulators. Scenario planning can also be a useful tool for assessing potential regulatory impacts.

Taking a proactive, systematic approach to monitoring regulatory trends will help you manage risk and recognise new opportunities. For instance, it can help you align with emerging consumer values and prepare for future legislation. Regulatory changes may also present opportunities, such as rewards and subsidies for sustainability efforts or investment.⁹

EXAMPLE: US Senate Bill on Xinjiang forced labour

The US Senate bill restricting goods manufactured in Xinjiang, China, demonstrates the trend towards increasing regulatory focus on social issues in global value chains. As a starting point, the bill assumes goods from Xinjiang are produced with forced labour, placing the burden on companies to provide evidence that their value chain is free of forced labour.^{10, 11}

EXAMPLE: Germany's Supply Chain Due Diligence Act

Germany's Supply Chain Due Diligence Act (SCDDA)¹² forces companies to identify and manage environmental and human rights risks in their supply chains, including child and forced labour. Procurement planners must adapt by ensuring the compliance of direct and indirect suppliers, annually reporting on their due diligence, and potentially facing fines or exclusion from public tenders for non-compliance.¹³