Deep Dive: Auditing Sustainability Requirements in the Value Chain
Over the past two years, the entire sustainability sector in Sweden has taken a significant step forward thanks to Adda's ESG audits focusing on the value chain. As sustainability advisors, we have helped several clients understand what these requirements entail and how to develop processes for sustainable supply chains in line with the OECD framework and Adda's requirements.
The need for robust risk analysis and risk management has been around for a long time, but the way these are monitored has become increasingly stringent each year. All Swedish municipalities and municipal companies are connected to Adda's procurement portal, which means that many companies could potentially be subject to these audits.
Ethos is proud to have supported clients both proactively and reactively in managing Adda's contractual requirements for sustainable supply chains.
We often see that clients have conducted overall risk analyses and established processes, but these are not detailed or in-depth enough to meet the requirements they have signed. Contracts that include work on responsible supply chains in accordance with the OECD guidelines typically require commitments from the parties to ensure ethical, sustainable, and responsible business practices throughout the entire supply chain. This includes:
1. Due Diligence: Ensuring that the supply chain adheres to environmental, social, and governance (ESG) standards, identifying risks, and taking action to address issues such as child labor, human rights violations, and environmental damage. This is a continuous process that requires ongoing improvement and active collaboration with suppliers and stakeholders to create positive change.
2. Risk Management: Regularly assessing and managing potential risks in areas such as working conditions, corruption, environmental impact, and health and safety. From our experience in supporting clients, this step needs to be much more detailed.
3. Follow-ups: Providing clear and accessible information about procurement practices, suppliers, and measures to mitigate risks in the supply chain. Many of our clients lack sufficiently detailed follow-ups as they have not had thorough enough risk analyses as a foundation.