Facts & Figures
International supply chains and responsible management
Due to increased public pressure and tightening legal frameworks, companies face the task of ensuring responsible management not only within their own organisations but also in their international supply chains. Misconduct by international supply chain partners can have serious consequences for a company. In particular, it can negatively impact a company’s image and legitimacy, and, thus, its competitiveness, performance, business success and attractiveness to shareholders and investors. Therefore, it is in the companies’ best interest to ensure responsible business practices throughout their international supply chains. However, successfully addressing the complex challenges along international supply chains requires all actors involved—first and foremost, companies and their suppliers—to take collective action.
The CoAct handbook provides large companies and small and medium-sized enterprises (SMEs) with tools and methods to ensure responsible management in the various supply chain constellations.
For this purpose, a model was developed to classify each buyer-supplier relationship according to the company’s ability to influence the supplier and the risk level associated with the supplier related to environmental, social and governance (ESG) issues. The model shows that each company, even if its respective ability to influence the supplier may differ, is able to take measures for responsible management in each constellation. In addition, options for action take the form of a roadmap and a toolkit.
Supplier classification model based on the ability to influence and the ESG risk level
Building on the classification of the business relationship and the determination of the ESG risk level, a supplier classification model was developed, to classify suppliers according to these two dimensions. The model consists of eight quadrants, each representing a supplier category reflecting the ability to influence and the ESG risk level.
The company’s business relationships with its suppliers are divided into one of the categories ‘Strategic’, ‘Leverage’, ‘Bottleneck’ or ‘Non-Critical, and thus inserted into the model to determine the company’s ability to influence its supplier. In addition, the suppliers’ classification is set according to their ESG risk level.
If the supplier’s business activities carry elevated or high ESG risks, the business relationship is located in the outer area of the circular model. If the supplier’s business activities pose a low ESG risk, the business relationship is located in the inner circle. Hence, the aim is to uniquely position each supplier in the circular model.
