The rafts of legislation pertinent to energy supply chains cover issues like greenwashing, First Nation considerations, carbon emissions targets, health and safety, employment practices, and many more, depending on the geography of operations and the extent of supply chains.

But it’s important to note that, state-driven geopolitical measures aside, the majority of the strictures and governance in place are driven by public opinion. The fact that trade strictures and legislation emerge and change slowly in relation to public mood gives companies in the energy sector a significant opportunity to differentiate themselves from competitors proactively.

Source: Achilles Information Ltd

In addition to a competitive edge, of course, compliance with mandatory measures and mature reporting processes mean that operating costs will be significantly lower in the longer term than those organizations still reacting to laws and strictures as they appear.

Establishing forward-looking due diligence concerning an organization’s supply chain makes abiding by the terms of and reporting on current and likely legislation an intelligent investment in existing operations and the company’s future. As the energy sector transitions towards renewables and the size of the sector grows accordingly, hot topics like green metal extraction and forced labor will be reflected more in legislation. The ability to plan, mitigate, and change now presents opportunities.

The key to taking a proactive approach is transparency. The energy sector’s historical basis in fossil fuels means that process opacity must be avoided to ensure public and governmental confidence. That’s not to avoid financial penalties for greenwashing or poor practice but to create an industry with less need for onerous legislation.

Developing a process for due diligence in supply chains in the sector need not require enormous resources. Smaller players in the vertical are as affected by the need for regulatory compliance as the giant multinationals. But, risk reduction can be done without enterprise-scale budgets. TechHQ spoke recently to Adam Whitfield, Head of ESG at Achilles Information Ltd., to talk about how the company’s offering combines technology and human expertise to ensure the veracity of data gathered during due diligence processes.

Adam Whitfield, Head of ESG. Source: Achilles Information Ltd

“In the way supply chain risk management has evolved over the last few years, I think we are unique in the amount of resources that we use to carry out human evaluation of documentation that’s uploaded. A lot more evaluation is done through collection of public information through [web] scraping, for instance. We take that information and then use [human] readers to check it,” said Mr Whitfield.

The human element helps companies ensure that publicly available information in the digital domain is accurate. The nature of the internet means that data may not be complete or up to date, or may skewed by its very volume. A minor yet highly public incident – whether with negative or positive connotations – can be quickly amplified online and obscure the real picture.

“We have around 200 auditors around the world that we’re able to deploy to actually go and visit companies. We visit [and] audit around six and a half thousand companies a year, and so we’re taking information that’s being collected and verified remotely, and then, potentially, we’re going to [the] source to see if a company has policies and procedures in place to look after their staff or to protect the environment and so on. We go and visit the factory, the workshop, the site [and] actually see what’s going on,” Mr Whitfield said.

Using the Achilles platform, suppliers for a company in the sector register and upload relevant information: policies, documents, accreditations, licenses, and certifications. When these expire or are due for renewal, the system will flag the case and surface any contradictions needing manual clarification. That’s an essential feature in making due diligence a constant – it has been considered a process enacted just once, early in a relationship. Continually evaluating the supply chain’s elements ensures long-term compliance and transparency.

With accurate and verified data, companies can monitor their supply chain partners over time, evaluate the bigger picture of the effects of their total operations, and report to stakeholders and, where relevant, to governmental bodies and the public. Ensuring continuous compliance prevents the need for reactive measures and rushed supplier evaluation, increasing the value of partner relationships and allowing for better long-term strategies.

Transparency of supply chain operations means energy and distribution companies insulate themselves from penalties from extant legislation and can better plan and change strategy to comply with new measures coming down the road.

In highly regulated industries such as power generation with stringent targets around resource extraction and carbon emissions, for example, long-term change in operations needs to be reflected by the operations of all supply chain partners. Failure to ensure that third parties comply and adhere to best practices can jeopardize progress towards a company’s own targets.

Source: Achilles Information Ltd

Public perceptions of an energy sector operator can be created by even a tiny cog in the larger machinery of its supply chain. The Achilles solution helps reduce that risk, added Mr Whitfield.

He said: “[Companies are] able to present actual demonstrable evidence and data that they use to report. The public is less concerned because, actually, they’re receiving information that’s been independently validated or verified. […] In the past, companies have produced sustainability reports that have been like wish lists or fictional pieces of work without any kind of evidence to back them up. That’s where you’ve had issues around greenwashing. Whereas actually if you’ve got an organization that’s carrying out an independent verification of their carbon footprint to an ISO standard, and then actually they’re able to report on that.”

An ethical and sustainable supply chain can only be achieved with transparency, accurate data, and verifiable practice. The opportunities that come from a better and more efficient way of managing a supply chain in the sector are an integral part of the change the energy industry is experiencing. To ensure that the systems to achieve that are in place does not need to be a massive resource drain. Its modest costs bring multiple benefits: in compliance, future compliance, public relations, reporting, long-term strategy formulation, and a dozen ancillary areas.

In our next article in this series, we’ll focus on the business benefits accruing directly and indirectly from a proactive and continuous process of due diligence for the sector’s supply chain. But if what you’ve read so far has piqued your interest, head over to the Achilles website to read more.

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