How DLT Can Help Businesses Meet Their ESG Commitments

Of Srikumar Ramanathan, Chief Solutions Officer at Mphasis

Almost two decades since the tenure IT G was titled in a landmark report Whoever cares wins, mindful and green investing has become both smart and mainstream. Whether individuals or corporations, financial institutions or investors, regulators or insurers, everyone in the ‘business community’ recognizes that making ethical decisions is no longer just ‘being awake’ – it also makes good business sense.

The pandemic has only reinforced this realization. Capital flow into ESG funds more than doubled in 2020. In the US alone, ESG funds have captured approximately $51.1 billion in new investments – accounting more than 25 percent of all funds invested in US mutual funds in 2020. This surge in interest and engagement in ESG investing highlights the need for companies to prioritize compliance with ethical environmental, social and governance parameters to remain in the calculation.

As obvious as this may be, it is not an easy task. From a company perspective, supply chains have become increasingly networked, complex and global, especially in recent years. This has broadened the scope of regulatory requirements that companies must consider, while at the same time increasing their concerns about risk management. As a result, there is a growing need for organizations to take a bird’s-eye view of their operations, continually identifying potential vulnerabilities and looking out for environmental, social and governance (ESG) risks across the length and breadth of their value chains.

Towards a stakeholder approach

What has accelerated this need for continuous and reliable verification of international supply chains, especially in the wake of the pandemic, is the shift taking place in both society and business from a largely shareholder to a stakeholder approach. The pure pursuit of pure profit is now obsolete. In their place is a growing understanding of the interconnectedness of the three Ps and the need to place business ethics, production processes and corporate practices in a humane and sustainable framework for all involved.

But with the global nature of current supply chains, companies are understandably struggling to keep up. The slightest breach has the potential to erase hard-won reputations among stakeholders, have a domino effect on other companies in the chain, and cause unexpected financial and other setbacks. Take for example the criticism of some of the world’s leading fast fashion labels, including Boo and zara, were faced with the production of cheap single-use clothing with limited consideration for environmental or labor conditions. Consider the Swedish retail giant HM was recently flagged for “greenwashing” by the Norwegian Consumer Agency.

Besides the impact on reputation and costs, are there legal obligations in some parts of the world for companies to disclose the impact and legitimacy of their value chains? This can often further strain a company’s resources and be both expensive and cumbersome.

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