Inflation and rising costs are forcing firms to leave behind ESG initiatives in an effort to “keep their heads above water,” per a new survey.
Firms are being forced into supply chain changes due to rising costs as well as disruption.
Some 90 per cent of supply chains have experienced disruption in the past year, an Ivalua-commissioned study conducted by Sapio Research shows.
While many businesses have seen efforts to improve sustainability standards “hampered” (64 per cent), research also found over half now work with “cheaper rather than greener suppliers” and more than a third have shifted operations to be more local to deal with the uncertainty of rising costs.
Alex Saric, smart procurement expert at Ivalua, said “inflation has taken its toll on ESG progress,” and as businesses attempt to manage inflation, “environmental and modern slavery protections have fallen by the wayside.”
The pressures of inflation are only “adding to the mix” when it comes to supply chain changes, James Watkins, head of policy and public impact at London Chamber of Commerce and Industry, said.
“One of the key supply chain costs is energy,” Watkins added. “The cost of energy for businesses since Putin’s invasion of Ukraine is now very high and the government is not helping all businesses who use energy intensively – from restaurants to dry cleaners. This must change.”
“Many organisations are also onshoring supply chain operations to reduce risk from geopolitical disruptions,” Alex Saric, smart procurement expert at Ivalua, said. “But those opting to onshore must keep some diversity in the risk profiles of their supply chains to reduce the impact of local disruption.”
Alex Veitch at the British Chamber of Commerce said “there is no doubt the cost-of-living crisis means many smaller firms have been focussed on keeping their heads above water. So, it is perhaps no surprise that many SMEs lack the ability to properly research and plan for Net Zero.”