Indian manufacturers and suppliers will need to accelerate their environmental, social and corporate governance (ESG) programmes to stay competitive in the global markets, according to Girija Pande, a Singapore-based industry veteran.
While price, quality and deliveries were the focus earlier, ESG compliance has increasingly been added as a prerequisite for selection of supply chain partners in the global marketplace, elaborated Pande, the newly appointed non-Executive Chairman of Zurich-based Global ESG Advisory Board of Chain IQ.
Chain IQ is an independent major global sourcing and procurement firm which was carved out many years ago from UBS Bank. It manages annual purchases of nearly USD 50 billion on behalf of its global clients.
"Buying market was already very tight because of supply chain disruptions due to changes in the geopolitical environment, inflation and the pandemic," he pointed out.
Further, buying from suppliers has just become that much more difficult because of the focus globally on ESG compliance," Pande told PTI.
"There is a need to accelerate the implementation of ESG programmes from manufacturing stage to deliveries through internationally established supply chains which now have a long-list of ESG compliant checks," he stressed.
The ESG timetable for Indian manufacturers and suppliers will be tight, he cautioned, and added that transition to net zero Carbon emission must be planned by 2030 in sync with global MNC transition plans.
Internationally, global supply chains, including those of Chain IQ, are putting pressure on their suppliers with "a long-list of ESG checks" as to how carbon footprint is being reduced throughout the process of sourcing raw materials, use of energy and delivery procedures, said Pande, who has worked over three decades across Asia.
Procurement marketplace is going to be very tough and selective. Bulk buying by global supply chains will be competitive.
Chain IQ provides its customers significant price advantages through its bulk buying approach leveraging over 30,000 global suppliers globally," said Pande, former President of Tata Consultancy Services (TCS) APAC.
Tier 2 and 3 suppliers and even small producers will in future have to comply with ESG in a multiple supply chain environment, said Pande who is working with Chain IQ's 30,000 suppliers globally including nearly 1,000 in India where Chain IQ has two facilities staffed by nearly 100 procurement specialists.
"At the moment we are driving ESG compliance for these 1,000 Indian suppliers and we will assist them on this journey towards Net Zero by 2030 as part of transition to green supply chains."
SEBI has a very clear requirement for all the listed companies in India on being ESG compliant, he noted, adding that like anywhere else in the world, Indian companies are also under pressure to be ESG compliant.
Pande expressed confidence in the Indian companies' ability to scale up to meet global ESG standards as was evident in their adoption of ISO standards in the 1970s-80s.
He noted that India has committed to COP26 ESG goals and despite energy transition challenges, is doing well in the field of Green Energy with a significant ramp of renewable energy infrastructure.
He appreciates India's progress on the renewable sector and feels that an accelerated pace on COP26 commitment relating to ESG and carbon foot is urgently required.
Carbon pricing, carbon tax as well as carbon trading are also tied up to meeting ESG commitments.
The Indian government needs to take a bold step to announce the much-needed carbon pricing scheme, supported by a carbon trading system, offering manufacturers and supply chain operators risk hedging options, he said.
Europe has already announced a carbon price which in some countries has been set at about USD 100 per tonne with carbon trading services already set up to serve their customers looking for carbon abatement.
Singapore too has made similar announcements while China is in the process of doing so, he said.
"Suddenly supply chain challenges have become far more complex," said Pande who also serves on the Advisory Board of a Global ESG Fund and the High-Level Advisory Board of Brussel-based 'Digital Goes Green Foundation' supported by the European Union and the World Economic Forum.
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