As regulatory requirements grow, customer expectations rise, and ESG (Environmental, Social, and Governance) standards gain prominence, companies must take a proactive approach to understand and improve how their products are made and sourced. This is a critical step in building trust and transparency throughout the supply chain.

At Clearyst, a number of companies we work with receive surveys or other requests from customers seeking data on their supply chains. This data helps provide a comprehensive picture of emissions, social impact, and other issues. Rather than just responding reactively as data requests come in, there are several ways companies can get ahead. The right preparation enables companies to be more agile to risks, market shifts, and potential supply chain challenges over time.

Drawing from the proven strategies of industry leaders like Unilever and Nestlé, we've streamlined best practices into a focused approach tailored for medium sized businesses. This blog outlines a step-by-step framework for supply chain sustainability, grounded in real-world implementation challenges and solutions. Whether you're just getting started or refining an existing program, these practical insights are designed to guide and support your journey.

1. Start with a Clear Understanding of Your Current Supply Chain

A sustainable supply chain begins with visibility. Before setting goals or drafting policies, companies must map their full supply chain, including Tier 1 (direct suppliers), Tier 2 (suppliers to your suppliers), and ideally Tier 3 (raw materials and inputs).

Key questions to ask:

• Who are your suppliers at each tier?
• What materials are being used, and where do they come from?
• Are compliance and audit processes clearly documented?

In many cases, companies discover inconsistencies in audit data, supplier documentation, or a lack of transparency in the lower tiers - leading to blind spots for risk. Creating a thorough supply chain map can support companies in identifying key opportunities for decarbonization while also allowing for more accurate identification of risks and areas requiring greater diversification.

2. Create or Update Your Supplier Code of Conduct

The Supplier Code of Conduct is a cornerstone document in any supply chain sustainability strategy. It clearly communicates expectations around labor practices, environmental management, ethics, and compliance requirements.

Best practices for an effective Supplier Code of Conduct:

• Align with leading industry standards (e.g., ISO, ILO, UN Global Compact, OECD Guidelines)
• Explicitly share monitoring and compliance requirements, such as annual third-party audits for Tier 1 and Tier 2 suppliers
• Include provisions for data transparency and supply chain traceability
• Translate and distribute to ensure accessibility across regions
• Create whistleblower protections (anonymous reporting channels in local languages)

An updated and clear code sets the tone for accountability and strengthens your position when working with new or existing partners. The Supplier Code of Conduct can also be a great way to communicate company values to suppliers and ensure alignment. 

3. Formalize Audit and Documentation Practices

While audits are common in global supply chains, many companies fall short when it comes to organizing and analyzing audit data. Audits may be sent via email, inconsistently stored, or not tracked over time - limiting their usefulness for ongoing improvement.

Recommendations:

• Assign a compliance lead to oversee all supplier accountability efforts
• Translate and distribute the Supplier Code of Conduct; require signed acknowledgment
• Centralize all audits by year and supplier in a shared digital location
• Use a simple system to log audit results and track corrective actions over time
• Establish an anonymous whistleblower process in local languages
• Consider scalable software tools to manage compliance data more efficiently

This approach not only helps you track supplier performance but also simplifies internal reviews, certifications, or reporting requirements.

4. Address Non-Compliance with a Structured Remediation Process

Even top-performing suppliers may face issues. What matters is how companies respond to audit findings.

A sample remediation framework might include:

• Logging non-compliance issues by year and supplier
• Following up at 1, 3, and 6 months to monitor progress
• Requesting evidence of corrective actions
• Implementing a clear escalation path for unresolved or repeated violations

By defining this process, companies ensure that audits aren’t just checkboxes, but tools for meaningful improvement. Beyond defining the process, companies need to clearly communicate expectations regarding non-compliance to suppliers, strengthening partnerships and reducing friction when challenges arise.

5. Develop a Due Diligence Process for New Suppliers

Many organizations select suppliers based on reputation or referrals, especially if they’ve worked with major brands. While this can be helpful, it doesn’t replace a formal ESG due diligence process.

A robust supplier onboarding process should include:

• Pre-screening for ESG risks, ideally informed by risk assessments performed for other parts of the supply chain
• Supplier self-assessments or questionnaires
• Documentation of labor practices and environmental policies
• Independent or third party audits where appropriate
• Evaluation of ability to comply with regulations to which the company is or may become subject to, such as Extended Producer Responsibility, EUDR, CBAM, or others. By performing due diligence with an eye for compliance on new suppliers, companies can streamline future reporting requirements

This approach reduces risk and signals to suppliers that your company takes sustainability seriously.

6. Begin to Strategically Tackle Tier 3 Suppliers

The impacts of Tier-3 suppliers - especially those involved in raw material extraction or processing - can be more challenging for companies to address given less proximity within the supply chain. This can be of particular concern when creating a risk management plan for potential labor or environmental violations. However, companies cannot afford to avoid these emissions as Tier 3 can make up a significant portion of a company’s carbon footprint (depending on the industry).

To address this:

• Identify high-risk materials or regions and focus your efforts strategically
• Build trust with Tier 1 and 2 suppliers to request information from Tier 3 suppliers, beginning with the most critical data points and with a clear communication plan as to how the data will be used and why it is being requested
• Offer incentives for transparency rather than punitive measures
• Make data requests as simple and effortless as possible, using the appropriate software solutions that are right sized for your business

While addressing Tier 3 can seem daunting, developing a roadmap now can position your company for future compliance and leadership.

7. Align Supply Chain Practices with Broader Sustainability Goals

Supply chain sustainability shouldn’t exist in a silo. Instead, it should reinforce broader ESG priorities, including:

• Carbon Management: As Scope 3 emissions (indirect emissions from the supply chain) become a greater regulatory focus, mapping suppliers and materials becomes critical.
• Responsible Materials: Consider including supplier expectations around sustainable sourcing, such as avoiding materials linked to deforestation or high water usage.
• Sustainable Packaging: Collaborate with suppliers on packaging initiatives that reduce waste and increase recyclability.

These integrations can amplify impact and ensure your supply chain efforts support long-term business goals.

Conclusion: A Call to Action

Building a sustainable supply chain demands structure, consistency, and collaboration across internal teams and external partners.

To get started:

• Review and update your Supplier Code of Conduct
• Create systems for storing and tracking audit results
• Establish a due diligence process for new suppliers
• Develop a roadmap for engaging suppliers by tier over time

Ready to implement your sustainable supply chain strategy? Reach out to Clearyst to get started today.

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