Sustainability 2.0: Supply Chain Resilience

Why every ESG risk is a supply chain risk, and how to build businesses that sustain the balance sheet, the planet, and people.

Reframing ESG as Core Risk Management

Across global markets, the role of environmental, social, and governance (ESG) considerations in supply chain risk management is increasingly debated. Some businesses and elected officials are raising concerns that ESG requirements could place constraints on national competitiveness, particularly given recent policy shifts in the United States and continuing regulatory revisions in the European Union under the Omnibus package.

Yet this polarisation obscures a fundamental reality: ESG factors are not isolated reporting obligations, but embedded risk and opportunity drivers, that materially affect business operations.

Sustainable business practice is about managing exposure to risks that determine long-term performance: Compliance, Operational & Reputational (COR risks). ESG factors are not a separate set of concerns from key business priorities; they are the lens through which these risks become visible. The key question is therefore whether businesses recognise that ESG issues are already shaping their cost structures, supply chains, and long-term viability? The most pragmatic approach to sustainability acknowledges that businesses do not act out of a moral imperative, but out of strategic necessity.

This holds true for most of the global economy but is sharply visible in the case of Critical and Strategic Raw Materials (CSRM), which are at the nexus of political tensions and climate transition needs. While this blog’s analysis applies to most supply chains, it specifically covers metals and minerals sourcing.

ESG Risks are Supply Risks

Beyond inherent technical vulnerabilities such as geological concentration and resource depletion, many of today’s most pressing supply chain disruptions stem directly from events and issues that fall under the ESG risk rubric. The vulnerability of global value chains to such ESG-driven disruptions is compounded by the context of geopolitical fragmentation and mineral resource concentration.

• Governance and Conflict. The war in Ukraine demonstrated how political and social crises can have far-reaching implications for supply chain security, especially when involving two mineral-rich countries which are either under sanctions or incapable of resuming production.
• Public Health: The COVID-19 pandemic began as a public health emergency before cascading into global value chain paralysis. It also accelerated the use of digital technologies, partly driven by remote working, and in turn increased societal demand for minerals.
• Workplace Incidents and Environmental Events: The stubborn persistence of poor occupational health and safety performance and the increasing number of serious tailings breaches not only expose severe human and environmental costs but also cause tangible business disruption through production stoppages, operational losses and challenges to trust in business brands that have taken years to build.
• National Resource Sovereignty: Public policies to strengthen CSRM “resource sovereignty” can be seen as political arbitration between social imperatives (economic growth, employment security) and environmental and governance considerations.

Nowhere is this convergence more apparent than in climate-related supply risks. The same global warming that drives the surge in mineral extraction to supply the metals needed for technology to power the energy transition is also projected to disrupt mining production itself. A significant share of mines extracting critical minerals are projected to lose productive days to extreme heat, while the manufacturing of key components, such as semiconductor fabrication in Taiwan, has already been constrained by drought. In response, institutional investors are increasingly diverting capital away from companies that fail to manage these climate-related exposures.

From Disclosure to Strategy: Moving Beyond Box-Ticking

The fragility of many corporate ESG initiatives can be blamed on the marginalising framing of corporate sustainability as philanthropic or compliance exercises, rather than as a strategic response to material business risks. Very often, the sustainability function is not given the budget, status or mandate needed to fully integrate ESG into corporate risk management.

Consider companies in the automotive, electronics, appliance OEM, or heavy industry sectors, including construction and infrastructure. From a supply chain perspective, these are effectively metals companies: metals are the fundamental ingredient in their products. Without metals, they are no more than an idea. Yet most companies remain unaware of their supply chains beyond the first tier, ill-informed about the raw materials that make up their composite materials, and fail to connect the dots between a mine closure due to an environmental, social, or governance incident and the resulting threat to their supply security. In the meantime, corporate budgets devoted to researching, understanding, marketing, and engaging consumers are vast, with marketing spend alone averaging 7.7% of company revenues across major industries. No company would dream of launching a product without knowing its market. Yet when it comes to understanding the landscape upstream and the risks that lie beneath the surface, many still operate blind, navigating unfamiliar territory without a map.

The environmental, social, and governance landscape is not an adjacent concern: it is the fundamental operating context. Sustainability 2.0, therefore calls for strategic integration: aligning supply chain strategy, enterprise risk management, and sustainability into a single, coherent framework for long-term resilience.

The Circular Economy: A Practical Path to Resilience

Embedding ESG priorities into business resilience can be achieved through circular economy principles. Circularity is not merely an environmental initiative that incidentally benefits the business; it can be a business strategy that incidentally benefits the environment.

Circular systems reduce dependency on concentrated and unstable supply sources. By recovering materials from their own products, remanufacturing components, or sourcing from local waste streams, companies become less vulnerable to external disruptions and price volatility caused by geographic concentration or political instability.

Although “recycled” does not mean “risk-free,” sourcing recycled materials can substantially lower a company’s carbon footprint. For example, recycled aluminium production requires only 3–5% of the energy. It can also shorten the supply chain and enable greater visibility over the practices and performance of business partners and the chance to engage and encourage the adoption of responsible business conduct principles and standards.

Building Competitive Advantage through Integrated Resilience

A sustainable business is one capable of operating not just today, but in five, ten, and thirty years. Achieving such durability requires the capacity to withstand economic shocks, many of which are now driven by global ESG pressures. As the consequences of climate change become more pronounced, even local disruptions can cascade through tightly linked global value chains.

While businesses are rightly encouraged to conduct supply chain due diligence to understand how their operations impact people and the planet, they must also ask the reverse question (in line with emerging practice and the principle of double materiality), namely: what ESG-related threats could affect their operations? For example, how might climate change, social unrest, or geopolitical tension disrupt production and sourcing?

Ultimately, this practice should evolve from a defensive posture protecting the business from ESG-related risks, to an offensive strategy, in which resilience becomes a competitive advantage.

Call for Action

Building on our-decade long experience working with companies to build resilient supply chains, here are 5 levers which have made our clients successful by adding an ESG lens to their business risks:

1. Map your exposure. Understand your vulnerability to ESG and supply risks using available data on production context and sustainability metrics. Overlaying production data with CAHRA and commodity risk indicators, such as through TDi’s Digital Platform, enables rapid identification of high-risk sourcing areas even before suppliers complete their SAQs.
2. Integrate the results of your exposure mapping into enterprise planning. Embed ESG-related scenarios into procurement, investment, and logistics planning to ensure decisions account for climate disruption, social instability, and governance volatility.
3. Foster cross-functional collaboration. Enable procurement, sustainability, and engineering teams to work together in designing diversified and regionally balanced supply networks that can absorb shocks from geopolitical tensions or natural disasters.
4. Advance circularity. Embed ESG and supply risk consideration into product design guidelines to guide material selection. Integrate circular and closed-loop sourcing models to reduce dependence on volatile commodity markets and depleting raw materials. Invest in R&D and recycling technologies to recover critical inputs and extend material lifecycles.
5. Build strategic supplier partnerships. Shift ESG compliance from a top-down requirement to a shared challenge. Collaborate with suppliers to build capacity, strengthen transparency, and align on best ESG practices including through long-term offtake agreements where available, as a means to secure access and visibility at the production stage.

TDi Sustainability has partnered with over 100 companies worldwide, delivering audit, advisory, and data-driven solutions that shape corporate strategies for long-term sustainability and resilience, both within operations and across complex, global supply chains. Our work spans the development of ESG and supply risk indices, brought to life through our digital tool suite; the benchmarking of international standards and regulatory frameworks; and the design and implementation of supply chain due diligence systems, including second- and third-party assessments. We have established supplier engagement frameworks that drive collaboration and accountability across value chains, delivering capacity-building programmes for executives and suppliers alike, covering topics ranging from niche technical challenges to emerging global sustainability trends. For blue-chip clients, we craft raw material roadmaps that align risk and opportunity mapping with strategic objectives and organisational capabilities, enabling them to translate sustainability ambition into long-term value creation.

If your organisation is seeking to future-proof its operations by integrating ESG, supply chain, and resilience strategies into a coherent framework, we would be delighted to explore how TDi Sustainability can support that journey.