1. Analyse Opportunities and Risks
To understand how the company works and can potentially work with sustainability both internally and externally, you should, as a first step, analyse the current situation regarding the organisation’s value chain and stakeholders. This analysis will then form the basis for your ongoing sustainability work. Through step one you will identify development opportunities that can create greater appeal and increased profitability for your company. You will also identify risks and possible inconsistencies that may violate international guidelines and which could lead to criminal liability and, in the long term, damage your company’s brand while also having negative financial consequences.
If a business operation is to be considered sustainable, the entire value chain needs to comply with the same standards. Shortfalls in sustainability practices in one of the links will have a negative impact on all partners in the value chain. In order to fully understand which measures are most effective for adopting sustainable practices, you need to analyse current status and determine the opportunities and risks for all stakeholders. In addition to your business value chain, other protagonists may want to have a say in how your business should be run from a sustainability perspective, so you should also assess the influence of these external stakeholders to determine which demands they might place on your performance.
Coupled with your goals and guidelines, the status analysis be entered into a template so that you can more easily identify focus areas and priotised actions in your ongoing sustainability work. Below is a step-by-step review of the status analysis.
Identify and analyse the value chain
First of all, the value chain for each of the company’s products is identified and analysed from a sustainability perspective, in-depth and as accurately as possible.
The company should then be able to identify the structure of suppliers, subcontractors (including transportation partners), customers and end customers for each product. It may not be so easy to obtain information about subcontractors, but this is important since the most serious shortcomings are to be found in this area. Work with your suppliers to get access to as much information as possible. If these companies have short value chains or already have good control of each process step, this is an advantage to you. However, if companies have complex value chains that are difficult to define, and if they don’t want to risk missing anything, you should get help from experts when carrying out the analysis. Below are examples of what value chain may look like, which vary depending on the products, the nature of the companies and the industry they are in.
Once the value chain has been identified, you should carry out an analysis of each link in the value chain from a sustainability perspective, and identify development opportunities and risks of anomalies that violate international laws and guidelines. The analysis should focus primarily on the most important areas of sustainable business, i.e. human rights, working conditions, anti-corruption and the environment. You should also analyse individual country-specific opportunities and risks in the markets where your company and its stakeholders operate.
To assist in this analysis, Business Sweden has outlined general opportunities and risks and a list of preventive measures for each sustainability area that can be used as a guideline. Review each respective area and analyse your value chain based on this list. You will find the different focus areas on the left below step 1.
Identify and analyse external stakeholders
When the value chain analysis has been completed, you should identify the company’s external stakeholders, that is, protagonists in society who in some way have an influence on the company. In this phase, it is important to identify which stakeholders the company has an impact on, and their potential impact on the company, and to analyse potential sustainability-related demands they might place on your business operations.
Examples of stakeholders:
Knowing what stakeholders expect and demand from you is essential before you plan a sustainability programme. By identifying all stakeholders and their potential needs and expectations in the future, it will be easier for you to explore opportunities and anticipate risks.
By visiting websites and the social media pages of your stakeholders you can get a clear idea about their sustainability policies and the guidelines they employ. Make sure to identify the issues that matter most to your stakeholders, whether these be customer expectations or investor-driven demands. This will provide better insight and a deeper understanding of each player, enabling all stakeholders in the value chain to work towards the same goal.
When you have identified the value chain and the stakeholders involved and pinpointed opportunities and risks facing your company, the next step is to prioritise actions. In step 2, once you have established your core values, you should decide on final priorities, however it may be useful to outline a general view in this initial phase.
Identify weak areas where urgent measures can have a major impact, and where neglection can directly affect the company’s brand image and profitability. Furthermore, it is important to take the financial consequences of either taking action or refraining from measures into consideration, while also investigating the efforts that will be required of you to achieve the desired outcome.