4 common pitfalls in supply chain management that could impact your audits

1. Material shortages: Disruptions at the source

Picture this: you’re ready to roll out a new product line, but suddenly your supplier informs you they’re out of the critical materials you need. Sound familiar? This is one of the most common supply chain disruptions that can cripple production timelines and hurt your bottom line.

And considering that climate change, geopolitical tensions, global supply chain disruptions, and market price fluctuations can all impact your supply chain, this is a scenario you are likely to run into more than once.

Why it matters: Material shortages often force companies to scramble for alternative suppliers, many of which might not meet your sustainability or compliance criteria. In fact, it is often common for businesses to turn to suppliers that have not gone through the proper evaluation or auditing processes as you don’t have time to assess them properly. This makes it tough to maintain transparency in your reporting for CSRD audits.

Pro tip: Diversifying your supplier base and building stronger relationships with key vendors can give you a safety net when shortages strike. Make sure any new suppliers align with your sustainability goals from the get-go.

Additionally, consider implementing processes for supplier management alongside supplier audits. This will also be enforced by CSRD as there will be reporting requirements on what policies, code of conducts, as well as targets companies have in place to manage their critical suppliers.

2. Fragmented supply chains: Too many moving parts

Today’s globalized supply chains can be highly complex and fragmented, with components and materials sourced from multiple regions. While this might help reduce costs, it complicates everything—from logistics to sustainability reporting.

Why it matters: Fragmentation often leads to miscommunication and inefficiencies. Auditing for ESRS S4 (Supply Chain Due Diligence) becomes a massive challenge when you’re dealing with multiple suppliers who have varying levels of transparency and compliance.

Pro tip: Invest in integrated supply chain platforms that allow you to standardize processes and improve communication with your suppliers. This will make it easier to track their environmental and social performance.

3. Lack of supply chain visibility: Flying blind

You can’t manage what you can’t see, and a lack of real-time visibility across your supply chain is a nightmare for sustainability audits. Whether you’re tracking carbon emissions or verifying ethical labor practices, blind spots can lead to reporting errors or, worse, non-compliance.

Why it matters: For ESRS in particular, you need detailed insights on everything from Scope 3 emissions to the environmental and social impacts of each supplier. Without transparency, these metrics are nearly impossible to track accurately.

Pro tip: Start to understand your supply chain all the way from raw material extraction to direct suppliers. As a middle step, you can start to identify high-risk suppliers. Then in the long-term, every step of the supply chain should be transparent and trackable, and easily auditable.

4. Social risks in supply chains – social and reputation

Beyond environmental and logistical challenges, supply chains also face significant social risks that can disrupt operations, damage reputations, and lead to regulatory non-compliance.

Key Social Risks

• Labor exploitation: From forced labor to unsafe working conditions, unethical practices in your supply chain can result in legal penalties, financial losses, and brand damage.
• Diversity and inclusion issues: A lack of attention to diversity and fair treatment of workers—particularly in supplier relationships—can spark public backlash or boycotts.
• Community impact: Suppliers who fail to engage with and support local communities may face resistance, protests, or even project shutdowns.

Why It Matters

• Reputation harm: Consumers and stakeholders are increasingly intolerant of unethical labor practices, and any link to them can lead to lasting damage.
• Regulatory compliance: Laws like the EU’s Corporate Sustainability Due Diligence Directive (CSDDD) and modern slavery legislation require thorough checks of social risks across your value chain.
• Business continuity: Strikes, boycotts, or supplier shutdowns caused by social unrest can bring production to a halt.

Pro Tips

• Conduct regular audits: Use third-party verifications to assess labor practices and ensure compliance across suppliers.
• Leverage technology: Tools like supply chain management software with social impact modules can help identify high-risk areas and monitor progress.
• Foster collaboration: Engage with suppliers to promote fair wages, safe conditions, and community development projects that align with your sustainability goals.

By proactively addressing both transportation and social risks, your supply chain can remain resilient, compliant, and aligned with your sustainability ambitions.

Conclusion: How to stay ahead of supply chain challenges

Supply chain management isn’t just about keeping the wheels turning—it’s about ensuring those wheels are sustainable, transparent, and efficient. Whether you’re dealing with material shortages, visibility issues, or rising costs, the key is to stay proactive. By leveraging the right tools and strategies, you can navigate these common challenges while keeping your company compliant with ESRS standards.

Not to mention, these benefits can extend beyond risk mitigation. You’re likely to develop better relationships with key suppliers who also have more resilient processes set up for their own supply chains.

At Position Green, we offer a comprehensive ESG management software designed to help you track your supply chains and every dimension of your sustainability-related data, but also include a dedicated Supplier Assessment software. It allows you to quickly address ESG risks and opportunities within your supply chain, as well as gain an overview of all your supplier data to ensure you’re on track for your Scope 3 emission goals.