How FMCG Companies Can Reduce Social & Environmental Risks in Their Supply Chains
Tomas Novotny
Solutions Expert
28 Jul 2025
About 4 mins
The world has changed for fast-moving consumer goods (FMCG) companies. Sustainability is no longer just a nice to have, it’s a business necessity. With incoming laws and growing consumer pressure, companies must rethink how they manage their supply chains.
Laws and consumer expectations are rising
Incoming regulations like the EU’s Corporate Sustainability Due Diligence Directive (CSDDD) require large companies to check for environmental harm and human rights violations throughout their supply chain, not just with direct suppliers. Companies with more than €450 million in turnover face heavy fines and legal risks if they don’t comply.
At the same time, shoppers are making more values-based decisions. Studies show that a majority of consumers, across all age groups, are choosing brands that treat people fairly and protect the planet. Brands that fall short are losing customer trust and market share.
What ESG risks look like in the supply chain
FMCG supply chains face four main categories of ESG risk:
1. Labor Risks
These include issues like forced labour, low wages, unsafe working conditions, and the exploitation of migrant workers. These problems often happen in lower-tier suppliers but can also occur in developed countries.
2. Environmental Risks
From deforestation tied to palm oil and cocoa, to carbon emissions and plastic waste, FMCG brands must manage their environmental impact. Regulations and consumer concern are increasing fast.
3. Health and Safety Risks
Food production, farming, and manufacturing can be dangerous. Poor safety standards may lead to worker injuries, legal issues, and supply disruptions.
4. Business Ethics Risks
Corruption, bribery, misleading green claims (“greenwashing”), and lack of transparency are all ethical concerns. These can erode trust and expose companies to reputational and regulatory harm.
These risks vary across suppliers. Agricultural partners may face pressure over labour or land use. Packaging and logistics providers are expected to show progress on emissions, materials, and working conditions.
SMETA Insights
Data from the last 3 years of SMETA audits within FMCG supply chains identified the top 5 non-compliances came from these issue categories:
1. Health, safety & hygiene
2. Working hours
3. Wages
4. Management systems
5. Environment
Moving beyond compliance
Basic due diligence, like yearly audits and supplier surveys, can check the boxes for regulators. But this approach often misses deeper problems and emerging risks.
Leading companies are now taking a more proactive approach by:
- Monitoring suppliers more regularly
- Embedding ESG criteria into procurement and sourcing decisions
- Training suppliers and working with them to improve
The goal isn’t just to avoid penalties. It’s to build a more resilient and trustworthy brand.
What leading FMCG companies are doing differently
Forward-thinking FMCG companies are using well-known standards and digital tools to manage ESG risks more effectively:
- Frameworks like Sedex and SMETA help track labour and ethical standards.
- OECD guidance offers a roadmap for responsible supply chain due diligence.
- Technology tools such as blockchain (for tracking origins) and digital platforms (for supplier communication) make ESG data easier to collect and act on.
These companies go beyond just checking compliance, they support their suppliers through training, audits, and shared improvement goals.
A simple roadmap for procurement teams
For teams looking to improve, here’s how to get started:
1. Map your supply chain: Identify suppliers across all levels, not just tier one. Understand where your materials come from and where risks may lie.
2. Prioritise risks: Focus on suppliers with the highest ESG risks, based on location, industry, and history.
3. Update supplier processes: Add ESG criteria to supplier scorecards, qualification steps, and contract requirements.
4. Train your team: Equip procurement staff with tools to spot and manage ESG risks.
5. Communicate openly: Share updates on ESG efforts with leadership, suppliers, and customers. Transparency builds trust and credibility.
Building a resilient supply chain starts now
The shift from basic compliance to active risk management is no longer optional. FMCG companies that lead this change will be better prepared for the future.
They won’t just avoid fines, they’ll build supply chains that are stronger, more sustainable, and more aligned with what customers and regulators expect.
