Supplier Risk Scoring Methodologies

March 10, 2024 - 5 min read

By Nishtha Verma, ESG Lead at Elm AI

Supplier risk assessments today have become more important than ever before, because they can help to better understand how threats to companies across the supply chain could impact organizations' abilities to deliver their own products and services in a responsible manner. But what are the different ways companies could assess ESG risks across their supplier networks?

Within Elm AI's ESG-focused Supplier Risk Scoring Framework, we employ a scoring methodology to evaluate supplier performance across each KPI comprehensively. The methodology involves several steps:

Within Elm AI's ESG-focused Supplier Risk Scoring Framework, we employ a scoring methodology to evaluate supplier performance across each KPI comprehensively. The methodology involves several steps:
Normalization: Standardizing data to ensure comparability across different metrics and suppliers.
Weighted scoring: Assigning weightage to each indicator based on its relative importance and impact.
Aggregation: Calculating an overall score for each supplier by aggregating individual indicator scores using weighted averages.

‍Integration of Ethical Considerations

Ethical considerations are integrated into the framework through the inclusion of specific indicators and criteria designed to assess supplier compliance with responsible standards and practices. By incorporating ethical considerations, we ensure that organizations can uphold moral standards and promote responsible sourcing practices throughout their supply chains, thereby enhancing their reputation and credibility in the marketplace.

‍Continuous Improvement and Future Directions

Elm AI's Supplier Risk Framework is designed to evolve and adapt to changing standards, regulations, and best practices in supply chain risk management. This involves a continuous review and updating of the framework to reflect emerging risks and industry trends, as well as feedback and insights from stakeholders and other industry experts. Future directions for the framework may include enhancements to its scalability, flexibility, and integration with emerging technologies, as well as expansion into new areas of risk management and sustainability.

As supply chains continue to evolve and face new challenges today, the importance of robust risk management frameworks cannot be overstated.