Executive Summary
Supply chains are one of the most significant sources of climate and ESG risk. They are also one of the least understood. Organisations are increasingly expected to assess exposure across suppliers, including indirect (Scope 3) emissions, physical risk and transition risk. However, most struggle to do this in a consistent and scalable way. The challenge is not simply a lack of data. It is structural. Supply chains are: multi-tiered and difficult to map, heavily dependent on SMEs with limited disclosure, dynamic and constantly changing, geographically distributed, and fragmented across systems and processes. As a result, organisations often operate with a partial view of their supply chain - one that captures direct suppliers but fails to represent the broader network on which they depend. This article explores why supply chain visibility is structurally difficult to achieve, how this affects climate and ESG analysis, and what a more effective approach looks like.
1. Context: Why Supply Chain Visibility Matters Now
Supply chains have always been complex. What has changed is the expectation placed on organisations to understand them.
Several forces are driving this shift: regulatory requirements, including climate disclosure frameworks such as AASB S2; increasing focus on Scope 3 emissions; operational disruption caused by environmental events; investor and stakeholder scrutiny; and the need for resilience in global and regional supply networks.
These forces have elevated supply chains from an operational concern to a strategic risk domain. Organisations are now expected to answer questions such as: Where are our suppliers located? What risks do they face? How do those risks affect us? Where is our exposure concentrated? Which suppliers are most critical?
In practice, these questions are difficult to answer.
2. The Visibility Gap: What Organisations Think They Know
Most organisations believe they have a reasonable understanding of their supply chain. They typically hold: supplier lists, procurement records, contract data, and spend analysis. This creates a sense of visibility.
However, this visibility is often limited to: Tier 1 suppliers, contractual relationships, and financial interactions.
It does not extend to: deeper tiers of the supply chain, geographic exposure, environmental risk, or sector-level vulnerabilities.
This creates a gap between perceived visibility and actual understanding.
3. The Multi-Tier Problem
Supply chains are not linear - they are networks. A typical organisation may have hundreds or thousands of direct suppliers. Each of those suppliers may have their own suppliers, and so on, across multiple tiers.
Risk does not stop at Tier 1. It often sits deeper in the chain. For example: a Tier 2 supplier may operate in a high-risk geography, a Tier 3 supplier may provide a critical component, and disruption at a lower tier may cascade upwards.
However, most organisations have limited visibility beyond Tier 1. This creates a structural limitation: Organisations depend on entities they cannot see.
4. The SME Challenge
A large proportion of supply chain activity is delivered by small and medium-sized enterprises (SMEs). These entities are critical to delivery, but often: do not publish ESG disclosures, lack structured reporting, have limited publicly available data, and operate regionally or locally.
This creates a significant data gap. While large suppliers may be visible, SMEs introduce: opacity, inconsistency, and variability in resilience.
This is particularly relevant in industries such as construction, manufacturing, and logistics where SME participation is high.
5. Fragmented Procurement Models
Procurement processes are often: decentralised, project-based, regionally driven, and time-sensitive. This is especially true in industries with local sourcing requirements, short project cycles, and variable supplier pools.
As a result: supplier selection varies across projects, data is not standardised, visibility is not consistent, and exposure is difficult to track.
This creates a moving target. The supply chain is not a fixed structure - it is continuously evolving.
6. Geographic Exposure Without Context
Many organisations have access to geographic data. However, this data is rarely connected to: environmental risk indicators, supplier activity, or business operations.
This leads to a situation where: locations are known, but risk is not understood.
For example: a supplier may operate in a flood-prone area, but this is not visible in procurement systems, and therefore not considered in risk assessment.
Without linking geography to risk, visibility remains incomplete.
7. The Disconnect Between ESG and Procurement
In many organisations, ESG and procurement functions operate separately. Procurement focuses on cost, quality and delivery. ESG focuses on sustainability and reporting. This creates a disconnect.
Supplier data may exist, but it is not: enriched with ESG indicators, analysed for climate risk, or integrated into procurement decisions.
As a result: ESG insights do not influence supplier selection, procurement decisions do not reflect climate risk, and reporting is disconnected from operational reality.
8. Static vs Dynamic Supply Chains
Supply chains are dynamic. They change due to: supplier turnover, project requirements, cost pressures, availability of materials, and external disruptions.
However, many organisations assess supply chain risk using: static snapshots, periodic reviews, and one-off surveys.
This creates a mismatch between the evolving nature of supply chains and the static nature of analysis.
9. Why Current Approaches Fall Short
To address visibility challenges, organisations often rely on: supplier questionnaires, ESG score providers, manual assessments, and targeted reviews of key suppliers.
While useful, these approaches have limitations. They are: difficult to scale across large supplier populations, dependent on supplier participation, inconsistent in methodology, and resource-intensive to maintain.
Most importantly, they do not create a system-wide view of exposure.
10. What This Means in Practice
The structural limitations of supply chain visibility have several implications. Organisations often: underestimate their exposure to climate risk, fail to identify concentration across suppliers, focus on visible suppliers rather than critical dependencies, struggle to prioritise action, and produce incomplete or inconsistent reporting.
This affects both operational resilience and regulatory compliance.
11. What Good Looks Like
Improving supply chain visibility requires a different approach.
Entity-Level Mapping: Suppliers should be linked to consistent business identifiers.
Geographic Risk Integration: Locations should be connected to environmental risk indicators.
Population-Level Analysis: Assessment should extend across entire supplier populations.
Dynamic Data Models: Data should be updated regularly to reflect changes in the supply chain.
Integration Across Functions: Procurement, risk and ESG teams should operate from a shared dataset.
12. From Visibility to Understanding
The goal is not simply to see the supply chain. It is to understand: where risk sits, how it accumulates, which suppliers matter most, and where intervention is required.
This requires moving from lists of suppliers to structured networks of risk and dependency.
13. Conclusion
Supply chain visibility is difficult not because organisations lack effort, but because the problem itself is structurally complex. It is shaped by: multi-tier networks, SME participation, fragmented procurement, geographic exposure, and dynamic relationships.
As expectations around climate and ESG increase, these challenges become more visible. Organisations that address them directly will be better positioned to: understand their exposure, improve resilience, support regulatory reporting, and make more informed decisions.
Closing Insight
Addressing supply chain visibility requires a structured approach that connects suppliers, locations and risk indicators into a consistent, scalable framework - enabling organisations to move from partial visibility to meaningful insight.