How to Identify Risk in Your Value Chain Using VSME

Is ESG just a compliance exercise or your best source of insight into Value Chain Risk? 

Risk is a natural part of doing business in today’s global economy. Companies operate in an increasingly complex landscape shaped by economic uncertainty, social change, and environmental pressure. This growing sense of instability is reflected in the World Economic Forum’s Global Risks Report 2026. Here, 50% of respondents expect a turbulent global outlook over the next two years. That figure rises to 57% over the next decade, while only 1% anticipate a calm outlook. 

These risks span environmental, social, and governance (ESG) issues. In the short term, geoeconomic confrontation ranks as the most severe global risk, reflecting rising geopolitical tensions. Social risks, such as inequality and the erosion of human rights and civic freedoms, also feature among the top concerns. Over the longer term, however, environmental risks dominate. Extreme weather events, biodiversity loss, and critical changes to Earth’s systems are expected to pose the greatest threats. 

For many companies, these risks materialize through their value chains. Supply chains account for 50–70% of enterprise operating costs, according to EY, and are responsible for more than 90% of organizational greenhouse gas emissions. Yet despite this exposure, only around half of companies report even basic indicators related to supply chain sustainability and risk. This lack of visibility leaves many organizations vulnerable, just as these risks continue to intensify. 

How to identify risk in your value chain

Because many sustainability risks arise through suppliers and other business relationships, companies need a structured way to identify where the most significant exposures lie within their value chain. 

A practical approach to identifying sustainability risks in the value chain typically includes the following steps: 

1. Map your value chain 

Start by identifying the key stages of your value chain, from upstream suppliers to downstream activities. This creates a clear overview of where different activities and relationships sit. 

2. Identify potential ESG risk areas

For each stage, consider which environmental, social, and governance risks may arise.  

3. Collect data from your value chain

Gather information from suppliers and business partners in a consistent and standardized way. Comparable data makes it easier to spot patterns and gaps. 

4. Screen for risk hotspots

Use sector, geography, and supplier information to identify areas where sustainability risks are more likely to occur.  

5. Prioritize the most significant risks

Focus on risks with the highest potential severity and likelihood to determine where deeper assessment or action is needed. 

This is where standardized reporting frameworks such as the VSME can play a valuable role. By providing structured sustainability information from the value chain, VSME supports more systematic risk identification and prioritization across their supplier networks. 

How VSME can support value chain risk identification 

Responses collected through VSME can help companies to identify potential risk areas across their value chain. For example, VSME data can help flag: 

• Partners with higher environmental exposure  

• Partners operating in risk-sensitive sectors  

• Partners located in regions with higher social risks or geopolitical instability 

By identifying these potential risk areas, companies are better equipped to plan their next steps in managing sustainability risks. VSME information can help companies: 

• Identify potential environmental and social impacts across the value chain 

• Prioritize suppliers for further validation or engagement if needed  

• Use the information as an input for their double materiality assessment 

In this way, VSME can serve as a practical starting point for gathering structured sustainability data and supporting a more risk-informed approach to value chain management.  

For more detailed information on how VSME data can help in identifying risk, download one pager below: 

Empowering the Value Chain Through Standardized Reporting

Beyond supporting companies in identifying and prioritizing value chain risks, requesting sustainability information through VSME also creates value for suppliers. Companies receive the structured data they need, while value chain partners get a clear starting point for sustainability reporting using a recognized and standardized framework.

Instead of responding to multiple, inconsistent questionnaires, suppliers can prepare their information once and reuse it across business relationships. The result is a true win‑win: companies gain a clearer view of sustainability risks in their value chains, while their value chain partners benefit from a simpler, more consistent way to report —and reuse—their sustainability information.

Want to better understand sustainability risks in your value chain? Get in touch to see how VSME, as a structured and standardized approach, can help improve visibility and focus where it matters most.  

8 April 2026