What is Supply Chain Sustainability?
Supply chain sustainability is an umbrella term that focuses on managing social, environmental, and economic impacts while implementing suitable governance practices throughout goods and services’ lifecycles.
The primary goal of supply chain sustainability is to create, establish, protect, and grow short and long-term social, environmental, and economic value for stakeholders that bring products or services to the market.
Why is Supply Chain Sustainability Important?
Companies focus on implementing a solid supply chain sustainability strategy for various reasons. The primary reason is to ensure compliance with governmental and global laws and regulations. Supply chain sustainability allows you to adhere to and support international principles for appropriate and eco-friendly business conduct.
Besides, companies take action to achieve better environmental, social, and economic impacts because societies and communities expect this from businesses. At the same time, green practices can benefit your company in various ways.
So, when you manage and seek to improve social, environmental, and economic performance and implement good governance throughout your supply chain operations, you can act in your own interest, stakeholders’ interest, and society’s interest.
How to Achieve Supply Chain Sustainability?
Building or achieving supply chain sustainability requires a step-by-step approach, careful planning, and preparation. Here are a few tips/tricks to streamline the entire process and achieve your goals.
Build a Business Case
There are numerous reasons for taking concrete actions and improving your supply chain’s environmental and social impacts. Corporate values and culture drive most companies to address sustainability issues.
Supply chain sustainability is the best thing to do because it drives environmental protection and social development, creating internal buy-in and commitment. Therefore, identifying specific business drivers for sustainability is crucial.
The business case for your company depends on various factors, such as the industry or sector, stakeholder expectations, supply chain footprint, organizational culture, and business strategy.
Supply chain sustainability practices can respond to multiple drivers, allowing you to boost your business growth and improve efficiency. We recommend focusing on the following points.
- Minimize business disruptions from social, environmental, and economic impacts
- Protect your brand’s reputation and business value
- Reduce costs of materials, energy, and transportation
- Focus on labor productivity and create efficient processes across supply chains
- Address business partner and customer issues
- Innovate to meet the needs of evolving markets
Manage Risks
You can protect your company from potential delays and interruptions via supply chain sustainability. We recommend implementing suppliers’ human and labor rights, labor, social, environmental, and governance practices by ensuring your business partners and stakeholders have robust compliance programs and effective management systems.
Risk management is critical to ensure consistency and reliable access to those resources if your company has a single supplier for necessary inputs. Consider investor and customer expectations to drive your company toward sustainability and responsible supply chain management.
Solid management of environmental and social issues can help your company analyze and manage risks. You can also use supply chain sustainability to ensure vendors and suppliers adapt and maintain ecological regulations and product responsibility legislation and reduce future liabilities.
We recommend partnering with vendors or suppliers to ensure minimum standards in practices, particularly management strategies, such as minimum hiring age, health, and safety conditions, and contracts with workers.
Focus on Operational Efficiency
When you focus on operational efficiencies in the supply chain, you can reduce your supply or transportation costs and reduce the carbon footprint of your supply chain, including water, energy, natural and synthetic material use, and improve worker health, productivity, and motivation. Advantages of focusing on operational efficiencies within your supply chain are:
- Health and safety practices that result in improved productivity and cost efficiency
- Understanding of critical processes, including natural resource management
- Analysis of extraction, manufacturing, and logistics, leading to better resource management
- Efficiency in designed processes and systems, reducing inputs and lowering costs
Moreover, efficiency and productivity programs require a complete understanding and analysis of various supply chain processes, including social and environmental impacts and cost drivers.
Address the root causes of problems is critical, and you can do this via solid communication capabilities, a thorough understanding of business drivers, and following up with sustainability trends.
An excellent example of operational efficiency is to reduce costs without impacting your supply chain operations, such as shipping products through ocean fright instead of air cargo when applicable.
Create Sustainable Products
Collaboration with vendors and suppliers on problems can strengthen product innovations. You can embark on initiatives to add new features and performance qualities to your existing products.
At the same time, this allows you to generate new products. For instance, sustainable products can have fewer negative social and environmental impacts than conventional products. Likewise, they have improved disposal options.
In addition, you can introduce sustainable products and make them a differentiating factor, leading to increased sales and higher investment returns. For example, you can source raw materials with environmental and social impacts, such as bioplastics emitting fewer emissions throughout their lifecycle. So, you can reduce your carbon footprint and greenhouse gases.
Establish a Vision
A solid vision and goals for your sustainable supply chain strategy will provide a clear direction for your operations. It also helps you define your business’s commitment and evaluate your strategy’s success. You can even identify areas that require continuous improvement.
However, your company’s vision and goals must come from the top of your company and ensure support from the leadership. Consult your company’s executives and managers from different departments when establishing a business vision.
Similarly, it would help to consider how you include representatives from supply chain management functions, including procurement, operations, corporate responsibility, design, logistics, marketing, quality assurance, legal human resources, compliance, and health and safety functions.
Considering these factors is critical to creating a solid business vision because each function is crucial in implementing a sustainable supply chain strategy. Even if you run a small company, ensure all leaders agree on the vision.
The output of your strategy is the statement of your company’s vision and commitment. When developing the statement, consider the factors that motivate your company to invest in sustainable supply chain practices. Ask yourself the following questions!
- What are customers’ demands and concerns?
- Do NGOs claim over supply chain practices and affect the brand reputation?
- Do investors inquire about my company to understand how I manage supply chain risks?
- Will non-compliance with standards and regulations prevent me from doing business?
- Is there intense pressure from my industry peers who develop sustainable supply chain strategies?
- Do I want to improve my company’s culture and increase performance via sustainability?
Adopt a Code of Conduct
A code of conduct is critical to establishing and managing vendors/suppliers and customers’ expectations. It creates a shared foundation for eco-friendly practices and sustainability, allowing supply chain management professionals to make informed decisions.
A supplier code of conduct is integral to your corporate values statements. Most companies see it as an affirmation of current expectations instead of a new set of requirements. Here are a few steps to develop a code for your business!
- Consult with stakeholders, including vendors
- Establish expectations based on global norms of behavior
- Avoid inventing new standards and regulations
- Avoid undermining global law and prevent conflicts with stakeholders
- Consult with cross-functional departments and teams, including supply chain management teams
Develop policies that align with international compact principles to streamline your supply chain sustainability operations and improve efficiency. Here are the fundamental principles to focus on when adopting or developing a code of conduct.
Human Rights
- No Forced labor
- No Child labor
- Wages and benefits
- Humane treatment
- Nondiscrimination
- Adequate working hours
- Freedom of collective bargaining
- Emergency preparedness
- Occupational safety
- Industrial hygiene
- Fire safety
- Machine safety
Environment
- No material toxicity
- No harsh chemicals
- Raw material use
- End-of-life products
- Recyclability
- Reduced greenhouse emissions
- Optimal energy use
- Appropriate wastewater treatment
- Biodiversity
Anti-Corruption
- Avoid conflict of interest
- Say no to Bribery and kickbacks
- Gifts, meals, and entertainment
- Proper accounting management
- Streamlined business record maintenance
- Information security and privacy
- No reporting misconducts
If you want to meet your business’s goals for supply chain sustainability, you must use the code as the foundation for establishing internal and external expectations. The code is also suitable for developing a framework for engagement and action with vendors, suppliers, and other stakeholders.
In addition, you must share the new code throughout your organization to raise awareness regarding the standards. Your supply chain management team should gain familiarity with the code of conduct and communicate it to existing and new vendors.
The purpose is to explain how your business intends to work with vendors and ensure compliance. Some of the best communication channels are websites, training programs, new staff, and online portals for senior management to strengthen the significance of the code.
Moreover, depending on your company’s structure and organizational complexities, it is crucial to establish internal policies and implement procedures to explain how your staff can execute the code.
Map Your Supply Chain Operations
Define your company’s supply chain strategy to understand the scope of sustainability management. You can use a supply chain mapping strategy to trace critical activities within your organization and the people involved in streamlining processes. Mapping your supply chain requires you to:
- Identify your service categories and focus on procurement
- Trace the flow of materials, collect data, and information
- Don’t stop with your direct vendors
- Go back to the original vendors
- Avoid making assumptions
- Understand your working relationships
- Gather information on human rights and labor
- Collect data on environmental, social, and corruption issues
- Identify the potential risks and opportunities
- Have thorough discussions with peer companies and industrial bodies
- Meet with civil society activists and organizations
Segment Your Supply Chain
Proper segmentation allows you to balance the fact that some risks will always exist, but specific problems can be addressed to avoid complications for your business, environment, and society. It would be best if you considered various criteria in your supply chain segmentation, such as:
- What are the most significant risks to human and labor rights, the environment, and supply chain ethics?
- What are the risks in your business that can impact your operations?
- How to meet your business vision and achieve supply chain sustainability?
- What are the risks of excluding small-medium businesses when implementing code demands?
- How do I monitor and audit supply chain sustainability processes?
Final Words
Supply chain sustainability is a strategy implemented by a company to ensure human rights, employees’ health, and safety and reduce a negative impact on the ecosystem.
It helps you reduce water and energy consumption, generate less waste, adapt more energy-efficient and sustainable systems, manage inventories, avoid overstocking, and decrease the carbon footprint.
However, most companies find it challenging to develop a sustainability strategy or implement the best practices. Developing a supply chain sustainability strategy requires thorough planning and preparations. You can use the tips/tricks above to streamline your operations and achieve your sustainability goals. Until Next Time!
