Supply chain sustainability gives companies the opportunity to identify areas of their supply chain that are not aligned with sustainability goals. This can help implement sustainable practices throughout their supply chain. Learn more here.
What is supply chain sustainability?
Supply chain sustainability refers to the management of environmental and social impacts, as well as economic and responsible practices throughout the lifecycle of a product or service.
It is about creating, maintaining and enhancing long-term environmental, social and economic value for all stakeholders involved in bringing products and services to market.
All companies must do their best to meet these standards for current and future generations. They should ensure that people and the environment are protected in the extraction, production and distribution of their products.
Why is sustainability important for the supply chain?
Sustainability chain sustainability initiatives are important for a number of reasons:
- Supporting the global supply chain: implementing supply chain sustainability initiatives ensures a stable supply of a specific raw material in the global supply chain by avoiding unsustainable practices such as over-extraction or over-harvesting, human exploitation, or excessive waste production.
- Ensuring compliance: supply chain sustainability enables companies to to comply with important policies on human rights, labor practices, environmental protection and good governance.
- Cost savings: sustainability initiatives enable companies to minimize their environmental footprint by reducing energy and water consumption and waste production, thereby lowering production costs and increasing profits and sales.
- Promoting brand integrity and sustainability: Companies that implement specific sustainable programs in their supply chains build and maintain the integrity and reputation of their brand. This equates to business continuity and risk mitigation.
- Promotes shared benefits for the company and stakeholders: sustainability in supply chains promotes the principles of corporate social responsibility, which enables them to address the environmental, economic and social interests of society at large, while benefiting the company in many areas of its operations.
What are the three elements of supply chain sustainability?
A company’s supply chain sustainability performance consists of 3 elements: environmental, social and economic impact. This triple bottom line approach can be translated to the more familiar elements known as People, Planet and Profit..
The term “people” in the supply chain is not just about the company’s employees doing the work. It is also about the welfare of production workers, vendors, suppliers, customers, locals in the region from which you source a particular raw material, and others.
The impact on the environment or “planet” can cover a whole range of aspects, including:
- Carbon emissions and waste from suppliers or supply logistics;
- Water or soil pollution from manufacturing operations, including the sustainability strategy to address this issue;
- Your company’s water and energy consumption, including the total carbon footprint during extraction, production or distribution; and
- The type of packaging used (recycled or virgin material)
- Many others.
Finally, it is the economic impact or the “profit” aspect of sustainability in the supply chain that makes it more attractive for companies to adopt sustainability programs. Having a sustainability strategy in the key processes of your supply chain reduces inefficiencies in terms of company time and resources, resulting in cost savings. It also makes your company more progressive and resilient to policy changes, climate change and social unrest.
How can supply chains become more sustainable ?
There are several ways your company can make its supply chains more sustainable:
- Map out supply chain processes and simply them to reduce waste. Companies should be able to map their supply chain processes and understand how raw materials and human resources are used at each stage of the production process. Cutting red tape in the process or simplifying some steps can significantly help reduce waste, speed up delivery or improve the overall quality of the product – all of which contribute to sustainability.
- Identify sustainability issues throughout the supply chain, especially those that do not align with ethical sourcing and transparency. Depending on the product being manufactured or sourced, there are a variety of environmental, social and economic issues. It is important to identify the sustainability issues for each stage and address them accordingly. Anything in the process that does not comply with ethical sourcing and transparency should be red-tagged.
- Define your supply-chain sustainability goals and strategies. Now that your organization has mapped its supply chain processes and the critical areas where improvements can be made, you can define the goals and strategies to reduce the resulting impacts. Some of the specific goals and strategies you can consider are:
- Minimize overproduction through efficient supply and demand planning;
- Reduce fossil fuel consumption by optimizing routes;
- Fully utilize containers and transportation assets to consolidate shipments; and
- many others.
- Work with your suppliers to implement your supply chain sustainability programs – and make sure they comply. Your company should work with your suppliers, taking inventory and keeping an eye on their sustainability performance. Your company can ultimately decide which suppliers can work with you to meet your sustainability goals, and which cannot. You can stop working with your suppliers if they do not meet your goals, or offer your suppliers incentives to improve their sustainability performance.
- Monitor environmental, social and economic risks. It is important to keep track of any environmental, social, and economic risks you had at the outset, before you implement a specific supply chain sustainability plan. This will serve as a benchmark for you to measure the progress of your supply chain sustainability initiatives.
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