What are supply chains?
Supply chains are systems that link companies and organisations to their direct and indirect suppliers, allowing them to procure and distribute products and goods. These systems organise various activities, resources and information, whilst serving as networks that connect producers, transportation companies, warehouses, distribution centres and retailers alike.
Supply chain management works to design and implement the most efficient and cost-effective supply chain possible; however, doing so often overlooks sustainability as a key determinant.
Why is it important for companies to know what occurs within their supply chain?
Accurate information about a supply chain can save organisations a considerable amount of money. It can help both manufacturers and retailers produce and transport only what they can sell, eliminating the unnecessary expenses associated with producing, insuring, and shipping inventory that a company can’t sell.
Similarly, in recent years a rising number of multinational consumer companies have pledged to only work with suppliers that adhere to specific social and environmental standards. Studies have shown that supply chains are the link that connects your customers with products and services from across the world, but this comes at a significant cost to the environment. A standard consumer company’s supply chain accounts for more than 80% of its greenhouse-gas emissions.
These multinational companies expect their first-tier suppliers to comply with these standards, and they ask that these suppliers, in turn, ask for compliance from their own suppliers – who ideally ask the same from their suppliers. And so on. The aim is to create a cascade of sustainable practices that flows smoothly throughout the supply chain, or, as we prefer to call it, a Supply Network.
It’s an admirable idea, but it’s been hard to realise in practice. Many of the largest consumer companies that have committed to implementing this practice have faced scandals brought about by suppliers that, despite being aware of sustainability standards, have nevertheless gone on to violate them. Consider the scrutiny that the world’s leading tech companies endured not long ago for sourcing electronics from overseas companies that required employees to work in hazardous conditions and the fallout that major retail brands suffered for using suppliers that were dumping toxins into rivers in South Asia.
What’s more, all those scandals involved first-tier suppliers. The practices of lower-tier suppliers are almost always worse, increasing companies’ exposure to serious financial, social, and environmental risks.
What is sustainable supply chain management?
Sustainable supply chain management starts with being very aware of your company’s environmental, social and economic impact, and, most importantly, making the necessary changes to lessen it.
This process can involve everything from a warehouse’s source of power to the transportation of goods and beyond. If your warehouse manufactures products, your sustainability strategy will also involve reviewing the entire manufacturing process, which includes the sustainability practices of all vendors providing raw materials, the assembly of products in the plant, and the disposal and recycling of waste. To achieve this level of awareness, companies must be able to map out their entire supply chain. If not, they can simply not identify any issues that lie within.
Issues regarding this can arise when large companies outsource their manufacturing process to third parties, it would be difficult to ascertain the true picture of sustainability without performing regular site inspections and ensuring standards are kept high.
The benefits of a sustainable supply chain.
For companies to achieve a sustainable supply chain, they must first identify and tackle any environmental, social, economic, and legal concerns from across their supply chain. Taking a holistic approach significantly reduces waste and environmental footprint, while also improving health & safety and labour concerns.
A fully sustainable supply chain is one that ensures socially responsible business practices are being followed consistently. These practices are not only good for the planet, but they also help to support overall business growth.
The main benefits of a sustainable supply chain are:
Long-term cost savings
There is a common misconception that reducing the environmental impact of a business comes at a major financial cost. However, despite the initial cost, it can lead to overall larger savings in the long term.
Whether you are reducing waste or increasing the efficiency of buildings, vehicles, and machinery, you would quickly see the returns.
Having multiple suppliers in different parts of the world can help improve the continuity of your products or services, preventing costly downtime and reputation damage.
Protection against reputational damage
Your suppliers are representatives of your brand, thus the strategy that you use to deal with your supply chain can directly affect the way your brand is perceived by consumers.
As previously mentioned, when companies avoid implementing sustainable practices within their supply chain they risk large-scale damage to their reputation and potential business growth. However, a sustainable supply chain is the best way to ensure all social and ethical responsibilities are met, protecting both your suppliers and your reputation.
Potential for new partnerships
This one may be less obvious. A business with a sustainable supply chain is also an attractive prospect for other companies looking to form a partnership. Your environmental credentials will likely align with the values of another brand, making you a desirable candidate for potential partnership opportunities.
Building trust & attaining more business
A sustainable supply chain can land you more business as you prove your green credentials. In a 2021 survey, over 73% of millennials said they would prefer to buy from a sustainable business. With accreditation to support your environmental efforts, you are showing potential clients that you are taking essential strides in reducing any negative impacts on the world.
Business leaders need to make a concerted effort to regain society’s trust, as well as that of their consumers, employees, and the communities that they operate within.
Why it’s important to act now?
Currently, we simply can not maintain our quality of life or the Earth’s ecosystems unless we acknowledge and reduce the damage we do to the planet. If we don’t learn to live more sustainably, some of the effects will be:
- More landfills popping up everywhere.
- Continued loss of natural resources.
- More animals risk going extinct due to deforestation and pollution.
- An increase in respiratory issues for the population.
- Climate change through CO2 emissions. Harsher weather conditions.
- Worsening living conditions for lower-income communities.
- Rising sea levels.
- Declining soil quality, and likely the reduced nutritional quality of our food
- Compliance with meeting the United Nations’ 2030 deadline for achieving Sustainable development goals
We can already see a few of these effects occurring right now as we speak but the longer we delay, the worse it will get!
What steps can you take to create a more sustainable supply chain?
1. Evaluate your existing supply chain management/sustainability strategy
This can be achieved by mapping out your entire supply chain from start to finish to identify weak points where unsustainable practices are being used. This is done by looking at your suppliers and their manufacturing processes, your transport and warehousing methods, as well as your distribution of goods and services.
If you are unable to map the entirety of your supply chain it can be difficult to know where more sustainable methods can be added.
2. Create a strategy
Work with your operations and logistics teams as well as your procurement leaders to source sustainable suppliers or alter the current system in place to achieve your goals. There are many ways to increase your organisation’s sustainability impact such as opting for suppliers that source their raw materials more efficiently and sustainably which in turn saves precious natural resources. Alternatively, you could find a transport company that uses electric vehicles to deliver goods, whilst offsetting your carbon emissions through a tree planting strategy.
Focus on basing your strategies around your supply chain’s weak points – these are where the most gains can be achieved.
3. Communicate your strategy to your suppliers
Communicating your corporate strategies in a clear and open manner is the key to ensuring your suppliers can understand and actively participate in achieving your goals, and in our opinion, there is no better way of communicating your newly developed sustainability strategy to your vast supply chains than by hosting a supplier day!
A supplier day is a great way to kick start your momentum for sustainability by creating alignment and partnership amongst your suppliers. The opportunity to create a platform for two-way communication is something that must be leveraged to ensure the longevity of your strategy as well as its seamless integration within your business network as a new norm.
You suppliers are tourchbears, successfully implementing strategies they feel personally aligned to within their own companies. So when dealing with a important topic such as sustainability, it is imperative suppliers are fully informed and involved within the process from start to finish. This something any organisation can do by simply by hosting a bespoke supplier day that present their core purpose, such as sustainability, as the heart and soul of their event.
Find out more about what a supplier day is and why they are important here
4. Enjoy knowing you and your suppliers are doing your best as a company to help the planet.
Your actions may seem small, but when combined with the power of your supply chain, even the smallest of acts can hold the biggest of impacts!
Click here to book a meeting with our Sales Team to find out how you can leverage your sustainability strategy, create alignment within your supply chain and so much more, simply by hosting a supplier day.