How to Build and Manage a Sustainable Supply Chain

The Resilient Enterprise | The riskmethods Blog
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What company isn’t thinking about sustainability in supply chains these days? Spoiler: There isn’t one. So if you’re not already working on making sure that your company’s global supply chain is sustainable, then you’re already well behind the curve. This isn’t a new concept anymore — to keep on top of your competition, sustainability is an absolute must.

Are you ready to make your supply chain lean, green and socially responsible? Read on to gain your competitive advantage.

What is a sustainable supply chain?

A sustainable supply chain is one whose processes do not have a negative impact on coming generations. Most commonly, sustainable supply chain management is associated with environmental topics like eliminating air and noise pollution, reducing waste, saving energy and more. However, this concept shouldn’t be confused with the idea of an environmentally-friendly green supply chain, which is directly focused on the environment and is about integrating environmentally-friendly processes into the supply chain. Sustainability includes considerations of the environment, but is also broader than that.

In fact, sustainability is generally considered to have three pillars:

  1. Economic: Economically sustainable practices are those that support long-term economic growth.
  2. Environmental: Sustainable practices with respect to the environment are those that won’t have a negative impact on the environment in the long run—e.g., those that don’t use excessive amounts of energy.
  3. Social: Socially sustainable actions are those promote the well-being of a community and culture.

A sustainable supply chain is one that considers economic, environmental and social aspects, and is comprised of processes that consider the future impact of its actions in these three different areas.

So while the environmental aspect of sustainability is important, it’s not the whole picture for your business. A truly sustainable supply chain is one that doesn’t have negative environmental, economic or social implications. A supply chain that uses modern slavery, for example, might still be considered a green supply chain — but it wouldn’t be considered a sustainable supply chain.

5 reasons why supply chain sustainability is beneficial

There are very real and very concrete business benefits related to a program promoting sustainability in the supply chain. Here we break down the top five that we see.

#1: Improving customer satisfaction.

Every company needs to keep its customers happy, and in today’s hyper-aware consumer culture, sustainability is a key element of that. Consider the food industry: 50 years ago, few people were aware of inhumane practices in processing animal products — and even fewer people cared. But now you can go to any grocery store and find beef boasting that it comes from grass-fed cows, and eggs that come from cage-free chickens. The food industry learned that its processes needed to be sustainable if they wanted to keep their customers happy — and other businesses are in the process of learning that very same lesson right now.

#2: Complying to regulations and standards.

Regulations concerning sustainability are on the rise, and it’s essential that supply chains comply with them. The Clean Water Act in the US, for example, regulates the release of pollutants into US waters. You better believe that complying with this regulation is an advantage to your organization — or you’re likely to see some legal consequences in your future.

#3: Avoiding reputational damage.

You know what’s even worse than a government fine because your company or one of your suppliers hasn’t complied with a specific regulation? The bad press that you’re going to get from it. Whoever said that any press is good press was definitely not thinking about getting in the news for violating sustainability expectations. Take, for example, when the Environmental Protection Agency (EPA) found that many VW cars being sold in the US had a “defeat device” in diesel engines that could detect when they were undergoing emissions tests and would change their performance accordingly to improve the results. After this scandal, VW lost the trust of consumers worldwide and recalled millions of cars, resulting in the company reporting its first quarterly loss in 15 years. And it wasn’t a small lost, either: $2.7 billion.

#4: Qualifying for certifications that give you credibility.

It’s one thing to say that your company is exercising sustainability — it’s quite another to prove it. There are an increasing number of organizations that now offer certifications to demonstrate that companies are working with sustainability in mind. The Green Business Bureau's (GBB) certification process, for example, awards points for each sustainable activity an organization completes, and also provides guidance around future initiatives that might help your business.

#5: It makes the world better.

Don’t get us wrong — sustainable supply chains do have all the business benefits we just listed. But let’s not overlook the most basic reason: Sustainable initiatives make the world better. And every business should want to have a part to play in something like that. 

What’s the biggest barrier to supply chain sustainability?

person tries to climb over barrier

There probably aren’t many companies these days who would say that they don’t want a sustainable supply chain. But if it were as easy as wanting a sustainable supply chain, then we wouldn’t even be having this conversation. The fact is, as good as a company’s intentions might be, there are a lot of barriers to actually enacting a sustainable supply chain.

The biggest, though, is almost certainly one that starts with procurement and logistics: that is, a lack of visibility into the sub-tiers of supply chains. Very few companies, especially ones with global operations or multiple business units, can fully map out their entire supply base — not just their direct suppliers, but their direct suppliers, their sub-suppliers, their sub-sub-suppliers…well, you get the point. A supply chain isn’t a chain at all — it’s a network. And it’s an expansive network that is difficult to map. But if you don’t have a full grasp of all the elements of that network, then how are you supposed to make sure they’re sustainable?

That’s why our #1 recommendation for overcoming sustainable supply chain issues is to gain global visibility into your sub-tier suppliers with a supply chain risk management program. Once you have that, you can monitor them to make sure they’re implementing the sustainable practices that your company requires — and work with them to improve those practices if they’re not meeting your standards.

7 steps to achieving supply chain sustainability

Sandra Beckwith, a supply chain journalist (and friend of riskmethods!), always has great things to say about supply chain management. One of our favorite pieces is her guidelines on the key elements of building a sustainable supply chain.
She breaks the how-to of a sustainable supply chain into seven steps:

  1. Get buy-in from stakeholders on your sustainable supply chain goals.
  2. Identify where you’re spending the most so you can identify where you need to make cuts.
  3. Focus on your company’s own needs in order to set realistic sustainable supply chain goals.
  4. Assign responsibility by establishing a steering committee or some other guiding body.
  5. Communicate with your employees to let them know that sustainability is a priority.
  6. Establish processes that guarantee the initiative is continued.
  7. Make sure that you have the infrastructure support you need for a sustainability initiative (such as technology).

Which technologies can help to make supply chains sustainable?

In this day of information overload, it’s basically impossible to keep on top of any problem without at least some digital assistance from supply chain technologies. What kind of sustainable supply chain innovation might help your company? As we mentioned earlier in this blog post, the #1 barrier when it comes to achieving a sustainable supply chain is probably the challenge of overcoming a lack of visibility into your sub-tiers. Therefore, our top recommendation for a technology that will assist with sustainability is one that solves that problem. Do you know what’s happening at your direct suppliers, sub-suppliers, sub-sub suppliers, and so on? The right technology can make sure that you do.

At riskmethods, we offer supply chain risk management technology, which can let you know about sustainability problems and their impact in your supply network — for example, by alerting you when a supplier violates environmental regulations. In cooperation with our partners, we also give you the ability to learn more about sustainability practices at your suppliers. Many of our customers have taken advantage of The riskmethods Solution to assist with sustainability — for example, specialty chemical company Clariant was able to assess the compliance and sustainability of 12,000 suppliers in just a few weeks. Their supply chain risk management program has won multiple awards, including a World Procurement 2019 award for risk management and sustainability.

To learn more about Clariant’s award-winning supply chain risk management program, including how they’ve worked sustainability initiatives into their program, fill out the form below to read our case study.

Sustainability and Compliance in Supply Chains: Best Practices from Clariant

Fill out form to download case study
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