Why Sustainability Is Important to the Supply Chain Industry

Why Sustainability Is Important to the Supply Chain Industry Featured Image

Photo by Grant Ritchie on Unsplash

The business community has recently commissioned companies to be more environmentally responsible. As sustainable operations become increasingly appealing to corporations, the business case for this is on the rise. Supply networks have become essential for many companies because they use significant resources.

What is Supply Chain Sustainability?

Supply chain sustainability is the ability of a company to manage its resources to meet current needs while protecting future generations’ capacity to meet demands. The concept of supply chain sustainability encompasses environmental, social, and economic responsibility. 

A sustainable supply chain begins with understanding the environmental impacts of each step in the supply chain and taking measures to mitigate those consequences. For example, a company might use recycled materials or renewable energy sources to power its factories. 

Social responsibility is also essential in a sustainable supply chain. Companies should ensure that their suppliers and subcontractors comply with labor standards and treat their workers fairly. Workers in developing countries often face harsh conditions and poor wages, so companies must ensure their suppliers are not taking advantage of them.

What are the Benefits of a Sustainable Supply Chain? 

Supply chain sustainability is the integration of environmental, social, and economic considerations into the management of a supply chain to achieve long-term sustainable value for all stakeholders. There are many benefits to implementing a sustainable supply chain. Some of these benefits include:

Reduced environmental impact.

According to findings published in the journal “Journal of Cleaner Production,” supply chain sustainability initiatives have reduced environmental impact. Companies that follow supply chain sustainability initiatives could reduce their carbon emissions by an average of 14%. These companies could also reduce their water usage by 9% and their waste output by 5%.

Business Branding.

 Sustainable practices make companies look good to consumers. According to a Cone Communications study, nine out of ten people would be more likely to purchase a product if they were aware that the company is environmentally friendly. Furthermore, sustainable practices can help businesses attract new customers and keep existing customers loyal. 

Improved efficiency and cost savings. 

Sustainable practices frequently result in increased efficiency and cost savings due to reduced waste and increased productivity.

It improves the sustainability of a supply chain through innovation.

Working closely with your suppliers will strengthen their understanding of your company’s goals, allowing them to suggest product improvements that meet your unique requirements effectively.

Talent attraction and retention 

A study by MIT found that companies with sustainable supply chains have employee retention rates that are 12% higher and talent attraction rates that are 17% higher than those without such practices. People prefer to work for a company that values the environment.

How to Get Started on Creating a Sustainable Supply Chain 

Supply chains link suppliers, manufacturers, logistics solution providers, and customers in an ecosystem that would not function without close collaboration. Leaders must adopt a collaborative mindset in today’s environment where change is constant. They cultivate a culture of collaboration within their teams as well as within the supply chain ecosystem in which they are active.

During the GSSC Summit, Ann Tracy, Chief Sustainability Officer at Colgate-Palmolive, spoke about the importance of collaboration, stating that we need to create an ecosystem with the same goal in sustainability, beginning with the company’s own employees and then reaching out to partners who can help realize the goals.

“What we need to do is go beyond our own supply chain and go to our suppliers. I think the supply chain plays a huge role, but no company can do it alone. We are in an era where companies are taking action and working together to tackle some of these big issues. So they have to work together. You start with your employees and then go outside, and then go beyond that. Look for partners that are important in this journey, build the ecosystem, and it’ll start to happen.” 

As the business world continues to evolve and change, a collaborative mindset becomes a strategic asset that enables collective intelligence and benefits individuals, companies, the industry, and, ultimately, the planet.

It is critical to evaluate the current state of the supply chain and identify areas for improvement. This might involve conducting a life cycle assessment to understand the full environmental impact of the supply chain or working with suppliers to source more sustainable materials. Once potential improvements have been identified, developing a plan for implementing change is important. This might involve setting sustainability targets and creating incentives for employees or suppliers who help to meet those targets. 

In her statement at the GSSC Summit, Sonal Pandya Dalal from FSA mentioned how increased transparency is essential for improving sustainability performance. This sentiment was also published in Alcott’s Global Q2 2022 Report, she said:

 “One of the major trends is really about increased transparency, which means increased accountability. If you are reporting and your peers are reporting, it allows you to benchmark how you’re doing against each other. And what a great way to create a ‘Race to the Top’ to incentivize competition to improve sustainability performance.”

A sustainable supply chain considers the environmental impact of each stage of production, from raw materials to packaging and shipping. Creating a sustainable supply chain can be challenging, but businesses can start with proper planning and careful implementation.

Monitoring progress and making necessary adjustments to the plan to ensure that the business is on track to achieve its sustainability goals is crucial for the success of the project. By taking these steps, companies can start creating a sustainable supply chain that will help protect the environment and create long-term value.

The Challenges of Supply Chain Sustainability

Cost 

The primary impediment to sustainable supply chains is cost, with smaller businesses struggling to finance the initial costs of making a supply chain more sustainable. This makes it difficult for some companies to justify the additional cost or effort.

Other companies discover that there aren’t any sustainable options or that they’ve inherited supply chains from acquisitions that are difficult to transition to sustainable practices due to complexity or organizational structure. 

Finding a balance between environmental responsibility and economic viability. –

 Often, pursuing one goal comes at the expense of the other. For example, forcing companies to choose between reducing their environmental impact or continuing to produce goods at the same rate could lead to increased emissions and pollution.

The need for transparency throughout the supply chain. 

Stakeholders must identify where goods and materials come from, how they were produced, and who was involved in the process. Without this level of transparency, tracking down problems and holding companies accountable for their actions can be difficult.

Ensuring the adoption of sustainable practices throughout the entire supply chain.

The challenge for sustainability practitioners is to ensure the adaptation of sustainable practices throughout the supply chain. This challenge gets more complicated because many companies are unwilling to expand their sustainability initiatives beyond their operations. Most companies see sustainability as a cost rather than an opportunity. 

How is Supply Chain Sustainability in 2022?

Supply chain disruptions are considered among the most significant risks to present-day business operations, even greater than such concerns as the coronavirus pandemic and the shortage of skilled workers. From rising material costs and logistical needs to constant delays and shortages, it’s becoming increasingly difficult for companies to meet, let alone exceed, consumer demand while remaining profitable.

Supply chains are seeing less reliability as organizations struggle to balance meeting needs with rising demand. One thing is certain: supply chain technology will continue to encounter disruptions in 2022 as executives prioritize digital transformation.

According to Insider, over 70 countries and 350 corporations have committed to reducing greenhouse gas emissions to near zero by 2040. Furthermore, entire industries have pledged to go completely electric in their products by the next decade. A major challenge, however, is the lack of global standards in place to accredit climate goals. As discussions about greener products and greener production continue, it is critical to examine all aspects of product development: sourcing, energy use, and reskilling talent are all critical components of cleaner production. A few questions remain: Are we moving at a speed that allows us to meet these targets? Will this be timely?

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