Supply-chain sustainability is a business issue affecting an organisation’s supply chain or logistics network in terms of environmental, risk, and waste costs.
“Companies tend to focus on their top-tier suppliers, but the real risks come lower down. “Verónica H. Villena, Dennis A. Gioia
As sustainability awareness gains traction, a trend has developed that sees companies imposing sustainability standards on their suppliers which get handed down the supply chain and serve to improve the sustainability of all participants in the process. It can be thought of as a cascading waterfall of practices that should in theory serve to make the whole supply network more sustainable.
The reality looks quite different. The number of scandals in recent years due to suppliers not adhering to their sustainability standards is vast and the problem already exists with tier one suppliers, offering a glimpse at how bad it has to be down the line.
The major Issues
1. Scale and complexity of supply chains
As supply chains become increasingly more complex, the challenge to keep supply chains transparent and be able to definitively quantify the sustainability impact of goods and services is becoming evident. Companies typically have good knowledge about their tier one suppliers and their sustainability profile, but data beyond this tier is generally lacking. The vast scale of supply chains nowadays poses a real challenge in dealing with the amounts of data and staying on top of the multitude of parties within it.
2. Need for affordable and reliable resources
The increasing demand for consumer goods and services goes hand in hand with an increase in demand for affordable, reliable and ideally sustainable resources. Governmental bodies, businesses and consumers call for improvements in the sustainability measures and as such, sustainable resources are in high demand.
3. Conform with emission standards
The greenhouse gas emission standards set out by the Paris agreements and similar agreements throughout the world force companies into rethinking their supply chain and evaluating the impact of their goods and services along the entirety of their value chain. Typically, a large portion of the environmental impact is created by precursors to the products a company sells, and so visibility along the journey from raw material to the actual product plays an increasingly important role.
Sustainability challenges are numerous, grave and complex but there are ways that businesses can manage their impact and reduce risks considerably. Much of the risks associated with sustainability boil down to the intransparent nature of supplier networks. There are however steps that any business can take to stay at the forefront of sustainable practices.
The 6 steps to sustainable supply chains
Map out the supply chain
The singular most important step is to map out your supply chain in order to achieve visibility into your supplier network, going beyond your tier one suppliers. This broad overview of your supply chain allows you to see environmental, economic and social factors that might impact your supply chain, and allows for a transparent calculation of risk along each step of the way. A holistic view should encompass not only the raw materials and the product along each supply chain tier, but also the packaging, byproducts and even the product disposal.
2. Evaluate your suppliers
Once you have mapped out your supply chain and know every link in the chain, you have to evaluate the suppliers beyond your tier one level. On the one hand your goal is to gain a deeper understanding of which factors influence your suppliers, on the other hand you can set sustainability standards which have to be met by every supplier associated with your business. Supplier audits and code of conduct are two well-established tools to evaluate and set supplier practices.
3. Monitor your suppliers
Sustainability issues might arise at any given time at any supplier so it is vital that all suppliers in your company’s ecosystem are monitored in order to stay up to date with current developments and be able to react in case of a sustainability risk. The quicker you learn about an issue the faster you can react and the more time you will have to resolve the problem or find an alternative, so monitoring solutions have to be able to pick up any and all events in real-time. Solutions such as Prewave can monitor suppliers in nearly all languages and across all channels in real-time and can thus provide the necessary competitive edge.
4. Implement an organisational culture of sustainability
A successful sustainability strategy implementation requires the participation of all employees, suppliers and stakeholders. A cultural shift is necessary to align the goals and perspectives within an organization. Education and training can act as a way to instill this shift and align everyone with the mission.
5. Collaborate within your industry or share of suppliers
While the leverage of smaller companies over their suppliers might be too small to effectively foster change, companies often share the same supplier with other companies, and cooperation with them can bring about change in the suppliers practices. The bargaining power of a collective of customers can be instrumental to bring about change and help all involved realize their sustainability goals.
6. Lay out a sustainability framework to measure and track
The key to a sustainable strategy is concrete sustainability goals, which should be set for your own organization, but also for suppliers down the line. Any actions you choose to implement should be tracked and measured in order to quantify the impact of all actions and identify trends and opportunities. It is the best practice to define goals that are measurable, quantifiable and viable to reach. Sustainability goals should be expressed as a number: ‘To reduce the environmental impact of our manufacturing plant A’ is not as readily measurable and achievable as to ‘Reduce the CO2 emissions of our manufacturing plant A by reducing the mileage on components that are delivered to the plant by 50%’.
The bottom line
Approaches to sustainability are as varied as the issues are itself. No single action will solve all the problems and our economy as a whole still has a long way to go towards a truly sustainable future.
What is clear however, is that visibility along the supply chain is a concept that finds its way into almost all sustainability solutions. Prewave is perfectly suited to make a big leap forward in terms of sustainability evaluation, monitoring and visibility. We already work with a vast network of companies to improve their supply chain resilience, and we would be happy to show you how you can strengthen your supply chain and reach your sustainability goals.