As supply chains rebuild after the past few years of pandemics, global shortages, and market disruptions, companies are looking for ways to future-proof this integral logistics function.
Sustainability, in particular, has become a top priority in modern supply chains. Supply chain sustainability refers to a company’s efforts in managing the environmental and societal impacts of its operations, as it moves products from raw materials to finished goods.
Supply chains in any industry are complex systems that involve multiple components and teams working in collaboration. By looking for opportunities to promote sustainability initiatives at every step of the chain, companies can do their part in minimizing environmental harm as well as optimizing their own operations.
Why businesses are focusing on sustainability
The push for sustainability programs has gained traction as issues like climate change, environmental pollution, and labor and human rights move to the forefront of global consciousness.
Government agencies in various countries are proposing new climate legislation. Customers are increasingly selective about how and where products are made. And businesses are prioritizing initiatives to become more aware and responsible for their impact.
Companies today recognize the need for a significant change in how they operate. Global supply chains can potentially be major drivers for sustainability strategy and help companies adapt to a fast-changing and uncertain environment.
What is a sustainable supply chain?
A sustainable supply chain embeds environmental, ethical, and societal responsibilities across the product journey.
At every step of the process—from raw material sourcing to production to final order delivery—a sustainable supply chain has a positive impact on individuals and communities. It also promotes minimal environmental harm, focusing on energy and water consumption, waste management, and carbon emissions.
The definition of a sustainable supply chain is broad on purpose, encompassing all types of businesses and enabling reinterpretation as the standards of sustainability will inevitably change.
4 Benefits of a sustainable supply chain
Today, we see an increasing number of businesses moving toward sustainable supply chains.
Here are the main benefits a sustainable supply chain offers beyond its positive environmental and societal impact.
Meets regulatory compliance
While exact regulations depend on the company’s location, most countries have started pushing for additional environmental, social and governance (ESG) requirements.
The Securities and Exchange Commission (SEC), for example, is in talks to “require registrants to include certain climate-related disclosures in their registration statements and periodic reports.”
The European Union’s Financial Reporting Advisory Group (EUFRAG) is likewise implementing mandatory sustainability reports across hundreds of data points. By taking the initiative to establish a sustainable supply chain, companies can get ahead of inevitable regulatory compliance.
Lowers operating costs
A major business benefit of supply chain sustainability is lowered costs and increased profitability. Sustainable supply chain management is more streamlined in operations and selective with third-party partners, eliminating unnecessary costs.
The efficient use of energy, for example, can make a significant difference in monthly expenses. Recycling and reducing packaging materials also lead to more sustainable operations and a lower overall cost.
Improves brand reputation
An immediate benefit of supply chain sustainability efforts is a boost in reputation and goodwill. Companies that take the responsibility to implement sustainable business practices also end up gaining greater brand affinity, customer loyalty, and market share.
In addition, sustainability issues are a growing interest for many of today’s investors and stakeholders, who see sustainable companies as more resilient in the long run.
Boosts employee satisfaction
Most employees are happier working for a company that champions a greater cause and benefits from more considered, environmentally friendly working conditions.
In a recent Ernst & Young survey, 37% of companies that invested in sustainable supply chains saw an improvement in the quality of employee life, 31% experienced a decrease in employee turnover, and another 31% noticed enhanced efficiency and productivity.
4 Ways to start making your supply chain sustainable
While every company’s supply chain operates differently, there are a few basic steps that can get you started on creating a sustainable supply chain.
Identify areas of improvement
Start by evaluating the social and environmental impact of your end-to-end supply chain. This includes every resource and supplier used to deliver finished products to customer.
Reduce gas and oil consumption
The first place to focus for supply chain sustainability is transportation. Efficient route planning and shipment consolidation can easily reduce excess miles. Not only does this reduce gas and oil consumption and CO2 and greenhouse gas emissions, but it can also lessen drivers’ total hours on the road. Logistics and route data can be tracked using order management software and continuously optimized for greater sustainability.
Adopt a circular economy in your supply chain
Circular supply chain practices sit at the core of most sustainable supply chains. Supply chains by nature use a large amount of materials, including packaging, replacement parts, and machine components. This creates a lot of discarded waste that ends up in landfills.
Circular supply chains aim to minimize the one-time use of materials and natural resources. By going beyond traditional business cases and finding ways to recycle and repurpose materials, companies can balance their input and output and effectively reduce their carbon footprint.
Coordinate with your third parties
Supply chains typically extend beyond internal teams to include third-party providers, distributors, or last-mile fulfillment centers. All these components must work together to complete a more sustainable supply chain.
Communicate your sustainability goals and code of conduct, as well as your expectations and traceability methods for determining compliance.
Final thoughts
Supply chains play a major role in the transition to greater sustainability performance. Aside from being one of the most integrated areas of operations, working closely with accounting, procurement, and other functions, the supply chain significantly impacts a company’s bottom line.
By taking control of environmental and social responsibilities, companies with a sustainable supply chain can see better cost savings, improve employee satisfaction, and attract more customers and sales.
This article originally appeared on QuickBooks and was syndicated by MediaFeed.org.
Featured Image Credit: xiaoke chen/istockphoto.
