COP 26: Supply Chain Sustainability

COP 26: Supply Chain Sustainability

What is supply chain sustainability?

In recent years, supply chain sustainability has become an important corporate goal as organisations seek to reduce the negative environmental impact of their overall operations. The term refers to the extent to which a company considers the environmental, as well as human impact, of their products’ journey from development to manufacturing to delivery. This applies to all elements of the supply chain from raw materials sourcing to how the product is made, stored, delivered, and transported from one stage to the next. A sustainable supply chain minimises the harm caused by energy, waste, and water consumption. It should also create a positive impact for the people in and around a company’s operations. Concerns over sustainability are considered alongside to traditional concerns around revenue and profit.

Why is supply chain sustainability important?

For most companies, their supply chain is responsible for the largest segment of their environmental impact. According to McKinsey & Company, the supply chain accounts for more than 90% of most consumer goods companies’ environmental impact. Inevitably, the operations involved in a goods supply chain, such as mass-production and long-distance transportation, often involve energy-intensive processes. Therefore, organizations that want to reduce their carbon footprint will most sensibly confront the problems in their supply chain. Making changes to their supply chain is often the way that companies can make the biggest difference to their environmental impact.

The complexity of supplier relationships and transporting goods across borders crossings are some of the biggest obstacles to creating a sustainable supply chain. These factors can make visibility of issues like labour conditions, used to manufacture products, in another country difficult to reliably discern. A commitment to supply chain sustainability is not just important from an operations standpoint, but also to encourage transparency. Visibly practicing eco-awareness can improve your reputation and further legitimizes your organization in the eyes of partners and consumers. According to Nielsen, half of consumers surveyed said they would change purchasing habits to reduce their impact on the environment.

A sustainable supply chain can also improve productivity and efficiency, leading to improved performance while costing less money. By investing in sustainable techniques and resources in your operations, you increase the efficiency of buildings, machinery, and vehicles with a significant cost saving.

For example, when Sainsbury’s partnered with vets to support its dairy farmers, they were able to more effectively find and deal with common health problems in their cows. This led to their 55,000 cows producing 140 litres of milk more than the national average. Due to the investment in their supply chain, Sainsbury’s required fewer cows to fulfil demand.

How do we make supply chains more sustainable?

  1. Identify critical issues and areas of improvement within the supply chain. The environmental impact of a supply chain is the sum of the entire production and delivery process. Therefore, companies should understand where the most emissions and environmental risks are being created.
  2. Utilise available supply chain management and measurement tools to track your company’s progress and find its weaknesses. Organizations such as The Sustainability Consortium, World Wildlife Fund, and The Sustainability Accounting Standards Board have created guidelines and key performance indicators that can help businesses achieve their environmental goals. This information can come from a variety of sources. In 2018, the U.S. Department of Labour listed 148 types of goods from 76 countries produced by child labour or forced labour in 2018 to help American businesses eliminate child labour from their supply chains.
  3. Make sure your supply chain mission is in line with global sustainability goals. Companies should model their efforts around scientific recommendations to achieve the greatest impact to the global sustainability agenda as the countries move towards carbon neutrality.
  4. Choose and collaborate with other sustainable suppliers. The practice of collaboration and combination of resources between manufacturers can help organizations reduce cost, environmental risk, and waste. For example, by collaborating and communicating over modes of delivery, companies can reduce pollution by ensuring half-empty vehicles are not sent out in the same direction.
  5. Maintain accountability throughout the process to ensure liability. This is achievable through customer-facing goals, impact tracking software, sustainability programs and teams, progress reports, and routine audits. The Carbon Disclosure Project found in 2019 that 65% of its corporate members used environmental metrics to inform supplier management and hold their business partners accountable to their sustainability goals.
  6. Purchase carbon offsets. Organizations that have less control over their supply chain or want to begin making an immediate impact can also invest in carbon offsets. This will directly negate an organization’s carbon emissions through a positive environmental initiative.
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