In a survey performed by The Sustainability Consortium (TSC), less than one-fifth of respondents reported that they had a comprehensive view of the sustainability of their business’s supply chain. Without knowing what a sustainable supply chain looks like, it can be tricky for business owners to get full visibility into the true environmental impact of their work.
So, what are sustainable supply chains, why do they matter, and how can you improve your business’s supply chain practices?
What is a Sustainable Supply Chain?
Let me first break down what a simple supply chain is. At its core, a supply chain is a system of processes that it takes for a company to create a product or service from start to finish. Whether we’re talking about the supply chain for manufacturing shoes or soda, these supply chains form a complex network of people, resources, and actions.
As a business owner, there’s a good chance that you typically look towards supply chains that save you money. However, this perspective can overlook the importance of choosing to work with environmentally-friendly suppliers and materials.
If your business has a sustainable supply chain, it means that you have evaluated and specifically chosen vendors which uphold sustainable practices. This has a powerful Environmental, Social, and Governance (ESG) advantage for any organization. In recent years, more and more companies have been choosing to move toward sustainable supply chains. Not only are they better for the planet, but they are more profitable in the long term.
Peter Senge, a faculty member at the MIT Sloan School of Management, notes that many businesses focus too strongly on short-term financial growth. This can mean choosing to work with suppliers that engage in environmentally-harmful practices like pollution and improper waste disposal. For Senge, “most companies act as if sustainability is about being less bad,” instead of truly aiming to be good.
In an interview with the Harvard Business Review, Senge described how Coca-Cola wanted to cut the amount of water needed to manufacture a liter of Coke. Their supply chain was ignoring the hundreds of liters of water it required to grow the sugar needed to manufacture the soft drink.
When Coca-Cola chose to partner with the World Wildlife Fund (WWF), they discovered all of the environmental implications that went into making a liter of Coke. The WWF helped Coca-Cola look into drip- and flood-irrigated sugarcane, which ultimately helped the company reduce its water usage responsibly.
What is the Current State of Supply Chains?
While sustainable supply chains are vital for businesses and the environment alike, many companies have trouble enacting a truly sustainable supply chain.
According to McKinsey, a typical B2C supply chain causes significantly more negative environmental impact than that same company’s own day-to-day operations. Conventional supply chains account for over 80 percent of a company’s greenhouse gas emissions, and 90 percent of their impact on land, water, air, and geological resources. At the same time, many companies don’t make an effort to reduce these emissions and decrease their impact on the environment. Only 25 percent of companies that report their greenhouse gas emissions to say that they’re working with suppliers along their supply chain to reduce emissions.
One major contributor to this issue is the fact that many big companies don’t work directly with all members of their supply chain. It’s common for suppliers to subcontract manufacturing work or materials out to other organizations. This makes more difficult, as businesses need to be aware of what these subcontracted organizations do, and if they’re committed to environmentally-friendly practices.
Sustainable Supply Chain Management: How to Revamp Your Supply Chain
Whether you’re a small local business or a large corporation, there’s always room for sustainable supply chain management improvements. If you’re looking to move to a more sustainable supply chain, consider these steps:
- Create a clear map of every single supplier in your chain (including subcontractors)
- Evaluate every supplier and take note of their energy use, environmental impact, waste disposal practices, and treatment of employees
- Develop a comprehensive policy for your business that delineates the standards that suppliers must meet in order to work with your company
- Communicate these standards to suppliers and determine if there are any current suppliers that you should cut ties with
- Research new suppliers that follow your sustainability guidelines
- Consistently update your supply chain map and regularly check in on supplier performance
Supply Chain Resources
Sustainable supply chain management can be complex, but there are plenty of resources compiled by reputable organizations that can help you along.
- The U.N. Global Compact put together a comprehensive guide called Supply Chain Sustainability: A Practical Guide for Continuous Improvement. This is a must-read for any company looking to foster a sustainable supply chain. It includes information on how to get started, establish expectations, engage with suppliers, create goals, and track performance.
- The World Wildlife Fund has a Supply Risk Analysis Tool that helps businesses identify the potential environmental impact their supply chain might have, and other risk factors.
- The Sustainability Consortium (TSC) offers TSC Toolkits that help your company perform self-assessments, build out supply chain diagrams, and enact supplier training.
- The Sustainability Accounting Standards Board (SASB) helps companies follow their standards and report to investors on why sustainability is a smart business decision. Their website has a breakdown of these standards, alongside other helpful tools.
Nick McCulloch is the Senior Sustainability Manager at Rubicon. To stay ahead of Rubicon’s announcements of new partnerships and collaborations around the world, be sure to follow us on LinkedIn, Facebook, and Twitter, or contact us today.