What is sustainability in the supply chain?
The benefits of taking the wider impact of your company on society and the environment into consideration are clear. Science is uncovering that human-driven climate change is a threat to our planet’s future, but we have the chance to slow or stop this through behavior change.
As a result, public demand for more eco-friendly practices across the board is growing every year. Let’s dive deeper into the three elements of a sustainable supply chain.
The planet and sustainability
If you have a complex supply chain, harnessing sustainability can be more difficult, but there are still best practices to improve it. By establishing a sustainability policy with achievable, measurable goals, you can better address environmental concerns.
Consider the following:
- Can you ask suppliers to use recycled packaging or switch to a company that does?
- Are you working with manufacturers that pay attention to emissions and environmental impact?
- What is your carbon footprint? What are your suppliers’ carbon footprints? Can these be reduced?
- How much waste do you and your suppliers generate? Is it possible to reduce this?
Profit and sustainability
While moving toward sustainable operations is commendable, profitability is still important for businesses. There’s no denying that switching to suppliers that use recycled packaging can cost money, but you can often recuperate costs elsewhere.
Automation and digital transformation are two of the best ways to cut costs while enhancing sustainability. Using less paper reduces operational costs significantly and protects the environment. What’s more, diversification of your supply chain can reduce costs, and certain environmental practices come along with attractive tax breaks.
People and sustainability
Moving toward a more socially sustainable company is multifaceted and complex but can have a huge impact on your reputation and profitability. Think about employee experience at your company in addition to your suppliers’ businesses. Consider if:
- Your vendors adhere to health and safety and fair labor standards
- Suppliers take steps not to pollute the local environment
- You’re working with a diverse set of suppliers who reflect your commitment to inclusivity
If you can show that you and your supply chain are equitable and socially progressive, it can be easier to attract high-quality workers and savvy consumers. With millennials and Gen Z placing a high value on social change and accountability, the urgency of moving toward sustainable practices is only set to increase.
Top benefits of having a sustainable supply chain
A sustainable supply chain is excellent for business for a number of reasons. From the obvious benefits of reducing environmental impact to long-term value creation, these are some of the main benefits your company can reap from making your supply chain sustainable.
Better for the environment
Companies in the past were turned off by moving toward sustainability because of the perceived costs. However, despite the fact some practices require a higher spend, many actually cut costs. One of the most pertinent elements that reduces costs while saving the planet is reducing waste.
In the past, many operators viewed waste as an unavoidable aspect of running a business. Take a restaurant operation. Most hospitality businesses didn’t think twice about throwing out uneaten food until relatively recently. These days, it’s possible to partner with a biological waste company and recycle food into fuel.
Other opportunities include:
- Switching to suppliers that are closer to your business to reduce your carbon footprint
- Using recycled and recyclable packaging
- Offering employees incentives to cycle or walk to work
- Using eco-friendly machinery and working with suppliers that use this type of equipment
Long-term value creation
Reducing your carbon footprint and increasing operational efficiency come with a clear bonus for sustainable companies: cost reduction. While switching to eco-friendly machinery and a supplier that does the same might have an upfront cost, it can save money long-term. Suppliers that spend less on fuel and logistics can pass savings on to you.
What’s more, there might be cost savings available for businesses that recycle waste instead of throwing it into a landfill. And with sustainability legislation coming into play more and more, you’ll avoid fines for noncompliance by updating your practices to be more sustainable.
Finally, savings occur simply by having a sustainability policy, being more aware of where every dollar is spent and only using materials you actually need.
Enhanced reputation
As mentioned previously, upcoming generations place a high value on social and environmental accountability. By being transparent about your efforts to move toward a sustainable supply chain, you’re protecting your reputation.
Companies that focus on being socially, financially and environmentally sustainable are seen as more desirable and attractive. And with social media and digital communications playing such a key role in society, a brand’s reputation is more fragile and susceptible to damage than ever.
Employee retention
When your business has a reputation for sustainability, you can improve your employees’ experience of working for you. When a workforce feels like it’s contributing to the betterment of the planet, it can make efforts more meaningful and enjoyable. Employees who find their work meaningful are more likely to be motivated, loyal and productive.
Advertising your company as having a sustainable supply chain can also make working for you more attractive to prospective employees.
Attracting and retaining consumers
Sustainability in the supply chain isn’t only appealing to the workforce but also to consumers. Consumers increasingly want to make sure they spend money with companies aligned with their belief system. Many look into supply chains to check factors such as carbon footprint and whether supply chains are ethical and sustainable.
New avenues for innovation
Working closely with your suppliers and collaborating over ways to improve sustainability can inspire new avenues for innovation. Sharing your corporate mission and vision with your suppliers can help you clarify your goals and make better decisions when it comes to processes, services and products.
Potential for new partnerships
Putting efforts into sustainable supply chain management can open doors for new corporate partnerships and opportunities. You may appeal more to progressive, sustainable suppliers and clients, in addition to other organizations.
Other companies that prioritize sustainability may be more attracted to your operations, and there’s a potential they’ll approach you for partnerships. On the other side of the coin, you can reach out to ambitious, future-focused companies for the same reason. Sustainability is a way of standing out ahead of your competitors to consumers, partners, employees and suppliers.
Risk mitigation across your supply chain
By implementing a supply chain code of conduct , you’ll be more savvy about mitigating risks. You’ll carry out risk assessments with a different approach, identifying risks and scenarios that could harm the environmental, social and financial health of your company. By doing so, you’ll find the majority of potential risks that could harm your company’s growth are identified and controlled.
With such focus on compliance, reputation, finances, health and safety and the planet, you can mitigate risks holistically.
How to approach making your supply chain sustainable
It’s clear that striving toward a sustainable supply chain can benefit all businesses at various levels. When you begin, consider following this process:
- Make a compelling case to your stakeholders and get them on board.
- Identify your objectives and establish goals with internal KPIs, a code of conduct and a streamlined mission.
- Determine the breadth and scope of your project, and try to include every supplier instead of a select few.
- Evaluate your current suppliers and ask them if they’re prepared to make changes with you where relevant.
- Consider risk management carefully and establish external KPIs to manage, monitor and measure sustainability across your entire supply chain.
The advantages of implementing sustainability in the supply chain are numerous and can enhance your company’s reputation, profitability and attractiveness to potential employees. Take your time to formulate the necessary processes and procedures and choose partners that add the most value to your business. The results will enhance recruitment, encourage customer and employee loyalty and inspire excellent relationships with future-focused partners.
