July 15, 2022 | Supply Chain Strategy
Sustainable practices in the supply chain have today become a key component of corporate sustainability goals.
Supply chain sustainability involves the management of environmental, social, and economic impacts of the delivery of goods and services to the market. It also requires compliance with regulations that support sustainable business operations.
Integrating supply chain sustainability into their operations enjoins firms to engage with all their stakeholders, right down to the raw material producers.
Supply chains are vital links connecting a business’s inputs to its outputs. Typically, supply chains were focused on managing costs, timely deliveries, and reducing transportation times.
Of late, increased awareness among customers — of the environmental, economic, and social costs of supply chains has compelled more and more businesses to focus on building supply chain sustainability. Also, businesses now understand that they need to extend their attention to the business operations of their suppliers and customers.
Environmental: This usually gets the most attention. Businesses focus on minimizing their carbon footprint, packaging waste, water usage, etc. Besides having a positive environmental impact, these practices also produce a positive financial impact. For example, recently, Walmart advocated less packaging and recycling packaging material. Reducing/re-using packaging had a positive environmental impact, helped lower costs, and delivered a positive financial impact.
Social: The social aspect of sustainability requires a business to elicit the support and approval of its employees, suppliers, customers, other stakeholders, and the larger society that it operates in. Essentially, this promotes fair treatment of all the people who help run the supply chain and pushes the business towards being a responsible community member - locally and globally.
Is the business’s supply chain being staffed with child labor? Do employees have safe working conditions, and do they receive fair wages? These are some of the questions that the social pillar forces businesses to contend with.
Governance: The governance aspect includes compliance, good corporate governance, and the alignment of the interests of the business’s boards of directors with the interests of the shareholders, customers, and the community. Good governance includes adhering to transparent accounting methods, avoiding conflicts of interest in choosing board members, etc.
A business implements sustainable practices by minimizing the consumption of limited resources or by adopting alternative resources that have a lesser adverse impact on the environment.
The three pillars of sustainable supply chain help businesses organize disparate business practices under one common goal that ultimately benefits the environment and the community.
The three pillars of sustainability demand accountability across the value chain — from the business, the suppliers right up to the retailers. If sustainable supply chains become the determining factor providing the competitive edge, it could reconfigure many global supply chains primarily driven by low-cost production. For that reconfiguration to occur, supply chain sustainability will have to further evolve from just being a trend to being a true commitment.