Sustainability in The Supply chain: Breaking The Status Quo
As more and more companies embrace a more sustainable business model, the supply chain is an essential factor to consider. Despite good intentions, it’s not always easy to ensure that every cog in the chain is doing its part. We look at the benefits, the challenges faced, and how technology can be the solution to them all.
Sustainability in the Supply Chain
The next few years will be a perfect time for consumer companies looking to create new opportunities. According to McKinsey, some 1.8 billion people are expected to join as global consumers in 2025, a 75% increase over 2010.
Therefore, consumer spending will increase at a projected 5% per year over the next two decades. This is excellent news for investors but not so great for the environment if not done wisely.
Consumer companies need an affordable and reliable supply of energy and natural resources to manufacture and sell goods. However, one of the conditions that can hold back a company’s growth is poor sustainability performance.
Thus, to meet global climate targets and satisfy demand, consumer goods companies would have to significantly reduce their greenhouse gas emissions.
What is a Sustainable Supply Chain?
Over the past few years, we have seen more and more multinationals commit to working only with suppliers that meet social and environmental standards. Moreover, they are asking these first-tier suppliers to do the same for their own suppliers.
Therefore, a sustainable supply chain is a cascade of sustainable practices that flows through the network. Environmental standards include issues such as environmental degradation, deforestation, greenhouse gas emissions, pollution, and water safety.
The Value of Sustainability in the Supply Chain
Implementing a sustainable model in the supply chain benefits companies’ own interests but also society and the planet.
Some of the benefits that can be achieved with a sustainable supply chain are:
- Decreased energy costs by setting emissions targets that help them identify potential areas for improvement.
- Branding: consumers are increasingly concerned about the origin of the products they buy and how they are produced, so offering a sustainable model is much more attractive.
- Reputation: closely related to the previous point but more focused on investors. We find that the media have uncovered several scandals that have damaged companies in this field. As a result, interest in sustainable investment funds is growing.
- Corporate culture: also within the company, great importance is given to belonging to a company with sustainable values, which can be a key point for recruiting and retaining talent.
- Regulatory compliance: governments are also demanding a more outstanding commitment to the environment, which can lead to sanctions if they are not complied with.
- Improving business partnerships and creating new win-win business opportunities.
Challenges of a Sustainable Supply Chain
The idea of creating a sustainable supply chain is admirable and necessary but challenging to achieve.
Many of the multinationals that have committed to it have faced scandals caused by non-compliant suppliers. Big names such as Apple, Dell, and Nike are just some of the examples of companies that have been splashed for sourcing products from companies that forced their employees to work in dangerous conditions.
And although the worst practices are carried out by lower-tier suppliers, the exposure of large companies to financial, social, and environmental risks is increasing.
Therefore, the significant challenges facing companies in achieving a sustainable supply chain are:
- Lack of supply network visibility, especially for companies that often work with multi-tier suppliers.
- Suppliers and subcontractors lose the transparency of operations beyond the tier next to their own.
- Multinationals often place orders that exceed suppliers’ capacity or impose unrealistic deadlines, leading the latter to demand abusive work shifts.
Examples of Supply Chain Sustainability
It is possible to start changing our business model towards a more sustainable model. According to Forbes, some of the most important are:
- Integrate sustainable data into business processes and networks: when initial targets are set, performance can be measured, and data obtained throughout the chain can be used to refine operations. Having this sustainability data available will also enable it to be shared across the network to ensure that targets are met.
- Manage carbon exposure: After the initial data capture, emissions must be accounted for and managed across the network. As mentioned above, the lack of visibility in the chain is one of the significant problems, but technology provides this transparency so that action can be taken as soon as possible.
- Going circular: technology can help companies to reduce, reuse, recycle and use recovered materials to minimize waste and adopt a circular business model. To achieve this, products should be designed with end-of-life in mind.
- Putting people first: when implementing such strategies, the involvement and support of the workforce must be ensured: from respecting the workforce and creating a diverse and safe space to providing professional development opportunities for talent throughout the supply chain.
Consulting Services for a Sustainable Supply Chain
We could say that it is a must for companies to make sustainability a central element of their overall business strategy. To do so, they need to examine the strengths and weaknesses of their network.
Thus, having a partner to accompany you on this path can be the key to all questions. Technology, as on so many occasions, is the solution, and at Plain Concepts, we know how to put your business at the forefront of sustainability at any point of the supply chain.
Contact our experts, and we will study your case.