Throughout the world, sustainability is becoming increasingly crucial for corporations across all industries to address and integrate into their business. This is evidenced by the 90 percent of executives that agreed sustainability was important in a recent study conducted by MIT Sloan Management Review and The Boston Consulting Group. However, as many companies strive to operate in a more sustainable manner, they quickly discover that the majority of their environmental impacts come from a surprising source: the supply chain.
Research shows that the supply chain contains on average, 5.5 times as many greenhouse gas emissions as its in-house operations counterparts. The sad reality is that less than one-fifth of companies have a comprehensive view of their supply chains’ sustainability performance. And while there isn’t a “one-size-fits-all” approach toward integrating sustainability into the supply chain, consciously making an effort to do so is necessary for the health of a business as well as its profit, people, and the planet. In this blog post, we explore several actions stakeholders can prioritize to move toward a more sustainable supply chain while reaping the benefits that come along with doing so.
The Business Case for Sustainable Supply Chains
Most businesses, in recent years, have come to understand that climate change poses one of the largest risks to supply chains, as it slows economic growth, disrupts operations, reduces demands for goods and services, and changes resource availability and costs. However, surveys show that many managers do very little to address and mitigate the impact of supply chain disruptions due to climate change, which doesn’t do corporate leaders any favors. According to McKinsey & Company, “The typical consumer company’s supply chain creates far greater social and environmental costs than its own operations, accounting for more than 80 percent of greenhouse-gas emissions and more than 90 percent of the impact on air, land, water, biodiversity, and geological resources.” The good news is, building a more sustainable supply chain can increase efficiency, reduce costs, and generate new business opportunities, while greatly reducing your environmental impact. Don’t just take our word for it: Procter and Gamble reported cost savings of more than $1 billion while cutting their environmental impact in half. Below, we list six steps businesses can take to move towards a more sustainable supply chain:
6 Steps for a Sustainable Supply Chain
Map out your supply chain
First things first, businesses need more visibility into their supply chains in order to find areas for improvement and reduce their chances of risk. Corporations that avoid the crucial first step of mapping out their supply chains are more likely to become disrupted unexpectedly. So, what is “supply chain mapping” exactly? It is a diagram, outline, or map of products made and sold as well as all of the components associated with creating and delivering said products—including, but not limited to, raw materials, supplier locations, storage warehouses and distribution centers, and transportation routes needed to create, and ultimately, sell products. Questions to consider while mapping out the supply chain include: Which suppliers do we depend on? What measures need to be put into place to make sure we can identify and overcome any potential supply chain disruptions as quickly as possible? What operational changes could lower costs? Thinking through these questions ensures that when a potential risk arises, you have the necessary information and references at hand to assist your organization in determining exactly which suppliers, parts of the process, or products are at risk as well as what steps need to be taken to solve the issue at hand. Many large companies, such as Nike, publicly share their supply chain maps in an effort to be transparent about their approach to sustainability and make their mapping process replicable.
Start a conversation with your suppliers
Even the most eco-conscious businesses cannot achieve sustainability on their own. Gaining support from suppliers, and working together towards a shared goal, can ensure sustainability remains a priority throughout the entire supply chain and not just the part in which your company operates. A recent survey of roughly 1,000 supply chain executives found that organizations that engaged with suppliers at any tier were 38 percent more likely to achieve or surpass their expectations and have their initiatives result in cost reductions.
As a result of the pressure to be more sustainable, many businesses have begun conducting “supplier surveys”, which is a method corporations use to evaluate current suppliers to determine if they are a good fit for their business and to whether other prospective suppliers better suit their needs. For example, Pacific Gas and Electric (PG&E) uses responses from the Electric Utility Industry Sustainable Supply Chain Alliance survey to understand the performance and sustainability of their suppliers, examining areas ranging from greenhouse gas emissions to water usage. All in all, an organization can build on and expand its own sustainability practices by engaging meaningfully with suppliers that have the same values, thereby benefiting its own bottom line.
Collaborate within the industry
It may seem counterintuitive, but sharing knowledge and best practices within your industry can increase awareness and deliver significant long-term value to all parties involved. For instance, as a tire manufacturer, working with other tire manufacturers to purchase rubber in bulk can help save money and cut down on waste production. On a larger scale, for example, The American Apparel and Footwear Association, a trade association representing apparel and footwear manufacturers and suppliers, aggregates ideas and best practices from various brands across the entire industry to more easily share knowledge that can benefit all businesses involved. Instead of focusing on constantly competing within your industry, think about the support, industry knowledge, and growth your business could gain from collaboration and knowledge sharing—especially when evolving your supply chain toward sustainability.
Define clear strategies and goals
Setting supply chain goals and measuring against them can help stakeholders better understand supply chain performance and identify areas for improvement. However, managing supply chain sustainability can be a complicated process unless you have the right metrics available. That’s why determining the correct variables to measure and report on is critical. So, where do you start? According to The Guardian, there are over 2,500 different metrics used to measure sustainability within supply chains. The article states that quality, air emissions, energy use, and greenhouse gas emissions were the most commonly used factors to measure performance. When deciding on what to measure, remember to consider the variables and impacts of your suppliers, distributors, manufacturers, and consumers. Earth 911 points out that many industries have developed tools to provide a framework for evaluation. One example is the Sustainable Apparel Coalition’s Higg Index, an assessment tool developed for the apparel and footwear industry, which helps brands measure and score sustainability performances. Once your business begins tracking key metrics, it can better understand progress and identify areas of improvement.
By definition, packaging optimization is the use of smart packaging to contain, communicate, and protect your products during transportation. The packaging is the first thing consumers notice about a product, and, believe it or not, can say a lot about a brand’s commitment to sustainability. In fact, businesses have reported a 30 percent increase in consumer interest for their product(s) when they a strong attention to their packaging. That said, waste from packaging still poses a severe threat to the environment if it’s not biodegradable or sustainable. In the United States alone, we produce over 300 million tons of plastic every year, but only 8 percent of it gets recycled properly. While packaging costs are ultimately unavoidable, efforts to reduce the packaging expense are still worthwhile and, likely, will impact your business’ bottom line positively. Try experimenting with different materials and solutions to identify products that can ship in smaller boxes or reduced packaging—even a tiny decrease in product packaging can increase revenue, cut costs, and reduce your company’s overall carbon footprint.
Reuse products when possible
Single-use products have created a "throw-away" culture by normalizing the consumer behavior of using items once and throwing them away—think: cotton pads, floss picks, coffee pods, plastic bags, and more. In an effort to reduce waste, brands can use reusable packaging, including pallets, bins, reusable plastic containers, and totes to move products through supply chains. A great example of incorporating these sustainable efforts is Subaru Logistics, the car company, which was able to reduce 689.7 tons of packaging materials in March 2018 and lessen their overall environmental impact. Reusable packaging also offers a sturdier and more efficient way to transport products because it is made to protect the goods repeatedly while eliminating the need for disposable packaging. At the end of the day, reusing products means less packaging has to be manufactured, which reduces the amount of energy required to produce the product in the first place. The investment of buying into reusable packaging may, initially, not seem worth it, but when you take a closer look, the reduction in waste and packaging costs will generate more cost savings than the original expenses.
There’s no easy way to put it: Businesses that fail to incorporate sustainability into their supply chains are at higher risk of disruptions as a result of climate change and other unforeseen environmental circumstances. Now is the time to start planning for how your organization will integrate sustainability into your supply chain activities. Hopefully, by reading this post, you’ve realized a number of ways that your business can begin to improve its processes, whether that’s through focusing more closely on communicating with alternative suppliers or identifying an opportunity to join forces with other businesses in your industry to make lasting, sustainable change. No matter what avenue you choose to prioritize, know that there are several actions, both large and small, that businesses can take to inject more environmentally-friendly practices into their supply chains that will result in long-term success. In the comments section below, let us know what your main climate supply chain concerns or focuses are. And, be sure to check out the resources below for more information on how investing in sustainable behavior can help your business’ bottom line:
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