How To Build a Sustainable Supply Chain
- Environment
The global supply chain has connected customers with products and services across the world, but it has also had a dramatic effect on the environment. Building sustainability into your supply chain can reduce its impact and deliver concrete benefits to your organisation.
The effect supply chains have on the environment cannot be understated, accounting for more than 80% of a consumer company’s emissions. But it isn’t just the environmental impact that makes current supply chain models increasingly unviable; the economic disadvantages are growing too.
For instance, Unilever estimated that water scarcity and losses in agricultural productivity have led to annual losses of €300 million. As a result, more and more organisations are looking to make their supply chains more sustainable.
What is a sustainable supply chain?
A sustainable supply chain is the result of a holistic application of environmental, social, economic, and legal concerns to the entire supply chain.
In creating a sustainable supply chain, a supply chain manager will consider factors such as:
- waste
- carbon emissions and carbon footprints
- labour conditions
- health and safety
- worker exploitation
How to build a sustainable supply chain
The following five steps can help you build a sustainable supply chain.
1. Identify sustainability issues within the supply chain
Your first step is to analyse your entire supply chain, break it down into its various elements, and identify which of them could be improved. Some of these elements will be easy to identify; for instance, haulage will emit emissions, which can always be improved.
But there will be plenty of other elements that might not be immediately obvious. Perhaps the factory produces hazardous chemicals, or the working conditions are below standard? Or perhaps there are health & safety risks in your depot, or even your offices? Addressing all of these could help your sustainability.
2. Adopt a circular supply chain
Most supply chains begin with materials, which are shipped to the manufacturer. The resulting products will then be shipped to distribution centres, and then on to the final destination. Once they have been used, the products often end up as waste.
The circular supply chain seeks to reduce that waste, or even eliminate it, by connecting and adding in two new steps: recycling the products, and sending them back to the manufacturer for reuse.
3. Fuel consumption
Reducing fuel consumption is more than just encouraging drivers to avoid idling their engines; Safe and Fuel Efficient Driving (SAFED) driver instruction can make a big difference to both emissions and costs.
It’s not all on the drivers either, investing in aerodynamic improvements to vehicles involves an upfront cost, but can deliver significant savings.
4. Eliminate dead mileage
Even after you’ve reduced fuel consumption, there’s still a potentially huge issue with your haulage fleet: the return journey.
Once your fleet has transported their load to the next stage of the supply chain, they’ll need to return to base to pick up more goods to transport. But when they’re driving back to their starting point, they’re burning fuel, creating carbon emissions, and using time on merely moving from one place to another.
Instead, look into ways to make this return journey more efficient. Perhaps there are materials that they could transport back to their starting point, or perhaps you could hire out your fleet for a portion of their return journey by transporting materials for another company? This would make the return journey more efficient, and also deliver more return on your investment of fuel and time.
5. Engage suppliers
While some organisations can control their entire supply chain, many businesses will engage with suppliers, haulage companies, and other third parties. Although you won’t have direct control over their operations, this doesn’t mean that you’re forced to write off these links in your sustainable supply chain.
This isn’t to say you should put your foot down with all of your suppliers. Instead, encourage and reward positive attitudes towards sustainability:
- Make sustainability a regular part of your conversations
- Increase business
- Provide recognition and awards
- Share the costs of sustainability improvements
Any supplier who has achieved ISO 14001 will be holding their operations to strict environmental standards, so you can be sure that you can incorporate their operations into your sustainable supply chain.
What are the three elements of supply chain sustainability?
Three elements of supply chain sustainability include social responsibility, environmental responsibility, and financial responsibility.
Social responsibility
Social responsibility involves the moral, ethical, and philanthropic expectations that society has of a business.
This means making sure that every person in your sustainability chain, from company employees to those working for your suppliers, are treated fairly, in line with human rights laws and labour laws.
Environmental responsibility
Environmental responsibility involves protecting the environment from the potential harm caused by a business’ operations, its suppliers, and its partners.
While environmental responsibility in a supply chain includes a host of considerations which vary from business to business, it’s essential for businesses to understand all the ways in which they impact the environment.
By having a firm understanding of this, businesses need to take action to reduce their environmental impact and to adhere to the relevant environmental obligations and laws.
For more information on environmental sustainability in business, read our guides to find out how to make your business environmentally sustainable, and how to write an environmental policy.
Financial responsibility
Financial responsibility involves addressing the financial needs of the business – from shareholders, employees and customers, to business partners and financial institutions.
Financial responsibility in a sustainable supply chain includes compliance with financial laws and regulations, financial planning, risk management, and insurance coverage.
The benefits of a sustainable supply chain
A core tenet of a sustainable supply chain is that socially responsible business practices aren’t just good for the planet and the people who live here, but it can bring concrete benefits for the business too.
Reduce costs
Reducing the environmental impact of an organisation is often viewed as a cost, but much of these efforts are focused on efficiency and reduction of waste, which can actually lead to savings. For instance, when a Scottish haulage fleet invested £100,000 into reducing its environmental impact, it reaped savings of over £650,000 in return.
Improve continuity of supply
When devastating floods struck Thailand, two of the world’s largest hard-drive manufacturers found themselves facing delays, shortages, and steep costs due to their reliance on Thai suppliers. By diversifying your supply chain, you avoid over-reliance on a single link.
Protecting against reputational damage
Awareness of sustainability issues is growing, and so if any of those issues are found in your supply chain, your organisation could be at risk. The news that your operations have an undue environmental impact, or that raw materials for your products are being collected in dangerous conditions by underpaid workers, could cause serious damage to your reputation, to your revenue, and even to the future of your organisation.
Why is sustainability important in a supply chain?
The importance of sustainability in supply chain management extends beyond becoming environmentally aware as a business alone. For many businesses, the supply chain is responsible for the majority of their environmental impact, therefore, developing a sustainable supply chain strategy is essential.
By building sustainable supply chains then, businesses can implement more impactful, positive changes on their environmental footprint.
Practicing environmentally aware and eco-conscious ways of working in every aspect of your business, benefits the planet, improves your reputation and reduces costs.
How ISO 14001 can help build a sustainable supply chain
ISO 14001 is an internationally recognised standard that can help you put an environmental management system into place. Such management systems will help you identify gaps in your business, including in your supply chain, where you could make green efficiency savings.
You can use this management system to analyse your supply chain and build your sustainable supply chain, but ISO 14001 is also a quick and easy way of demonstrating these green credentials to a potential client. This means you don’t need to go to great lengths to explain your work in sustainability; you can simply produce your certification and boost your chances of acquiring new business.
Take our free online course to find out more about ISO 14001 and how you can introduce sustainability to your business and your supply chain.