A sustainable supply chain is when the processes involved in the creation of goods and their transportation to consumers maintain and enhance ecological, human and economic health.
The sustainability of a product’s supply chain is becoming increasingly important to consumers – and therefore to the raw material producers, manufacturers, logistics companies and retailers that make up the product creation and delivery network. But what exactly is a sustainable supply chain, and how can your business achieve it across its operations?
What is a sustainable supply chain?
A sustainable supply chain involves integrating environmentally and socially responsible practices into the entire supply chain lifecycle, from raw material sourcing to production, distribution, and disposal.
Also referred to as a green supply chain, the goal is to minimise the negative impact on the environment while maximising social and economic benefits.
The concept might seem complex, but it boils down to incorporating sustainability into every stage of supply chain management, continually considering the impact on the planet and people. This holistic approach ensures that businesses do not operate in a vacuum but rather contribute positively to the ecosystem they are part of.
Why is a sustainable supply chain important?
Build resilience and reduce risks
Engaged and proactive regarding environmental, political and social issues
The climate crisis and geopolitical conflicts pose a threat to modern supply chains. By already considering the environment, and social and political effects of their organisation, companies with sustainable practices are more attuned to unfolding issues and what can be done to prevent disruption.
Transparency
Ensuring you both have, and are a component of, a sustainable supply chain requires transparency, where there is clear visibility of all aspects of a business and product creation. This makes it more likely that issues like unethical practices or unsafe actions will be spotted and dealt with.
Ready for regulatory challenges
Businesses with sustainable supply chains should already be engaged with the most progressive pay structures, employment support and sustainability measures. Combine this with the operational visibility required to ensure you contribute to sustainable supply chains and operate one yourself, and these companies are better equipped to adapt to regulatory changes without incurring significant penalties or operational disruptions.
Foster trust among stakeholders
Consumers
Consumers today are more informed and concerned about the ethical practices of the brands they support. A sustainable supply chain signals to customers that a company is committed to better society and the world, enhancing brand loyalty and customer trust. When consumers trust a brand, they are more likely to become repeat customers and brand advocates.
Investors
Investors are increasingly considering Environmental, Social, and Governance (ESG) criteria when making investment decisions. A sustainable supply chain can significantly boost a company's ESG score, making it more attractive to investors who are looking for long-term value and ethical investments.
Communities
Businesses don’t operate in a vacuum—they are part of broader communities. Companies with sustainable supply chains often engage in practices that benefit local communities, such as fair trade or supporting local suppliers. This fosters positive relationships with the community, enhancing the company’s reputation and the ease with which it operates in its local environment.
Cost benefits
Consumers will pay a premium for sustainability
Recent research demonstrates that consumers are ready to pay an average of 9.7 percent more on sustainably produced or sourced goods. By investing in a sustainable supply chain, companies can justify higher price points, leading to improved profit margins.
Reducing waste
One of the direct benefits of a sustainable supply chain is cost savings through waste reduction. Efficient use of resources and minimising waste not only benefits the environment but also reduces operational costs. For instance, optimising packaging to use less material can lead to significant savings over time.
Reducing energy cost
Sustainable practices often involve energy efficiency measures. Whether it's using renewable energy sources or implementing energy-saving technologies, these practices can lead to substantial reductions in energy bills. Over time, these savings can considerably impact the bottom line.
Key components of sustainable supply chain management
Ethical sourcing
Ethical sourcing is the practice of obtaining raw materials, services and products in a responsible and sustainable manner. This involves ensuring that suppliers adhere to ethical standards, including fair labour practices, environmental protection, and animal welfare.
By choosing suppliers who prioritise sustainability, businesses can ensure that their supply chains do not contribute to environmental degradation or social injustice. A Supplier Management software solution can help you manage supplier sustainability by allowing you to track risks and issues, create risk assessments, monitor insurances and certifications and more
Efficient resource utilisation
Efficient resource utilisation means using resources in a way that maximises their value while minimising waste. Practices to improve resource utilisation could be reducing equipment downtime, monitoring and making changes to improve Overall Equipment Effectiveness (OEE), and ensuring that people with the right skills sets are assigned to the correct jobs.
Use of technology
Technological solutions can help you meet your sustainability goals. Cloud computing allows businesses to operate digitally, reducing the environmental costs of physical infrastructure and energy.
Data analytics tools can be used to identify areas where resource use can be reduced, and predict future trends. By leveraging technology, businesses can enhance their ability to track, analyse, and improve their supply chain sustainability.
Green logistics
Green logistics involves adopting eco-friendly practices in transportation and distribution. This can include using fuel-efficient vehicles, optimising delivery routes to reduce fuel consumption, and adopting alternative fuels.
By reducing the carbon footprint associated with transportation, businesses can significantly lower their overall environmental impact.
Sustainable packaging
Sustainable packaging refers to the use of materials and design techniques that minimise environmental impact. This can include using recyclable or biodegradable materials, reducing packaging size, and eliminating unnecessary packaging.
Sustainable packaging not only reduces waste but also appeals to eco-conscious consumers. By adopting sustainable packaging practices, businesses can enhance their brand image and meet consumer demand for environmentally friendly products.
Waste management
Effective waste management involves minimising waste generation and ensuring that waste is disposed of in an environmentally responsible manner. This can include practices such as recycling, composting, and waste-to-energy initiatives.
By reducing waste, businesses can minimise their environmental footprint and conserve resources. Effective waste management also aligns with regulatory requirements and enhances community relations.
Social responsibility
A business looking to operate or remain part of a sustainable supply chain must consider not just their impact on the planet, but on people.
Social responsibility involves ensuring that the supply chain promotes positive social outcomes. This can include fair labour practices, safe working conditions, and community engagement.
Continuous improvement
Creating a sustainable supply chain is an ongoing process. It requires regularly evaluating and enhancing sustainability practices. This involves setting sustainability targets, monitoring progress, and implementing corrective actions.
It can be useful in these cases to make the most of supplier and workforce management solutions that provide robust reporting functionalities and data visualisation. This way, you can regularly report to leaders and stakeholders about the progress being made in sustainability, and test if measures are effective.
Achieving a sustainable supply chain requires a comprehensive and integrated approach. By prioritising ethical sourcing, efficient resource utilisation, green logistics, sustainable packaging, waste management, social responsibility, transparency, technology integration, continuous improvement and reporting, businesses can create a positive impact on the environment and society.
A sustainable supply chain not only benefits the planet but also enhances business success. By adopting sustainable practices, businesses can reduce costs, enhance brand reputation, ensure compliance, and build resilience. These benefits contribute to long-term business sustainability and competitiveness.
Supplier & Contract Management ensures that you maintain accurate and auditable supplier information at all times, allowing you to more easily assess the sustainability of your supply chain – with in-built supplier compliance assessments for sustainability, modern slavery and policy.
Time & Attendance puts people planning information at your fingertips, to create optimised rosters and identify areas for efficient resource utilisation.
OneAdvanced works to ensure the sustainability of its own supply chain, operating according to a Supply Chain Responsible Business Alliance (RBA) Code of Conduct and monitoring supply chain emissions. You can read more in our societal report.