Concern over climate change is increasingly mainstream. In fact, the concern has gone from being hypothetical to being real: 59 percent of consumers say climate change is impacting their local communities, and 31 percent say it affects them personally. Likewise, sustainability is becoming less of a nice-to-have and more of a need-to-have for businesses—and their supply chains.
What is supply-chain sustainability?
As an evolving concept, sustainability is hard to pin down. Broadly speaking, sustainability refers to a framework for decision-making that considers the economic, social and environmental consequences of the decisions in question.
Sustainability provides the context, or guidelines, to make decisions about resource use with a focus on long-term viability rather than just immediate risks, benefits and costs.
Why does supply-chain sustainability matter?
As a concept, “sustainability” has been popping up more often: in ads, product branding and social media. It can be tempting to place sustainability in the buzzword box. But, according to data from GetApp, with 76 percent of Americans shopping for eco-friendly products at least some of the time, it’s not a term businesses should shrug off so readily.
Your customers are beginning to expect transparency around your business’ practices, and supply chains are ripe with opportunity. Every stage of the supply chain—from production to distribution—can be evaluated on the sustainability of its practices.
In addition to taking environmental measures such as examining emissions levels and resource efficiency, businesses can evaluate the ethics of their labor practices and fairness of their economic practices. A GetApp survey found that respondents also think sustainable companies should donate to a social cause (28 percent), follow ethical practices (53 percent) and not test on animals (32 percent).
Make your supply chain more sustainable with these 5 steps
1. Understand the risks and opportunities in your supply chains
Because of the complexity inherent to many supply chains, businesses often don’t have a full understanding of its sustainability impacts. A good first step in closing that gap is mapping your supply chain: listing suppliers, identifying social and environmental risks associated with each one and prioritizing related efforts.
One way to prioritize suppliers is to consider spending, volume of business and geography. Top suppliers can then provide sustainability metrics to further classify them based on environmental performance. This information can later be built into the design and procurement of future projects.
You don’t have to take everything on at once, but focus on the areas that will have the most impact within as short of a time frame as possible. Your suppliers are different: Assess them differently.
2. Set sustainability targets within the procurement process
To evaluate your suppliers and build sustainability into your business’ procurement processes and operations, set sustainability targets. Targets will help you track supplier performance and incorporate these new standards into future contracts.
Communicate these goals to your teams, customers and suppliers to make them a part of the conversation. It’s not only important to make sure all stakeholders understand the importance of sustainability and the goals your business has set; it also matters that they are able to take ownership of these initiatives.
Hyatt Hotels established sustainability goals under their 2020 Vision plan, with the objective of reducing GHG emissions and water and energy usage. In just two years, Hyatt reduced water usage by 18% percent, GHG emissions by 19 percent and energy consumption by 10 percent in the United States.
3. Set a baseline supplier performance
Once you’ve mapped your suppliers and set targets, collecting data from your suppliers will help your business understand where they stand.
One way to do this is to administer a baseline questionnaire or survey that suppliers can use to self-assess their performance on various key areas.
Some businesses have chosen to model their surveys after GRI guidelines and CDP questionnaires. A few industries, including the pharmaceutical industry, have also gone as far as to implement a standard survey so that suppliers don’t have to fill out a different survey for each client.
These surveys can be used to check supplier performance on energy and water usage, waste generation and disposal, and greenhouse gas emissions, among other things.
4. Leverage data to make informed decisions
You’ve mapped your supply chain, set goals and measured supplier performance—congratulations! Just one more thing to consider: Taking these steps probably means you’ll have lots of data on your hands. Managing this data isn’t easy, but it’s essential to making informed decisions.
Making use of your business’ supply chain data can help you spot inefficiencies, automate decision-making and improve customer experience. The more accurate your data, the more efficient you’ll become and the clearer your picture of your business and suppliers will be.
5. Use software to analyze data and automate processes
The key to wrangling your data and squeezing the most value from it may be to use a reliable supply chain management software solution. Not only will the right system gather the data you need, it will also analyze it, derive insights and automate processes.
Not sure where to start? Look for solutions that include at least a few of the following features:
Supplier relationship management: Enables users to plan and manage interactions with suppliers. This centralizes communication, ensuring a consistent message and improving collaboration between several teams. SCM software that has this feature may also help with step No. 3 (setting baseline performance) by gathering relevant survey data and tracking responses.
Asset management: Tracking assets and delivering maintenance in a timely manner will help you ensure your business’ operations run smoothly but also keep you ahead of their depreciation curve and running on minimal energy.
Shipment tracking: Tracking shipments will keep you in the know but can also allow you to benchmark carrier performance. Timeliness encourages resource efficiency, but the logistics side of your supply chain has more potential: Think route optimization and fuel efficiency, among others
Reporting and analytics: This feature is essential to leverage your data. A solution that processes data, identifies trends and triggers alerts will reduce manual processes and improve information accuracy.
Victoria Wilson is a specialist analyst with GetApp, an online resource for software buyers to compare products side-by-side with free interactive tools, detailed product data and user reviews. Founded in 2010, the Barcelona, Spain-based Gartner company also serves as an online lead generation channel for SaaS.