The supply chain and sustainability have become interconnected in the past few years, with companies worldwide emphasizing environmental consciousness for themselves and their supplies.
It’s crucial for reputation, and going green benefits businesses by lowering costs, driving innovation and improving employee satisfaction.
How can company leaders improve sustainability? Here’s how supply chain professionals can transform their organizations.
How Can Supply Chains Become More Sustainable?
Talking about sustainability is easy, but incorporating new policies is challenging. These five reasonable changes demonstrate what supply chain professionals can do today to improve their organizations.
Before implementing new policies, company leaders must visualize the supply chain to find liabilities. The flow of goods and materials provides the necessary insights into what aspects of the business require changes.
For example, a manufacturer may review its suppliers and find other options closer to its facility. Oil and gas account for 15% of energy emissions worldwide, so shortening the supply chain reduces fuel costs and improves a company’s carbon footprint.
Managers can also use their supply chain map to identify waste. E-commerce companies may use more packaging materials than needed, leading to misuse. A business can improve operations by using more sustainable materials and increasing focus on recycling.
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Setting Sustainability KPIs
After mapping the supply chain, logistics professionals can develop policies to strengthen their weak spots. However, these actions are only worthwhile if leadership monitors progress and continues to find improvement. Supply chain managers should set sustainability key performance indicators (KPIs) to ensure the company follows its promise to be more environmentally conscious.
KPIs are integral for sustainability goals because they provide a clear benchmark for employees to strive for. Company leaders can measure progress over time and adjust their strategies when necessary. If something isn’t working, it’s better to know early rather than later. KPIs are also beneficial because they’re effective communication with stakeholders. Leadership can use them to demonstrate progress and build credibility with the board.
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Communicating With Suppliers
The supply chain starts with an individual company but involves all suppliers, manufacturers, distributors, retailers and consumers. Professionals should communicate with suppliers and other entities to ensure they employ sustainable practices. Some companies offer discounts, favorable contracts and other financial incentives to go green and reduce their carbon footprint.
Logistics professionals can share sustainability knowledge to improve the supply chain for all organizations involved. Companies can also collaborate on benchmarks to benefit both entities. For example, two businesses could pledge to use greener packaging or reduce energy consumption. Communicating with suppliers builds trust through transparency.
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Reviewing Supplier Performance
After communicating with suppliers, reviewing their performance over time is essential. Companies must be willing to identify and improve their sustainability weaknesses. If they don’t, they become liable and harm the supply chain’s environmental consciousness. A business’s suppliers reflect on it, so checks are crucial.
Suppliers improving their practices can remain partners in the supply chain, but companies that don’t risk replacement. For example, a manufacturer may request its distributors to increase the use of electric vehicles (EVs). EVs improve sustainability with zero tailpipe emissions and less energy consumption than gas-powered cars. Partners that don’t comply risk losing an integral part of their supply chain.
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Implementing Sustainable Sourcing
Supply chain managers reviewing their flow of goods should scrutinize material sourcing. Some sustainable practices sound environmentally friendly, but a closer look shows a different story. For example, a manufacturer may produce EV batteries. These devices don’t rely on fossil fuels for power, but they require mining lithium, cobalt, nickel and other items harmful to the environment.
Environmental impact is something companies should consider because of its long-term ramifications. One practice may seem profitable now, but how will it affect the bottom line 30 years later? Supply chain professionals should ensure their suppliers enforce sustainable methods.
For example, fishing companies use trawling, unreported fishing and other unsustainable strategies to capture seafood. These practices may bring short-term profits, but they harm the environment. The United Nations says 3 billion people worldwide rely on seafood for their daily diets, so unsustainable methods impact a significant percentage of the planet’s population. Harming this many people affects long-term profits and expansion opportunities negatively.
How Can Professionals Aim High With Sustainability?
Some goals take longer than others, often requiring decades to implement. While they need more time, these three ambitious targets significantly improve the supply chain’s sustainability.
Greenhouse gas (GHG) emissions are difficult for companies to avoid entirely. However, organizations can offset their emissions by becoming carbon neutral. This transition is challenging for multinational corporations, but it’s a worthwhile long-term venture.
Numerous prominent companies worldwide have committed to carbon neutrality this century to demonstrate sustainability. This goal is central among automakers. General Motors has pledged carbon neutrality by 2040 by eliminating tailpipe emissions and using renewable energy in all manufacturing facilities worldwide.
Increasing renewable energy and reducing waste are terrific ways to reach carbon neutrality, but supply chain professionals can also use carbon offsets. Companies can participate in tree-planting projects, environmental cleanups and other projects to limit carbon liability.
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Investing in Advanced Technology
Some companies face financial roadblocks when improving their supply chain’s eco-friendliness. Advanced technologies are often expensive due to high demand and the required materials. Many devices are also new and have limited competition on the market to drive down the price. While it may be costly, it significantly improves sustainability.
For example, some companies are turning to blockchain to track their goods. This technology improves supply chain visibility and traceability by allowing businesses to monitor their products throughout the process. However, blockchain costs more than traditional databases and requires employees with expertise to implement it properly. Otherwise, it could be wasted money.
The last few years have seen construction companies use 3D printers to build houses and offices. These machines lower costs but have a high upfront price. These printers start at around $180,000 but can eclipse $1 million for top-of-the-line devices.
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Creating a Circular Economy
Many companies create products for their suppliers and customers without considering what happens afterward. However, these leaders are doing themselves and their employees a disservice by not considering the entire life of their items. Professionals can enhance their sustainability by creating a circular economy for what they manufacture. Allowing consumers to upcycle and recycle improves the supply chain.
Companies can create a circular economy by intentionally designing their products for reuse and recycling. For example, sustainable EV battery producers allow consumers to recycle them at the end of their life. Recycling facilities extract lithium and cobalt from the battery and repurpose the metals for other uses — thus reducing demand for consuming virgin materials.
Creating a circular economy comes with added costs, making it a lofty goal for some businesses. For example, some areas may lack recycling facilities to incentivize companies. Additionally, producing recyclable materials costs more because of complicated manufacturing processes or high expenses.
Fostering Sustainability in the Supply Chain
The global supply chain has come under the microscope in recent years. Various disruptions have challenged companies worldwide to become more sustainable and resilient in an ever-changing world. Professionals can improve sustainability and go green by implementing reasonable and ambitious solutions.
