Vikram Dua

CEO, LSIWorld

Sustainability in the Supply Chain

A move to greater sustainability involves a move to greater efficiency, as the two go hand in hand. Sustainability has now become a vital part of every organization’s model, making it more than just an icing on the cake. It has become a great corporate social responsibility to introduce sustainability in their supply chain management. The idea of the introduction of sustainability in many companies can be seen everywhere, from small and local business, to big MNCs. The only reason is because despite upfront costs, investing in making the organization sustainable enough actually helps in making a big impact on company’s profitability. Having a sustainable approach not only aids in the betterment of the nature but also the growth in the company’s financial betterment. For example, Unilever evaluated that natural calamities that happen due to climate changes created an annual loss of €300m.

The term ‘sustainability’ has become a buzz phrase in the industry but what actually is it and how can we implement it? LSI World discusses what you need to know about the sustainability, steps to take, some tips in becoming environment-friendly and why you should not give it a second thought to implement it.

What is Sustainable Supply Chain Management?

Sustainable Supply Chain management is a wholistic view of company’s environmental, social and economic impact. Most importantly, it includes the necessary measures taken by your company to lessen it. Usually, supply chain sustainability includes spotting out the source of raw materials, ensuring the workers are working in good conditions and reducing the greenhouse gas emissions.

Why is Sustainable Supply Chain Management important?

There is a common misapprehension in the industry about going sustainable, that it requires a treasure for an organization to go sustainable which is not legit. In fact, it brings big savings to home. By investing in sustainability, one can see quick returns. Nike changed the way it used to manufacture some trainers and witnessed the labor cost reducing up to 50%, material usage reducing by 20% and took home 0.25% higher margins than the usual.

Since the sustainability is directly related to the betterment of the environment around us, it also affects the logistics and the shipment process. In 2011, two of the major Thai suppliers found themselves unable to fulfill the orders because of a heavy and harsh monsoon season, which led to shortages, delays and steep costs.

Other than keeping the Earth safer to live, having a sustainable Supply Chain Management also helps building up the brand reputation in the industry which, further, attracts more business. Between 2016 and 2018, Apple, the tech brand lost 27 places (from 2^nd to 29^th) in the Reputational Quotient Poll after the company came under scrutiny regarding its working condition of Chinese factory. According to the reports that were published, Apple was said to have had the worst performing quarter since 2016 which also resulted in them losing market shares both in China and Japan.

Tips for Supply Chain Sustainability

1. Identify critical issues

Many companies fall prey of not being able to identity the issues or even understand how going sustainable affects their supply chain. There is always room for improvement, and as you thrive better, you must map out most important environmental and social challenges your company has. Companies must point out where the most of the emissions and risks are located and how they can make a better place for people to work at.

2. Communicate to your customers and suppliers

After focusing on mapping out the risks and coming up with an idea to go sustainable, you must communicate effectively with your customer and suppliers by establishing certain expectations. The communication must be done through supplier code of conduct. The guidelines for assessing a successful code of conduct can be found by doing a little research.

3. Organize Training and Capacity Building Sessions

Another important tip to introduce sustainability in the organization is by training and capacity building programs. You can put forth the best practices and case studies from your best performing suppliers via an online training module, townhalls or quarterly/annual conferences. With such practice you not acknowledge them but also encourage the other to do better.

4. Baseline Supplier Performance

Baseline assessment of supplier performance is the starting point of for future practices aimed at sustainability in supply chain management. By these assessments, you will get an idea of starting point. You can conduct the assessment of supplier performance by online surveys and questionnaires.

5. Drive Performance Improvement

Sometimes, the surveys fail to identify the challenges in the company. That is when creating an audit program comes in the picture. You can use it to measure the performance and implement some steps for the improvement as time goes by. On-sit audits can reveal local practices, practical optical opportunities and behavioral challenges that cannot be mentioned in the survey.

6. Adopting sustainable practices

Identify your sustainability goals and objectives and take steps to implement steps to make your business sustainable. Try to evaluate your supply chain thoroughly. Is it sustainable enough? Does it need more implementation? Should you make adjustments? Take appropriate actions to make your business go more sustainable even if it includes changing vendors or transportation options. Encourage your business partners to adopt more sustainable practices in order to maintain your business and reputation. Remember, there is always a room for improvement.

As George Monbiot said, “Progress is measured by the speed at which we destroy the conditions that sustain life.”, having a sustainable supply chain management can make or break a game for the organizations. With the depletion of the ozone layer and deterioration of the earth’s condition, becoming environment friendly has become more important than ever. The earth is a museum of divine intent and we should cherish it while it lasts.