The Sustainable Supply Chain
Do good for the world, reduce costs and increase profits.
As companies tout sustainability practices — proud of minimizing their impact on the environment — they’re realizing it’s not enough to assess and improve their own habits. They’re looking to the practices of their supply chain, too.
Positive for the environment and for a company’s brand, practicing sustainability goes beyond smart environmental habits such as conservation of water, energy and other resources. It includes social responsibility and fair labor practices. And that’s true for leading companies and for their suppliers.
Companies who become stronger links in a sustainable supply chain become more attractive suppliers to leading companies. They will:
- Strengthen relationship to their best customers.
- Become poised to attract new customers.
- Increase their competitive advantage against companies that lag behind.
Such benefits are fueling a new procurement strategy: sustainable sourcing.
Parts of the whole
The choices made by every link in the supply chain affect the top company’s sustainability metrics and its reputation.
Take greenhouse gas emissions, for example. Focusing only on a company’s operational emissions has no effect on 50% to 70% of its total carbon footprint. In addition to the carbon every supplier emits in operations, the transportation network that delivers material between tiers of suppliers makes its contribution to the total. Similar correlations exist for a company and its supply chain’s landfill waste, water usage and energy consumption.
Solutions for sharing data
As companies begin seeking green suppliers, they’re setting targets for sourcing materials. Suppliers are being asked to report on carbon emissions and other resource usage more frequently. Plus, they’re getting requests to measure results against specific targets.
With multiple customers asking for sustainability-related data, reporting can become a major burden. Data-sharing networks are being created so a company can report its results once and multiple customers can access the information.
Passing along cost-savings
As companies answer requirements to measure and disclose climate data, they may discover ways to improve production and become more efficient. Cutting waste means cutting costs, which could help the overall supply chain.
Helping each other
Suppliers may get some help in becoming greener. Major companies’ sustainable sourcing policies usually require that suppliers help their own suppliers improve.
But as companies assess suppliers’ practices, suppliers turn a critical eye on them, raising standards across the board. Companies look both ways — trying to satisfy new demands from customers and helping suppliers meet new demands from them.
Satisfying new demands from customers is not the only reason to start improving your sustainability performance. Governments in many countries are establishing tougher regulations. If you serve the global market, you need to be aware of these regulations and ready to play by the new rules.
Sustainable suppliers will achieve profitability and growth as they cut costs, attract new customers and become industry leaders. At the same time, they will have the satisfaction of becoming good environmental stewards and better corporate citizens.
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