Driving Business Growth with Supply Chain Sustainability
August 28, 2023 •Rick LaGore
Supply chain sustainability is a critical aspect of modern business, yet many companies struggle to implement sustainable practices effectively, thus turning their sustainable goal into a mission statement versus a strategic objective with actionable tactics.
This challenge with supply chain sustainability often stems from the complexity of the company’s supply chains themselves. The convoluted web of providers, producers and distributors can be a difficult task to traverse in an eco-friendly way.
Even though the odds can be stacked against many companies, the importance of supply chain sustainability cannot be overstated. In the present day, where customers are progressively aware of their ecological effect, organizations must adjust or hazard being abandoned. Achieving this requires not just understanding what supply chain sustainability entails, but also recognizing its potential benefits for your business growth and brand reputation.
The Rising Importance of Supply Chain Sustainability
As we progress into a future where sustainability is not just preferred but expected, the importance of supply chain sustainability becomes paramount. A Nielsen study indicates that almost half of US consumers are willing to modify their purchasing habits in order to reduce environmental impact.
This change in consumer behavior puts significant pressure on supply chains and emphasizes how they can influence the environmental footprint of consumer goods companies. A McKinsey & Company analysis reveals that about 80% of greenhouse gas emissions and over 90% of impacts on biodiversity reported by the world's largest corporations originate from supply chains rather than direct operations.
Supply Chains: Major Contributors to Environmental Impact
A company's supply chain goes beyond its immediate operational boundaries, encompassing all activities related to producing and delivering products or services - right from raw material sourcing, manufacturing processes, transportation logistics up until delivery at the customer's doorstep.
Taking this extensive reach across various stages into account makes it clear why improving practices within a firm's own supply chain can significantly help minimize carbon footprints, as well as waste production. For instance, Apple has built award-winning green distribution centers, which demonstrate a greater commitment towards reducing negative environmental effects, while also providing cost-saving benefits due to increased energy efficiency.
Societal Expectations Driving Sustainable Changes
Besides changing consumer preferences for eco-friendly brands demonstrating strong corporate social responsibility (CSR), there are other societal factors driving businesses today towards adopting more sustainable practices. Regulatory bodies globally mandate higher transparency around business operations; investors demand detailed ESG (Environmental Social Governance) performance information before making investment decisions.
In response to public criticism over excessive plastic use, one fast food giant redesigned its packaging process. McDonald's announced plans back in 2018 to make all guest packaging sourced from renewable or recycled sources by 2025 globally - showcasing responsiveness toward stakeholder expectations along with proactive steps taken toward minimizing negative environmental impacts through improved procedures within their vast international distribution networks.
Defining Supply Chain and Its Management
The term supply chain is utilized to portray the multifaceted web of entities, associations, assets, tasks and advancements engaged with creating a product or service. This includes everything from raw material extraction right through to delivering the final product into the hands of customers.
Different industries have varying levels of supply chain complexity. For instance, an agricultural business may operate with a relatively straightforward supply chain that involves growing crops before processing them into food products, which are then distributed via various channels such as supermarkets or farmers' markets until they finally reach consumers. On the other side of the equation sits the automotive supply chain where components are assembled in various companies across the globe that is then shipped to subassembly and eventually to the automotive assembly
Understanding Supply Chain Management
In its simplest form, Supply Chain Operations Reference (SCOR), one of the world's leading methodologies for managing and measuring performance within supply chains, defines supply chain management as effectively coordinating all parties involved in this process so efficiency can be optimized while customer needs are met at every stage along this journey.
The entire process requires oversight across procurement processes at each stage - sourcing materials from suppliers; overseeing manufacturing operations where these inputs get transformed into finished goods; logistics functions responsible for warehousing stock until needed, then transporting orders when requested by clients - even after-sales services like handling returns if necessary due to market changes or consumer dissatisfaction occurring after the purchase period has elapsed.
Throughout the process, the constant oversight often necessitates intervention to resolve issues arising during the course of the transaction being completed successfully according to the contractual terms agreed upon between the buyer and seller.
Within today’s contracts there is good faith that the outcome of their relationship will result in value creation for both parties, while also ensuring to follow regulated environmental policies and rules governing the conduct of affairs related to trade and commerce, both domestically and internationally.
The missing component of many of today’s agreements are that their relationship will create economic activity aimed at generating wealth creation and contributing to sustainable development of society at large, promoting social welfare and improving the quality of life for citizens, benefiting from improvements in living conditions brought about by increased awareness and management of sustainable processes.
Unpacking Sustainable Supply Chain Management
The fundamental principles of sustainable supply chain management encompass reducing waste production, curbing greenhouse gas emissions and safeguarding water security. These are worldwide issues necessitating collective efforts from businesses globally.
Beyond the typical environmental impacts often thought of when thinking about a sustainable supply chain, others are starting to make a more comprehensive definition of sustainability that is typically thought of as ESG, but finding its way into sustainable discussions that includes social and economic aspects.
Understanding Environmental Stewardship in Supply Chains
In achieving sustainability within supply chains lies an essential role played by environmental stewardship. This involves adopting strategies aimed at minimizing adverse impacts on the environment while maximizing positive ones.
A successful strategy includes implementing green initiatives such as recycling programs or energy-efficient operations to cut down waste production and greenhouse gas emissions. The McDonald's redesigned packaging that transitioned away from polystyrene to paper based materials is an example brought forth earlier in this article that significantly reduced their carbon footprint.
Beyond these measures, companies can demonstrate greater environmental stewardship by incorporating specific performance language related to the environment in contracts with suppliers, ensuring adherence to certain standards regarding disposal methods of wastes or emission levels, thereby making their operations more eco-friendly.
Moving Towards Water Security
Rising demand coupled with diminishing freshwater resources across the globe has brought water security - another key aspect of sustainable supply chains under the spotlight. World Wildlife Fund reports that two-thirds of the world's population could face shortages by 2025, if current consumption patterns persist unchecked.
To combat this challenge, responsible usage policies need to be adopted not just within own facilities but the entire supplier network too. This might involve leveraging advanced technology, efficient irrigation systems, treating wastewater before discharging back into local ecosystems, preventing pollution, and conserving precious resources simultaneously.
A topic near and dear to InTek Freight & Logistics, Inc. is around curbing greenhouse gasses (GHG) by transitioning truckload capacity to a domestic intermodal solution where the EPA reports intermodal cuts GHG by 65%, when compared to truckload.
To that end, the EPA developed the Smartway program to help both shippers and freight companies measure and improve their carbon footprint. Since its inception Smartway has helped numerous companies create success stories by their measurement and improvement program.
Challenges Hindering Supply Chain Sustainability
The path to supply chain sustainability is fraught with numerous challenges. From the outset, businesses grapple with what can often be high upfront costs required for implementing sustainable practices and change management training to help people stay the course on supply chain sustainability efforts.
In order to incorporate eco-friendly measures into their operations, companies often have to invest heavily in new technologies and training programs or redesign products entirely. Despite these initial expenditures potentially leading to long-term savings through increased efficiency and waste reduction, they can still be a significant barrier for many organizations.
Beyond financial considerations, achieving visibility into supplier operations presents another major hurdle on the road towards greater supply chain sustainability. With suppliers scattered across different regions and countries forming complex networks, monitoring adherence to environmental standards becomes an intricate task.
Overcoming Barriers To Achieve Greater Sustainability
To navigate these challenges effectively requires tailored strategies that align closely with each company's unique operational context. One such strategy involves incorporating specific language related to environmental performance within contracts established between businesses and their suppliers.
This approach encourages vendors themselves to become more accountable regarding their own impact on the environment by setting clear expectations from the onset about acceptable behavior pertaining to issues like carbon emissions or waste management. In turn, this promotes better environmental stewardship, providing a legal framework for enforcement if necessary.
In addition, contractual solutions investing in technology aimed at improving transparency throughout entire supply chains also greatly aid efforts toward achieving greater sustainability. Digital tools such as blockchain and advanced analytics software are being increasingly utilized worldwide to track and monitor supplier activities accurately, thus enabling early identification of potential areas for improvement before they escalate into larger problems that could negatively affect both business reputation and customer satisfaction alike.
Another common obstacle faced when striving to implement sustainable supply chain practices revolves around difficulty measuring progress against set goals.
Without well-defined metrics and reliable data collection methods, assessing whether an organization's efforts are truly resulting in improved levels of sustainability becomes a challenging endeavor indeed.
Fortunately, there exist various standardized frameworks and certification programs designed to help businesses not only track but measure improvements over time against industry benchmarks, thereby allowing them to demonstrate tangible evidence of their commitment to responsible business practices to all stakeholders, including investors, customers, employees, and government regulators alike.
By understanding and executing against set standards, companies can manage their corporate governance policy as a part of executing their daily business.
The Business Case for Sustainable Supply Chains
A growing awareness is spreading among businesses that investing in sustainable supply chain practices is not only a moral decision, but one with potential rewards. Companies with robust sustainability measures have been found to yield higher returns on investment than those without such initiatives.
Sustainability efforts contribute to resilience against disruptions. In today's volatile global environment marked by pandemics and climate change-induced disasters, having resilient supply chains has become invaluable.
A Closer Look at Subaru's Zero-Waste Factory
An excellent example of how embracing sustainability positively impacts both environmental health and business growth comes from Subaru's Indiana car-making plant. This facility holds the distinction of being America's first zero-waste factory - setting a new benchmark for industries across the country.
This remarkable achievement was made possible through meticulous waste sorting and recycling practices implemented over several years. By diverting all its manufacturing waste away from landfills since 2004, Subaru managed to reduce their environmental impact significantly while saving millions annually - money otherwise spent on landfill fees now goes back into improving their operations further.
Better Brand Reputation & Investor Relations Through Sustainability
In addition to cost savings and increased operational resilience, there are more intangible yet equally important benefits associated with sustainable supply chain management - improved brand reputation being among them. As consumers grow increasingly conscious about making environmentally friendly purchases, businesses demonstrating a strong commitment towards green practices gain a competitive advantage in attracting these conscientious buyers.
Moreover, investors value companies showing proactive engagement in addressing societal issues like climate change or fair labor conditions within their operations.
In essence, sustainable supply chain management extends beyond traditional corporate concerns; it provides avenues for long-term success underpinning economic profitability, while contributing positively towards our planet's well-being.
Steps Towards Building a Sustainable Supply Chain
A sustainable supply chain is not an overnight achievement, but the result of strategic planning and consistent efforts. The journey towards sustainability starts with comprehensive supplier assessments to gauge their current performance in terms of environmental impact and ethical business practices.
Training programs on best sustainability practices for suppliers can also be implemented as part of this process. This encourages them to adopt more environmentally-friendly operations, which ultimately contributes to your company's overall sustainability goals.
Incorporating Environmental Metrics into Supplier Management
An effective strategy that businesses should consider adopting involves incorporating environmental metrics into supplier management processes. By doing so, companies are able to track progress towards achieving their supply chain sustainability targets using data-driven methods.
The Carbon Disclosure Project's survey provides valuable insights about how corporations manage carbon footprints across various stages in the supply chains they operate within - from sourcing raw materials all through production up until distribution. Such measurements allow firms to set realistic objectives, drive continuous improvement, and ensure accountability and transparency throughout the entire operation.
Promoting Sustainability Through Product Redesign
Another step forward in building sustainability involves product redesign aimed at reducing resource consumption and maximizing efficiency during manufacturing and distribution phases. A case in point is the adoption of eco-friendly packaging or optimizing designs for efficient transportation, thereby significantly cutting down waste generation while saving costs simultaneously. Again and on the risk of a little self promotion, improving GHG and fuel efficiency for helping educate and convert truckload shippers to domestic intermodal was the foundation to the initial InTek business plan.
Mandating Greater Sustainability From Suppliers
Leveraging influence over the behavior and actions of suppliers by integrating specific environmental performance language into contracts and setting clear expectations and standards regarding conduct and operations related to the environment and social responsibility is another important approach toward creating more responsible and socially conscious supply chains.
Forbes highlights several examples where corporations have successfully used contractual obligations to encourage better ecological stewardship amongst partners, resulting in mutual benefits including cost savings, improved reputation and better communities which we all live in.
Future Trends Shaping Sustainable Supply Chains
The landscape of supply chain sustainability is continuously evolving, with several emerging trends shaping its future. As businesses are progressively focusing on their environmental impact and working towards achieving their sustainability goals, they are exploring innovative models and leveraging advanced technologies.
A key trend that has gained prominence in recent years is the circular economy model. This approach aims to eliminate waste by creating a closed-loop system where resources are continually reused instead of being discarded after use. The shift from traditional corporate supply chain concerns about disposal and waste management to resource optimization underlines this transition.
Data-Driven Approaches for Enhanced Transparency
In addition to adopting new business models like the circular economy, companies also embrace data-driven approaches as part of sustainable supply chain management strategies. Leveraging sophisticated analytics tools along with AI (Artificial Intelligence) and ML (Machine Learning), organizations can gain deeper insights into every aspect of their operations - right from procurement practices at source locations through logistics processes until end consumer delivery.
This technology-backed strategy not only allows firms to track but predict potential disruptions real-time, thereby improving efficiency while minimizing negative environmental impact. It's an essential tool for enhancing transparency across all stages within a company's value creation process.
Conclusion - The Path Forward for Sustainable Supply Chains
As consumer consciousness of ecological effects grows, as found through the Nielsen study mentioned earlier in this article, businesses must prioritize sustainability in their supply chains, rather than just focusing on cost-effectiveness and efficiency to demonstrate greater environmental stewardship and incorporate sustainable practices into their operations.
To meet the challenge of global issues like climate change, companies must take proactive steps to make their operations more sustainable.
Sustainability: A Competitive Advantage?
The answer is yes. Companies that embrace sustainability often find themselves at an advantageous position over competitors who stick with conventional methods of operation. Subaru's award-winning green distribution center serves as a prime example of this dynamic at play.
Acknowledging Challenges & Embracing Solutions
Adopting sustainable measures across your entire supply chain may present challenges, upfront costs being one among them, but these hurdles should not deter companies from moving forward. There are solutions available even for seemingly daunting problems such as technology gaps or lack of visibility into supplier operations.
“Challenges are what make life interesting and overcoming them is what makes life meaningful.” - Joshua J. Marine.
Moving Towards A More Sustainable Future
We live in times where every organization plays a critical role in shaping our collective future by making conscious choices regarding resource use within its sphere of influence.
"Think globally, act locally." - Patrick Geddes.
Supply chain sustainability is more than just a buzzword, it's the future of business.
It's about looking beyond profits to consider environmental and social impacts too.
This means taking responsibility for every step in your supply chain, from sourcing raw materials to delivering finished products.
Sure, there are challenges. But overcoming them can lead to significant benefits like cost savings, improved brand reputation, and increased resilience against disruptions.
In fact, businesses that embrace sustainable practices often find themselves better equipped to navigate uncertain times and seize new opportunities as they arise.
The journey towards a sustainable supply chain isn't easy but remember - you're not alone on this path.
InTek Freight & Logistics is here to help you reduce freight costs while enhancing your company's supply chain into a competitive advantage with environmentally conscious strategies.
Ready for the next step? Let us guide you through the process of building a more sustainable and resilient supply chain today! Fill out our brief Request a Quote form, and we'll be happy to get back to you to discuss your unique needs. If you need more information about this or other freight topics, browse our Freight Guides for free eBooks and comprehensive articles, or check out more of our blog.