The term “sustainable supply chain” refers to a comprehensive view of supply chain operations, logistics, and technology that affect the environmental, social, economic, and legal elements of the supply chain’s components. A supply chain that fully incorporates moral behavior and consideration for the environment into a competitive and fruitful model is said to be sustainable. Transparency throughout the whole supply chain is essential; sustainability measures must cover everything from sourcing raw materials to last-mile logistics to product returns and recycling procedures. Identifying the source of raw materials, maintaining safe working conditions for employees, and lowering carbon footprint are typical sustainability measures. Let’s now look at the three components of the sustainable supply chain.
The Three Components of a Sustainable Supply Chain
Supply Chain Traceability and Transparency
From the very beginning of the Supply Chain through to end-use, the Supply chain traceability process tracks the origin and route of products and their inputs. The term “supply chain transparency” is a method for informing stakeholders about the supply chain and sourcing. The parameters of transparency include what information you will disclose, to whom, and when. Any business that wants to be seen needs to think about transparency from the beginning. The development of a culture of continuous improvement both within the business and across value chains is necessary for supply chain transparency. Supply chain managers now have access to a precise and unquestionable record of all the items and providers along the whole supply chain journey thanks to digital technology like blockchain and RFID sensors.
Green Supply Chain Management
Green supply chain refers to the concept of incorporating environmentally sustainable methods into existing supply chains. Green supply chains encompass all stages of a product’s lifecycle, including design, raw material extraction, manufacture, and distribution phases, as well as customer usage of the product and its eventual disposal (reconditioning, reuse, recycling). While the reduction of CO2 emissions is frequently the specific goal of GSCM, there are other real advantages for an organization, such as increased asset efficiency, decreased waste production, increased innovation, lower production costs, reuse of raw materials, increased profitability, and the perception of added value by the client base.
Circular Supply Chain
The term “circular supply chain” refers to the coordinated forward and reverse supply chains through intentional business ecosystem integration for value generation from products/services, by-products, and valuable waste flows over prolonged life cycles that enhance the economic, social, and environmental sustainability of businesses. The circular supply chain model encourages producers and retailers to repurpose waste resources for new products. Businesses are increasingly choosing to loop their supply chains to reduce costs and waste rather than using a linear “in and out” approach.
Benefits of Sustainable Supply Chain
If you want to create the business case for a more sustainable supply chain, quantifying the advantages of sustainable sourcing, manufacturing and distribution is essential. Even though increasing supply chain sustainability has many benefits, you will likely need support for the project because, like all (Environmental, social, and governance) ESG initiatives, it will demand resources, time, and dedication. Building the investment case can be made easier by utilizing all the advantages of a more sustainable strategy.
Fewer Negative Environmental Effects
Typically, this is the project’s main goal when it comes to supply chain sustainability. Many businesses place a high priority on minimizing their environmental footprint, and your supply chain can play a significant part in this.
Improved Operational Efficiency Can Lower Costs
This is a positive byproduct of having a smaller organizational footprint; increased efficiency not only enhances your performance in terms of the “E” of ESG, but it can also sharply lower your operating expenses.
Enhanced Supply Continuity
When the unexpected occurs, checking your suppliers’ business continuity plans and trying to create a more diverse and durable supply chain can pay off. When it comes to supply chains, reliability and sustainability are inextricably intertwined.
Increased Organizational Reputation
Supply chain can protect your reputation if it is properly managed and supervised, whereas businesses that fail to address supplier concerns risk attracting bad press. Concerns like modern slavery and ethical sourcing fall under the category of supply chain sustainability and can jeopardize your ESG credentials. At a time when ESG ratings and scores are becoming more and more important to investor and buyer decisions, no company wants to take that chance.
Chances to Increase Corporate Partnerships
To achieve zero discharge of hazardous chemicals (ZDHC) in the industry, prominent apparel and footwear firms have formed a collaboration. Collaboration has been proven to have considerable advantages for supply chain sustainability projects.
According to a Euromonitor survey, 64% of consumers think their purchases may change the world. These customers need to be aware of who makes their products, how they are carried, and how they affect the environment. When your supply chain sustainability is recognized, you may appeal to this affluent market.
Working directly with your suppliers, getting to know them, and conveying your corporate vision and purpose are all necessary for enhancing the sustainability of your supply chain. Your suppliers have a comprehensive understanding of your objectives, as a result, become useful partners who are much better positioned to offer changes to goods, services, and procedures.
Greater Employee Satisfaction and Better Talent Recruiting and Retention
People want to work for firms with stellar ESG records, especially the younger generation of job searchers. In a PWC survey, two-thirds of participants indicated they would purposefully steer clear of an employer who promoted a bad image of environmentalism. You’ll be better able to recruit and keep a more motivated workforce if your supply chain is sustainable. By avoiding the need to increase salary to make your industry more appealing to potential recruits, you will avoid having to pay higher recruitment fees, reduce employee attrition, and save money overall.
Improved Risk Management Across Your Supply Chain
Working with third-party suppliers will always expose you to some level of risk, regardless of how carefully you verify your vendors or how diversified your supply chain is. Your suppliers will have weaknesses that you need to address, whether they have to do with cybersecurity, the possibility of regulatory non-compliance, or operational or financial weaknesses.
Improving the sustainability of your supply chain will benefit both the organization and the economy as a whole. Instead of formulating objectives and establishing goals in this situation, many firms struggle to put these internally and externally driven imperatives into practice. The planning of supply chain strategies will be strengthened and improved by supply chain sustainability. The development of the circular economy and circular supply chain strategies will lead to an increase in supply chain sustainability. More and more businesses will emphasize conserving non-renewable energy and implementing sustainable practices. Professionals in the supply chain who work closely with top suppliers will follow sustainable guidelines and support a sustainable supply chain strategy.