Sustainable Supply Chain: What is it and how to create one? – 2024

7 December, 2022

Guide to creating a sustainable supply chain

A sustainable supply chain means creating a holistic approach toward attaining environmental, social, and economic concerns of the business.

In sustainability, the application of environmental, social, and governance standards is required to be the top priority. These efforts require the organization to partner and diligently work on the ESG standards, even if it requires additional initial investments over appropriate resources.

What is supply chain and supply chain management?
What is sustainable supply chain?
Stages of supply chain management
Why a sustainable supply chain is important?
What are the essential elements of a sustainable supply chain?
How can a business build a sustainable supply chain?
Tips for building a sustainable supply chain
Benefits of supply chain sustainability

What is supply chain and supply chain management?

A supply chain is a network of organizations, people, activities, information, and resources involved in moving a product or service from supplier to customer. Supply chain activities involve the transformation of raw materials into finished goods, and then the distribution of those finished goods to customers. The goal of a supply chain is to provide the right product to the right customer at the right time, in the right quantity, and at the lowest possible cost. Supply chain management is the coordination and optimization of these activities to achieve these goals.

What is sustainable supply chain?

A sustainable supply chain is a network of organizations, people, activities, information, and resources involved in the production, processing, and distribution of goods and services with the aim of minimizing negative environmental and social impacts while meeting the needs of the present without compromising the ability of future generations to meet their own needs. This means that the supply chain operates in a way that protects natural resources, reduces waste and pollution, and promotes social justice and equality.

These brands are great examples of supply chain sustainability.

Stages of supply chain management

The stages of supply chain management include:

Planning: This involves identifying the required materials, components, and services, as well as determining the best sources for these items.
Procurement: This involves purchasing the required materials, components, and services from suppliers.
Manufacturing: This involves transforming raw materials into finished goods, using various production processes and equipment.
Distribution: This involves storing and transporting the finished goods to customers or intermediaries.
Customer service: This involves managing customer relationships, providing technical support, and handling returns and complaints.
Disposal: This involves disposing of excess materials, components, and finished goods in a responsible and sustainable manner.

Why a sustainable supply chain is important?

Sustainable supply chain is important for several reasons. Firstly, it helps to reduce the environmental impact of production and consumption. By minimizing waste and reducing the use of natural resources, sustainable supply chains can help to conserve the planet’s resources and reduce greenhouse gas emissions.

Secondly, sustainable supply chains can help to improve the well-being of workers and the local community. By prioritizing fair and ethical business practices, sustainable supply chains can ensure that workers are treated fairly and have access to decent working conditions.

Thirdly, sustainable supply chains can help to improve the long-term viability of businesses. By reducing waste and maximizing efficiency, sustainable supply chains can help businesses to save money and improve their bottom line. This can help to ensure the long-term sustainability of businesses and contribute to the overall health of the economy.

Overall, sustainable supply chains are important for protecting the environment, improving social conditions, and supporting the long-term viability of businesses.

What are the essential elements of a sustainable supply chain?

The three elements of a sustainable supply chain include social responsibility, environmental responsibility, and financial responsibility.

Three elements of sustainable supply chain

1. Social responsibility

This factor involves the values, morals, and expectations held by the community and society where the business is set up. This includes ensuring that every participant of the supply chain – from employees to dealers – are employed fairly, considering human right and labour laws, and ensuring a safe and efficient working environment.

2. Environmental responsibility

This requires the business to protect the environment from any impact caused by the business which can be hazardous to biodiversity. It includes all the activities from business operations, suppliers, and partners.

The environmental responsibility applicable in the supply chain needs to have a set of considerations that can vary for different operations within the organization. Businesses need to understand different ways in which strategies will impact the business.

Once the business has a clear idea of activities and their environmental impact. The business also needs to look into the adherence to relevant environmental laws and other obligations.

3. Financial responsibility

The financial responsibility of the business involves looking into the financial matters of the business – shareholders, customers, partners, and institutions. It entails the compliance of laws and allocation of funds for different functions. It also includes financial planning for the supply chain, management of different risks, and covering insurance.

How can a business build a sustainable supply chain?

There are specific steps that businesses need to follow to start making the value chain more sustainable. Initially, look into the baseline of the current supply chain and check which activity needs to be worked on. Figure it with the feedback from stakeholders and create a thorough draft for the sustainability plan.

The business should analyse the entire supply chain and break it down into different elements and individual participants. It helps to identify the area of improvement. While some of the elements are easy to locate, it can take some research and survey to check where the emissions can be improved.

Many elements need to be improved, it can either be over the concerning hazardous chemicals, risking the working condition of the employees and maybe even the office.

Usually, the supply chain starts with procuring the materials, shipping them to the manufacturer, then to distribution centres, and finally to the customer. After consumption, the product that has been used ends up in the waste.

A sustainable supply chain would be circular, which would aim to eliminate waste. The business can create new ways and steps to recycle products and send them to manufacturers.

Fuel reduction is the next step for a sustainable supply chain. It is more than just eliminating excess drivers but also implementing fuel-efficient driving instruction that can help to create a major difference in costs and emissions.

2. While some corporations can manage their whole distribution network, many work with suppliers, transportation providers, and other intermediaries. Even though you won’t directly oversee their activities, you are not compelled to write off some of these elements in your green supply chain.

This does not mean that you should demand more from each of your providers. Support and recognize individuals who adopt sustainable lifestyles instead:

Regularly discuss ecology in your discussions.
Increased sales
Recognize and award winners
Distribute the price of environmental advancements

Tips for building a sustainable supply chain

You can start by creating a sketch of the supply chain and create a list of the suppliers. Determine the sustainability challenges and get detailed reports of the ESG impact. Now, you can work through reducing the intermediates in the business so that sustainable impact becomes easier to track down. New initiatives, ideas, and plans can be drafted to create better approaches and relationships that can be more successful.

There are many ambiguities about expectations set by suppliers. There are resources and tools for creating a better code of conduct that address many problems arising in the supply chain.

For sustaining the better performance of the value chain, it is important to implement education and training for the stakeholders and the participants of the supply chain. The businesses have to understand the potential of the ESG credentials and comply with the standards suggested. Education can help workers be aware of the implication of carbon emissions that the company produces – and steps that they can take to prevent them.

Besides the above-suggested changes, businesses can choose to work with value chain partners that can help to decarbonize the supply chain and choose low-carbon alternatives. Companies can work together to value chain standards and principles, that can also be applied in the operations.

Benefits of supply chain sustainability

The benefits of having a sustainable supply chain are not just restricted to complying with the legislation norms. They actually bring a lot of additional advantages to the business.

These are several benefits of a sustainable supply chain, including:

Environmental protection: Sustainable supply chains minimize the environmental impact of production and consumption. This helps to conserve natural resources and reduce greenhouse gas emissions.
Social responsibility: Sustainable supply chains prioritize fair and ethical business practices. This helps to ensure that workers are treated fairly and have access to decent working conditions.
Long-term viability: Sustainable supply chains help businesses to save money and improve their bottom line. This can contribute to the long-term sustainability of businesses and the overall health of the economy.
Customer satisfaction: Sustainable supply chains help businesses to build a positive reputation and increase customer loyalty. This can help businesses to attract and retain customers, and improve their market share.
Regulatory compliance: Sustainable supply chains help businesses to comply with regulations and avoid fines and penalties. This can help businesses to avoid legal and financial risks, and maintain their license to operate.

FAQs

1. What is a supply chain?

A supply chain is the network of activities, organizations, and resources involved in the creation and delivery of a product or service.

2. What is meant by a sustainable supply chain?

A sustainable supply chain is one that operates in an environmentally and socially responsible way, while also being economically viable.

3. What is supply chain sustainability?

Supply chain sustainability is the practice of ensuring that the supply chain operates in an environmentally and socially responsible way, while also being economically viable.

4. What Is Sustainable Supply Chain Management?

Sustainable Supply Chain Management is the management of the supply chain in a way that meets the needs of the present without compromising the ability of future generations to meet their own needs.

5. What are the 3 elements of supply chain sustainability?

The three elements of supply chain sustainability are environmental, social, and economic.

6. Why is supply chain sustainability important?

Supply chain sustainability is important because it ensures that the supply chain operates in a way that is environmentally and socially responsible, while also being economically viable. This helps to protect the planet, its people, and the economy.

7. How can supply chain be sustainable?

Supply chain sustainability can be achieved by implementing sustainable practices such as reducing waste, using renewable energy, and ensuring fair labour practices.

8. Why is sustainability important in SCM?

Sustainability is important in Supply Chain Management (SCM) because it helps to protect the planet, its people, and the economy.

9. How can we achieve sustainability in SCM?

We can achieve sustainability in SCM by implementing sustainable practices throughout the supply chain, from sourcing raw materials to delivery of the final product.

10. What are the 5 pillars of supply chain?

The 5 pillars of supply chain are Planning, Sourcing, Making, Delivering, and Returning.

11. What are the biggest challenges to supply chain sustainability?

The biggest challenges to supply chain sustainability include lack of transparency, lack of regulations, and lack of technology to track and monitor supply chain activities.