How to Increase Business Impact with Supply Chain Sustainability

Sustainable practices in the supply chain have today become a key component of corporate sustainability goals.

Supply chain sustainability involves the management of environmental, social, and economic impacts of the delivery of goods and services to the market. It also requires compliance with regulations that support sustainable business operations.

Integrating supply chain sustainability into their operations enjoins firms to engage with all their stakeholders, right down to the raw material producers.

The ESG of Supply Chain Sustainability

Supply chains are vital links connecting a business’s inputs to its outputs. Typically, supply chains were focused on managing costs, timely deliveries, and reducing transportation times.

Of late, increased awareness among customers — of the environmental, economic, and social costs of supply chains has compelled more and more businesses to focus on building supply chain sustainability. Also, businesses now understand that they need to extend their attention to the business operations of their suppliers and customers.

Environmental: This usually gets the most attention. Businesses focus on minimizing their carbon footprint, packaging waste, water usage, etc. Besides having a positive environmental impact, these practices also produce a positive financial impact. For example, recently, Walmart advocated less packaging and recycling packaging material. Reducing/re-using packaging had a positive environmental impact, helped lower costs, and delivered a positive financial impact.

Social: The social aspect of sustainability requires a business to elicit the support and approval of its employees, suppliers, customers, other stakeholders, and the larger society that it operates in. Essentially, this promotes fair treatment of all the people who help run the supply chain and pushes the business towards being a responsible community member - locally and globally.

Is the business’s supply chain being staffed with child labor? Do employees have safe working conditions, and do they receive fair wages? These are some of the questions that the social pillar forces businesses to contend with.

Governance: The governance aspect includes compliance, good corporate governance, and the alignment of the interests of the business’s boards of directors with the interests of the shareholders, customers, and the community. Good governance includes adhering to transparent accounting methods, avoiding conflicts of interest in choosing board members, etc.

A business implements sustainable practices by minimizing the consumption of limited resources or by adopting alternative resources that have a lesser adverse impact on the environment.

Also read: 5 Steps to Building a Sustainable Supply Chain

Why sustainability matters for businesses

The three pillars of sustainable supply chain help businesses organize disparate business practices under one common goal that ultimately benefits the environment and the community.

• For businesses, building sustainable supply chains requires addressing questions related to their business processes that could hurt the environment and the community.
• Beyond the social impact of benefiting the community and the environment, sustainable supply chains enhance the long-term profitability of the business. For example, adopting sustainable practices that benefit the community brings goodwill to the business. This prompts people to purchase the business’s product - helping profitability.
• Sustainability presents businesses with a larger purpose. In practical terms, it nudges firms towards basic business goals - efficiency, sustainable growth, and shareholder value. This also involves adopting best practices such as continuous improvement, community engagement, employee engagement, etc.
• As the trend for supply chain sustainability strengthens, businesses without a sustainability plan will face a market penalty.
• Sustainable practices encourage businesses to publish sustainability goals and report progress in achieving them. This keeps the community informed on the business’s use of resources, the net impact of its operations on the environment, and its plans for even greater adoption of sustainable practices.

Also read: How Enterprises Can Create Value With Renewable Energy

A long-term commitment

The three pillars of sustainability demand accountability across the value chain — from the business, the suppliers right up to the retailers. If sustainable supply chains become the determining factor providing the competitive edge, it could reconfigure many global supply chains primarily driven by low-cost production. For that reconfiguration to occur, supply chain sustainability will have to further evolve from just being a trend to being a true commitment. 

Explore how GEP’s supply chain software and supply chain services are helping leading enterprises make their supply chains sustainable.