5 Steps to Building a Sustainable Supply Chain

It would not be an exaggeration to say that supply chains drive today’s global economy as they move goods and services across geographies. And a sustainable supply chain has become a key component of corporate sustainability.

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

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

Here are five steps that businesses can take to achieve supply chain sustainability:

1. Conduct detailed supply chain mapping

The first step in any change process should be gaining complete understanding of the business’s current ground realities. Begin building a sustainable supply chain by mapping the flow of goods from the manufacturer to the consumer. While undertaking this supply chain mapping, keep sustainability as the point of focus. Focusing on sustainability implies paying attention to resource consumption, wasteful activities, and process efficiency.

Such a sustainability-focused mapping will help the business track how labor and resources are employed at each stage of the supply chain and identify specific areas of improvement. Software mapping tools are also available that enable businesses to get a detailed picture of their supply chains. These software mapping tools help trace every product from the raw material stage to the final product, identify every supplier, assess regulatory and political risks, and conduct system audits.

2. Engage with suppliers

For the success of the sustainable supply chain, it is imperative that all the suppliers in the network also adopt sustainable practices. Businesses need to engage with their suppliers and encourage the adoption of sustainable practices – by laying down compliance standards and performance metrics and conducting periodic audits.

Businesses should also work with their suppliers to help them implement new processes aligned with collective sustainability goals. For ongoing and consistent engagement with suppliers, the following may also be undertaken:

• Delivery of training programs on sustainability best practices
• Defining and communicating expectations on sustainable supply chain operations
• Instituting recognition/rewards programs for achieving sustainability goals

3. Set goals and define metrics

After having identified the focus areas for sustainability, the next step is to define metrics and KPIs. For any meaningful determination of KPIs, sustainability benchmarking is critical. Benchmarking helps identify areas of improvement and establish KPIs/KRAs that challenge the business to strive for best-in-class performance.

After sustainability benchmarks for the business have been established, institute a governance mechanism to track and monitor the progress of sustainability plans. This could be done through the measurement of revenue, profit, waste, etc. during the period under consideration. Periodic monitoring of KPIs/KRAs helps the business identify parts of the supply chain that have suboptimal performance. Metrics and audits help the business monitor growth and assess the effectiveness of its operations by evaluating results against defined metrics.

4. Leverage technology

The size and complexity of global supply chains necessitate the deployment of supply chain technology to identify areas of weakness and opportunities to improve supply chain management. For example, software tools for inventory management can be used to improve the procurement process and minimize inventory carrying costs.

When a business has hundreds of first-tier suppliers, collecting information on their performance can be a daunting task. Here, cloud-based software tools can simplify collection of real-time data for the evaluation of supply chain performance. Data analytics and AI/ML-powered tools can help businesses identify the most efficient and sustainable shipping routes. Data can also help identify the challenges of sustainable supply chain management – to enhance process efficiency through resource sharing between supply chain partners (for example, through shared shipping/warehousing, etc.) This can have a sizable impact on sustainability goals through reduced emissions.

5. Promote collaborative networks

The positive impact of one sustainable business on the environment can be multiplied through collaboration across all the businesses in the industry or even across industries. Businesses in the same industry can have shared supply chains. Collaboration among businesses on sustainability issues in supply chain management will promote the evolution of eco-friendly sustainability standards and processes.

Collaboration across industries helps in the recycling and repurposing of products after they have fulfilled their primary purpose. Repurposing discarded materials helps in recycling and promotes supply chain sustainability. 

Establishing a sustainable supply chain is not a one-time activity. Benchmarks evolve, metrics need to be fine-tuned, training needs to be ongoing, and the entire process needs repeated iterations. Sustainable supply chains not only deliver environmental impact, but also provide business impact by helping reduce operating costs.