Companies strive to make their supply chains sustainable for several reasons, including protecting their reputation, cutting costs and improving operational risk management.
To create a sustainable supply chain, businesses should first set sustainability goals and monitor them; additionally, they should require their suppliers to do the same.
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Many companies lack the visibility, data analytics and comprehensive programs necessary to reach their sustainability objectives, hindering green initiatives as companies struggle with making an effective business case for upfront costs associated with green initiatives.
Consumer businesses should work to reduce their environmental, social and governance (ESG) impact through supply chains. Supply chains account for as much as 90% of greenhouse gas emissions while impacting air, water, biodiversity and geological resources.
Consumer companies implementing ESG strategies can use them as a key way to meet customer demands – particularly among millennials, who seek purpose in their work – as well as create long-term value, retain talent and compete against suppliers that prioritize sustainability. Companies can enhance their ESG performance by setting measurable goals that align with wider sustainable ambitions, and encouraging collaboration at all levels. They can also drive efficiency by adopting technologies which reduce waste and carbon footprints. Examples include a road builder who switched to locally sourced asphalt, a fast food company which redesigned its packaging to eliminate repackaging and reduce waste, and an electronics manufacturer who requires its suppliers to sign a code of conduct compliance declaration.
At many businesses, their supply chains account for the bulk of their environmental impacts due to energy-intensive production and transportation processes. Companies can reduce waste significantly by adopting sustainable practices that cut energy usage such as using eco-friendly materials, optimizing transportation routes and cutting excess inventory/packaging levels.
Companies with significant purchasing power have the ability to exert influence over the sustainability practices of their suppliers. More recently, consumer companies have started taking steps to use this leverage against their suppliers’ business models; outdoor clothing company Patagonia requires its suppliers to meet specific environmental standards as an example.
Businesses can create sustainable supply chains that reduce their carbon footprint by using closed-loop recycling systems. This approach helps limit how much waste ends up in landfills or incinerators. Clothier shops, for instance, could include accurate measurements in their products to reduce returns due to wrong sizing issues; additionally, returned clothing could even be recycled into new garments or furniture products.
Reduce Carbon Footprint
Consumer companies’ supply chains typically account for far more of their emissions and environmental impacts than their own operations. That makes supply chain initiatives an ideal target area to prioritize for ESG initiatives.
Transport accounts for one of the greatest contributors to carbon emissions, so shifting towards more energy-efficient types of fuel can significantly lower emissions for businesses. Working with suppliers that offer sustainability scoring programs may also help businesses meet their sustainability goals more easily.
Road builders who previously purchased asphalt on price alone can now source it locally to decrease shipping distance and CO2 emissions, while plastic pallet pooling providers offer shipping containers that are up to 30 percent lighter than pooled wood containers, saving fuel costs while simultaneously decreasing CO2 emissions for each shipment.
55% of companies that launched supply chain sustainability initiatives expect increased operational risk management within three years, in addition to cost savings. Achieve success requires taking an all-encompassing approach including sourcing/procurement/manufacturing/logistics/distribution.
Partner with Suppliers
As consumers increasingly demand sustainable business practices, companies have begun partnering with suppliers who demonstrate transparency to enhance the impact of their investments. Assessing and auditing supply chains are effective tools for this effort.
Shipping online shopping orders in smaller boxes reduces waste and dimensional weight, thus cutting packaging costs while helping companies reach sustainability goals without breaking the bank.
Implementing a supplier code of conduct is crucial for creating an eco-friendly supply chain, and will serve to communicate expectations to all parties involved and assess response rate from suppliers. Doing this allows you to monitor whether they are meeting environmental, social and economic responsibilities as promised – something a standard business agreement cannot do! It ensures a truly collaborative partnership that supports your sustainable business goals.