What Makes a Sustainable Supply Chain
Whether it is from the impacts of geopolitical tensions, the rise of modern technological threats, or the risks of climate change, never has the sustainability of the supply chain dealt with so many uncertainties and potential hazards. It is crucial for supply chain managers and those interested in becoming supply chain managers to understand the difficulties, the strategies, and the opportunities for advancement in creating supply chain sustainability.
From best practices for optimized logistics to the elimination of greenhouse gas emissions as part of a carbon footprint reduction strategy, this guide outlines the micro and macro issues facing supply chain managers. It's important to understand the major benefits of a sustainable supply chain, the challenges in creating and implementing sustainability practices, and where to learn about sustainable supply chain management.
What Makes a Supply Chain Sustainable
The supply chain is the series of steps involved in getting a product or service to the customer. It requires the moving and transforming of raw materials into finished products, transporting the sustainable products, and distributing them to the end user. Along the supply chain are producers, vendors, warehouses, transportation companies, distribution centers, and retailers. All of these various links within the supply chain represent cost, time, labor, and a plethora of challenges to the company's ability to efficiently serve their customers. It's easy to see that sustainable supply chain management is critical to lowering a company's overall costs, boosting profitability, and maintaining the consistency of performance and output by the supply chain.
Supply chain management is more than a company's operations and the distribution of a product or service. Whether it's product development, marketing, finance, or customer service, businesses rely on the entire supply chain completely. It is critical that a company's supply chain managers, industry leaders, chief operating officers, chief financial officers, and other C-Suite executives constantly monitor the sustainability and efficiency of the supply chain and the supplier performance.
So what makes a supply chain sustainable? It's a question of environmental pressures, technological challenges, and the inefficiencies that cost the company manufacturing resources, capital, and labor. As the need to develop supply chain sustainability has grown more critical due to modern obstacles, the conversation focusing on best practices has been enriched by professional and academic leaders sharing their voice, perspective, and proposed models. In one study of how to best build sustainability with a heavy focus on conscientious and cost-effective oversight, Cory Searcy of Ryerson University presents a four-part model for supply chain management:
- Operating Legally - Whether in manufacturing, technology, pharmaceuticals, or any other supply chain practices, the complications from legal obstructions will constantly threaten the sustainability of the entire supply chain. However, addressing the legal ramifications and ensuring no disruptions from these issues is the first and most essential step in developing a sustainable supply chain.
- Operating Ethically - Supply chain ethics usually denotes freedom of employment and association, eradication of child labor, safe and hygienic working conditions, appropriate pay and working hours, humane and non-discriminatory treatment, anti-bribery and corruption, and environmental awareness. In 2017, it was estimated that two-thirds of corporations ignored corruption in their supply chains. If a company's supply chain is to be deemed sustainable, overcoming the trappings of ethical dilemmas is paramount.
- Operating Responsibly - Next is to be responsible, or to "do more good and less bad." For many companies, the challenge of having social responsibility and operating with a greater interest beyond just bottom-line results has become part of the communications strategy. For example, Sony offers consumers and interested parties to review their supply chain in a "Responsible Supply Chain" section of their website. Through this material, Sony is able to address the sourcing of materials, the company's code of conduct, the structuring of manufacturing and operations, and match fiscal objectives with supply chain management and sourcing responsibility.
- Operating Sustainably - To accomplish this, supply chain managers should examine practices, suppliers, and impact of all operations of all companies within the supply chain. Fortunately for those responsible in making these adjustments, which may be great in size and complication, many companies world-wide are making a concentrated effort to build a more sustainable supply chain and operate within environmentally, legally, ethically, and sustainably conscious ways. Not only has this resulted in greater sustainability, but for some companies, it has actually created a competitive advantage. One condition that can slow a company's growth is poor sustainability performance.
While many theorize about the best practices for sustainable supply chain management, more and more C-Suite executives are being challenged by internal and external pressures to evolve their management style to adhere to 21st century supply chain management techniques. The complications of trying to modernize a company's supply chain while remaining profitable and growing, despite the impact of additional costs, requires valuable executive-level talent capable of maintaining bottom-line standards. Chris Tyas, Nestlé's Senior Vice President, Supply Chain, is one executive who recognizes the benefits of a sustainable supply chain not merely for the organization, but for the individuals leading the operation. Envisioning a future that has more CEOs with supply chain management backgrounds and even greater integration of technology into the supply chain, Tyas believes both the executives and employees along the supply chain will be empowered by the move towards sustainability, while simultaneously enhancing the capabilities and the effectiveness of the operation. Nestlé, in an effort to educate shareholders and the public about their strategy for sustainability, publishes a Sustainability Review annually to share the company's core values and principles regarding supply chain management, sustainable economic performance and development, environmental practices, and social development.
The demand for immediate action towards sustainability has prompted even the financial community to rethink investment strategies. In 2019, Goldman Sachs announced a plan for " sustainable finance," dedicating $750 billion by 2030 towards sustainable financial growth and empowering the firm's Sustainable Finance Group to lead investment decision-making. The firm's support for sustainable supply chains and sustainability initiatives signals a positive step for industry, but does not halt the environmental impact of outdated supply chains. Still, Goldman is leading the way with their latest announcement that the firm's lending to companies in industries with a negative climate-impact, like oil and coal, will be reduced compared to past investments.
While this recent declaration by Goldman Sachs continues Wall Street's redirection towards more modern supply chain concepts, endorsing a sustainable marketplace is consistent with a growing trend for all businesses. There are many examples of companies making efforts to reach sustainability. Here are some notable sustainable initiatives introduced in the past few years:
- VF Corporation -one of the largest apparel, footwear, and accessories companies in the world-has committed that all their cotton sourced outside the U.S. or Australia will be the product of cotton-growing sustainability schemes by 2025.
- Wal-Mart not only placed a strict policy to cut off suppliers whose manufacturing, processing, and distribution methods contributed to carbon emissions, but their retail stores also utilize 100% renewable energy sources and their transportation systems maintain fuel-efficiency.
- Coca-Cola has partnered with the World Wildlife Foundation to launch a partnership to conserve the world’s freshwater resources. The company then expanded efforts to start the Water+ commitment to maintain health and resilience for freshwater basins in 11 key regions including the Amazon, Koshi, Mekong, Rio Grande/Bravo, and Zambezi. Through Water+, Coca-Cola has set sustainability targets for 2020 which include: Climate Protection – reducing CO2 emissions by 20% and reducing the carbon footprint across manufacturing, packaging, delivery, refrigeration, and ingredient sourcing. Renewable Packaging – developing packaging using plant-based materials including a PlantBottle. * Water Efficiency – improving water use efficiency per liter of product produced through operational advancements in the Coca-Cola manufacturing system.
With an understanding of the steps necessary to make supply chains sustainable, as well as examples of companies making efforts towards their best practices, the future of sustainability is bright, if demanding. Businesses can improve their supply chain management team and supply chain sustainability by offering enhanced educational opportunities.
Why the online MSSCM from Haslam?
Businesses interested in reaching supply chain sustainability or making advancements to their supply chain management team should consider providing their current C-Suite executives, as well as future executives and mid-to-senior level employees, with the opportunity to receive advanced degrees in supply chain management. Among the best options for individuals interested in becoming a supply chain manager or chief supply chain officer are online master’s degree programs, such as the online Master of Science in Supply Chain Management (MSSCM) from the Haslam College of Business at the University of Tennessee, Knoxville. Haslam’s online MSSCM is taught by an expert faculty of supply chain professionals who can speak to all aspects of the end-to-end supply chain, provide real-world perspective for working professionals tackling supply chain challenges of their own, and offer a curriculum that will provide the skill set to identify and eliminate hindrances to a company’s supply chain sustainability.
Businesses interested in reaching supply chain sustainability or making advancements to their supply chain management team should consider providing their current C-Suite executives, as well as future executives and mid-to-senior level employees, with the opportunity to receive advanced degrees in supply chain management. Among the best options for individuals interested in becoming a supply chain manager or chief supply chain officer are online master's degree programs, such as the online Master of Science in Supply Chain Management (MSSCM) from the Haslam College of Business at the University of Tennessee, Knoxville. Haslam's online MSSCM is taught by an expert faculty of supply chain professionals who can speak to all aspects of the end-to-end supply chain, provide real-world perspective for working professionals tackling supply chain challenges of their own, and offer a curriculum that will provide the skill set to identify and eliminate hindrances to a company's supply chain sustainability.
Learn more about Haslam's online MSSCM today.
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