Supply chain sustainability has been building up steam in recent years, as consumers have become more environmentally and socially conscious and look to companies to do the same. But as the world gets evermore complex, so does the environment of a company it’s doing business in. As a consequence, more and more companies are extending their sustainability commitment to their value chains – from subsidiaries to suppliers, from packaging to transportation and waste management.
Today’s globalized economy is getting evermore complex. And this is why outsourcing business operations doesn’t mean outsourcing responsibilities or risks. Quite the contrary actually – managing and improving environmental, social and economic performance throughout its supply chain, a company can not only conserve resources and limit its negative impact on the natural and social environment, but also optimize processes, uncover product innovations, save costs, increase productivity and promote corporate values. But how can you effectively integrate sustainability into your company’s supply chain? Here are 5 steps to step up your supply chain sustainability game.
1. Locate and prioritize critical issues across the supply chain
Let’s be honest: Many companies don’t really have a comprehensive understanding of the sustainability impacts of their supply chain. This is why the very first step is to inventory your supply chain, identify the most significant environmental and social challenges e.g. for your suppliers, and prioritize efforts.
By now there are several measurement frameworks and instruments available that can help companies find the most critical sustainability issues in their supply chains. For example the Carbon Disclosure Project (CDP) and the Global Reporting Initiative (GRI) have created standards and metrics for comparing different types of sustainability impact. Also the World Wildlife Fund (WWF) offers more than 50 performance indicators for measuring supply chain risks.
2. Link your goals to the global sustainability agenda
Once you know where your supply chain issues are, you can set goals for lessening the resulting environmental or social impact. In doing so, you should at least base your goals on current scientists’ recommendations for bringing various types of sustainability impact under thresholds.
General Mills used science-based climate protection targets to cut emissions for its entire value chain. In fact, with more than two-thirds of its total greenhouse-gas emissions occurring in its supply chain, the consumer food corporate announced in late 2015 that it would endeavour to cut emissions “from farm to fork to landfill” by 28 percent within ten years. To reach this ambitious goal, the company is encouraging its agricultural suppliers to follow sustainable practices and has pledged to obtain 100 percent of ten priority ingredients from sustainable sources by no later than 2020.
But hey, going a step further and going beyond the at least necessary scientific recommendations not only makes you a true pioneer in supply chain sustainability, but also way more successful in the future.
3. Develop training and capacity building programs
To really improve sustainability and drive behavioural changes throughout your supply chain, you should enable knowledge transfer. One way to do so could be via leveraging best practices and top performer case studies at events, via online training modules or through capacity building campaigns. By showcasing the success stories of selected suppliers, you not only recognize their efforts but also demonstrate the practical benefits of sustainability initiatives to others in your supply chain.
For example multinational IT company Hewlett-Packard (HP) with its supplier- and peer educator-run programs provides trainings to and improves the well-being of a large number of workers. Since the beginning in 2015 120,000 supplier factory workers participated in 15 programs at 124 factories in 3 countries, bringing the total to 243,600 workers trained.
4. Assist your suppliers and hold them accountable
The purchasing power held by consumer companies and retailers gives them significant influence over their suppliers’ business practices. Relatively few companies in the consumer and other sectors use that influence to get their suppliers to reduce sustainability impact, though that is changing.
In recent years, companies have adopted more sophisticated and effective methods for changing their suppliers’ practices. They have gone from disseminating codes of conduct, performing audits, and fielding questionnaires to helping suppliers design and implement sustainability programs that directly support the companies own goals. For example both Walmart and Unilever launched software tools to help their suppliers become more sustainable – whether it is a program that makes their factories more energy efficient or an online tool helping to collect data about sustainable practices in agriculture.
Monitoring the sustainability performance is one thing. Holding your suppliers accountable for it the other. This is why communicating back to suppliers in a constructive way is critical for future engagement and helps you provide encouragement for improvement. Don’ be shy to set high standards for your partners. And of course, you should also be willing to stop doing business with them if they fall short; just like you do if the quality or timing is not right.
5. If you haven’t already, start now
As I said, building a sustainable supply chain has many benefits. For doing so, it’s never too early, but it can be too late. The path to true sustainability in your supply chain is already ahead of you – you just have to take action.
“Business is often taking the initiative to move things forward. Focusing only on the business case underplays the value that business is and should be providing in society and with regards to development.”
Mads Øvlisen, Chair of the UN Global Compact Advisory Group on Supply Chain Sustainability