What is sustainability in supply chain management?
Sustainable supply chain management means taking responsibility for what happens in your supply chain. The activities in your supply chains impact the environment and have social aspects involving all stages of the chain, so you need to understand these.
Effective management therefore starts with mapping your supply chains, evaluating the impacts of your suppliers (including carbon emissions), and identifying your riskier suppliers. It then means working with them to address the risks and reduce negative impacts, which will make your supply chains more resilient.
Sustainable supply chain management also means collaborating with your suppliers on sharing best practice and innovation – working together over the long term to benefit businesses, the planet, and society.”
Sustainability in supply chains for large organisations can be enormously long and complex, with many steps throughout the chain being unknown or poorly communicated. Subsequently, supply chains can be difficult to manage – and that’s before considering improving efficiency and sustainability.
But with environmental and reputational pressures forcing sustainability to the forefront of companies’ future targets, improving sustainability in supply chains is paramount to their long-term success.
When it comes to refining its supply chains to incorporate a more sustainable edge, where should a company even start? Well, at the Crowd event on the 6th November, Anthesis facilitated conversations to establish some potential solutions to the challenges faced when creating a more sustainable supply chain.
Difficulties in Creating Sustainable Supply Chains
Throughout the roundtable discussions, it became clear that there are a large number of obstacles for businesses to address. Below are some of the key talking points:
- Firstly, there is no ‘one size fits all’ scenario when it comes to dealing with suppliers. Suppliers differ in size and operation, usually with specific needs and values, and their importance to the buyer and influence of the buying company also varies. Approaches to improve sustainability need to be tailored to the types of supplier.
- Supply chains are dynamic, and are prone to changes and adaptation over a long period of time. Companies need to continually map their supply chains and assess sustainability risks, and be prepared to adapt to be resilient. There are new tools and methods emerging to assist this process.
- Diversification can be important for a company to grow. However, this can come with a substantial increase in supply chain complexity. Some companies mentioned that an increased product range resulted in a 10-fold increase in suppliers, and hence a dramatic increase in the number of challenges to manage when aiming for sustainability.
- Around the table, it became apparent that it is rare for companies to have a sustainability officer or manager incorporated within their procurement team. This means that sustainability criteria are given little or no priority when selecting new suppliers or managing existing ones.
Suppliers who are more open and involved with their buyers have the potential to develop a competitive edge.
Five Ways of Creating a Sustainable Supply Chain
After discussing some of the key issues around implementing more sustainable supply chains, discussions naturally turned to potential solutions, which we have summarised into five main points.
1. Understanding the risks and opportunities in your supply chains
Mapping supply chains, evaluating the risk hotspots and identifying opportunities are the key steps. The focus should then be on the biggest priorities – don’t try and tackle everything at once but do the things that are important and will have the most impact in a reasonable time frame.
2. Setting sustainability targets within the procurement process is key
Sustainability targets should be developed and implemented into the procurement process, to promote and incentivise better consideration of sustainability by procurement teams and their internal clients. It was agreed that setting effective targets means that sustainability risks and opportunities are considered at the specification stage, and for procurement teams to take a role in achieving a company’s sustainability goals during their interactions with key suppliers. SMART goals are essential to ensure organisations reap real business value from supply chain initiatives.
3. What gets measured gets done
When sustainability goals are developed and agreed with suppliers within the initial agreement, they should subsequently be incorporated within the contract. Throughout the contract lifespan, continuous review should be carried out to assess progress towards the sustainability goals – and take corrective action where necessary.
4. Collaboration is key
In-depth discussion between companies and their suppliers seems to be an effective approach to addressing sustainability with the supply chain (for example the Tesco Supplier Network).
By working together and openly speaking about the challenges and potential solutions, it can help eliminate areas that are negatively impacting the sustainability of the chain, such as waste or poor labour practices. Leading on from this, suppliers who are more open and involved with their buyers have the potential to develop a competitive edge, by developing new, more sustainable pathways which lead to innovation and new business opportunities.
The concept of blockchain was mentioned throughout the conversation. There was a consensus that it had the potential to improve supply chain transparency, but the actual implementation of it was less clear.
The technology could help to address specific challenges that arise from intermediaries such as commodity traders, potentially minimizing their ability to corrupt the supply chain, or it could even cut them out altogether. The removal of unwanted or unnecessary steps can then lead to shortening of the chain, which can improve control and resilience and hence enhance sustainability.
The above points are just potential solutions and components to address to help achieve a more sustainable supply chain for your company. Here at Anthesis we can help you understand where the risks and opportunities are in your supply chains using our proven methods and tools, as well as helping to develop and deliver a prioritised action programme.
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