In recent years, consumers, investors, and governments have grown to care more and more about corporate social and environmental responsibility. This has led to the promotion of sustainable practices across various industries. However, companies are not only responsible for their own operations. A freight forwarder company also has to consider sustainability in the supply chain partners they utilize to manufacture and distribute their products.
As supply chains tend to be quite complex, achieving satisfactory sustainability standards is no easy feat. They are often the largest money pits and producers of waste in a company’s operations. However, this also means that they have the most room for improvement. In other words, there are many steps that businesses, big and small, can take to improve sustainability in their supply chains.
Let’s take a closer look at supply chains, what sustainability means in their context, and how companies can prepare for and approach the necessary changes.
What Is a Supply Chain?
A supply chain is an interconnected network of companies and facilities that take part in the process of producing, storing, and distributing goods or services. Depending on the industry, this can include manufacturers, warehousing facilities, distribution centers, third-party logistics providers, transportation companies, vendors, retailers, and more.
What Is Supply Chain Sustainability?
Supply chain sustainability is a set of practices a company adopts in order to promote both environmental and social awareness in its operational processes. The purpose of sustainable operations is to reduce the negative environmental impact and protect the people involved in any stage of the supply chain from unethical business practices.
Some of the most common sustainable practices include cost management and optimization, lowering transportation times and optimizing routes, utilizing eco-friendly resources, limiting carbon emissions, providing appropriate staff training, and more.
However, there is much more to sustainability than just adopting a set of practices and calling it a day. Let us take a closer look at why supply chain sustainability is important, how it works, and what challenges it can pose to third-party logistics providers and other participants in the supply processes.
Why Is Supply Chain Sustainability Important?
The importance of supply chain sustainability cannot be overstated. Nowadays, the average consumer cares more about the environmental impact of companies they do business with than they did even just a decade ago. Similarly, they are more acutely aware of unethical practices in terms of labor and human rights that may be taking place behind the scenes.
As a result, more and more people are making a point of avoiding companies whose business can be traced back to sweatshops, child labor, or other human rights violations, as well as high carbon emissions and other forms of pollution. In other words, businesses that don’t invest in sustainable practices risk losing clients.
However, beyond just consumer preferences, countries and states around the world have been introducing stricter legislation in terms of both social and environmental responsibility. For instance, in California, the Transparency in Supply Chains Act protects consumers’ right to insight into a company’s efforts to promote ethical social practices. Similar acts have been passed in the EU, Australia, Canada, and many other countries across the globe.
Ideally, however, none of these reasons should bear more weight than the simple ethical and moral drive to promote sustainable practices, ecological awareness and ethical operations. Despite all the efforts, human rights violations and ungreen business practices still run rampant in many corners of the world. By adopting a more sustainable business model, companies are making sure that they don’t play a direct or indirect part in allowing and perpetuating such practices.
Tiers of Sustainability
Most supply chains have up to three distinct tiers. Tier 1 includes all the partners that a business contracts directly (for instance, vendors or manufacturers). Tier 2, on the other hand, comprises the subcontractors of those partners (e.g., suppliers of materials that manufacturers use). Tier 3 includes tier 2 businesses’ subcontractors (for example, mining companies that produce said materials). Unfortunately, the insight into sustainability practices becomes less transparent with every tier.
Challenges of Creating a Sustainable Supply Chain
Despite sustainable practices being strongly promoted and encouraged in supply chain operations and management, implementing them can still pose several major challenges for companies:
– Cost: While running a more sustainability-focused business can pay off in the long run, the initial costs of shifting towards more sustainable practices can be quite steep, especially for smaller companies and suppliers.
– Planning: Promoting social and environmental responsibility isn’t a simple task. It requires thorough planning and readiness to respond to issues that arise along the way. Without proper training, a company’s personnel might not have what it takes to plan and prepare adequately.
– Transparency: One of the most common issues of supply chain sustainability is the lack of transparency, especially among tier 2 and 3 suppliers. Unfortunately, some companies use this fact to justify their lack of proactivity in taking steps toward a more ethical and eco-friendly business model.
Supply Chain Sustainability Best Practices
In order to tackle the challenges listed above, as well as take proper steps toward sustainable business operations, companies should adopt and follow a number of best practices:
– Understanding the supply chain: The first step toward improving sustainability in the supply chain is understanding its inner workings and identifying areas that should and can be improved.
– Maintaining a flow of information: All stakeholders in the supply chain should be aware of the planned changes and educated on how they can apply those changes for the best results.
– Choosing the right partners: Any company, tier 1 and tier 2 supplier should ensure to only contract those businesses that maintain transparent and sustainable operations and processes.
– Using renewable or eco-friendly materials and resources: In addition to choosing sustainable partners, companies can take steps to ensure that they use renewable energy, bio-degradable packaging, and other eco-friendly materials and resources.
– Setting clear goals: Thorough planning and clear KPIs are crucial for a successful shift towards better business practices, and sustainability is no exception. Having a clear goal in mind will ensure a company can take appropriate steps to reach it.
– Continually measuring progress: Companies should conduct regular internal audits to ensure the move toward sustainable practices is going according to plan and that the KPIs are being met within the prescribed timeframes.
– Revisiting the strategy: Sustainability is not a destination but rather a journey. Once a certain goal is reached, it leaves room for further improvement and new, more ambitious goals down the road.
A Work in Progress
Corporate sustainability is one of the crucial qualities of a modern business. Consumers and investors alike are actively choosing to do business with companies that care about the environmental and social impact they make. One of the most important things companies can do to meet these demands is to promote and achieve sustainability in their supply chains.
Although challenging, preserving consumer loyalty, adhering to the relevant legislature, and promoting ethical and ecological standards are worth the effort. Adopting relevant best practices and continually working on optimizing operational procedures are foolproof methods of achieving sustainability in the supply chain.