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What Are the Benefits of a Sustainable Supply Chain?

28 October 2021

Sustainability is an integral part of the business models of leading organisations these days. They’re urged to implement corporate sustainability by not only consumers but also investors, government regulations, competitors, and even employees.

But eco-friendly initiatives that focus only on the internal operations of a company won’t go a long way. Instead, organisations are prompted to review their supply chain by adopting the triple bottom line approach. This means that they need to interlink their social, environmental, and financial performance with a broader sustainability strategy.

Such grassroots sustainability initiatives are more cost-effective in the long run. They come with a wealth of additional benefits, including cost efficiency, minimised environmental impact, and increased reputation. Here is how your business can reap the benefits of a sustainable supply chain.

The importance of a sustainable supply chain

The purpose of a supply chain is to produce and deliver a final product or service to an end user. This is done through the networking of different organisations, the main ones being a company and its suppliers. The steps, information, and resources that are involved in the whole process are also taken into account. With effective supply chain management, you can minimise your costs and enhance distribution.

If you want to increase the efficiency of your supply chain, you can implement sustainability initiatives across the full lifecycle of goods and services across social, environmental, and economic practices. These are outlined in the 10 practical steps to supply chain sustainability compiled by the United Nations Global Impact. Some of the steps include:

  • the promotion of ethical labour
  • the advocacy of environmental responsibilities
  • the protection of human rights.

So why is a sustainable supply chain important? Because it offers long-term value for all of the stakeholders involved in the process, from the production of goods and services to their distribution. Moreover, it offers you full transparency in line with international regulations for sustainable business conduct. Managing your supply chains is so important that scholars believe that within the current business environment, one supply chain is competing against another, instead of one company against another.

Benefit #1: cost efficiency

What can the successful management of a supply chain sustainability result in? First and foremost, long-term cost reduction is on the agenda! Yes, an initial investment is required, however, the reduced waste and improved machinery efficiency can result in a substantial financial return and reduced carbon emissions.

One company that lowered its production costs and strengthened its profits is Nike. Through reducing labour expenses by up to 50% and decreasing material usage by 20% on some of its trainers, Nike increased its margins by 0.25%.

What can significantly benefit the efficiency of a sustainable supply chain is digital transformation. A study carried by PwC surveyed over 6,000 senior supply chain executives between 2019 and 2020 and found that those who adopted digital supply chain technologies (Digital Champions) experienced a 7% drop in supply chain operations costs. 55% of the Digital Champions said that the pandemic has made the investment in supply chain sustainability a top priority.

Benefit #2: minimised environmental impact

Traditional supply chains tend to harm the environment. Toxic waste, water pollution, and increased greenhouse emissions are only some of the negative effects of a standard supply chain. On the contrary, a sustainable one that adopts the triple bottom line approach can promote greater eco-consciousness.

Environmental responsibility is at the core of consumers’ behaviour. According to a recent report by Unilever, 33% of consumers are supporting brands based on their social and environmental impact, and this is predicted to increase.

A case study done on P&G’s environmental initiatives shows that the majority of consumers are willing to invest in sustainable products if they’re matched by quality. P&G is leading the way to establishing a new industry standard for supply chain evaluation, which will result in increased efficiency and reduced environmental impact. The company has published a Supply Chain Environmental Sustainability Scorecard which tracks improvements on key partner-related environmental sustainability measures in the supply chain. These measures cover water usage, electric vs fuel energy use, direct vs indirect greenhouse emissions, and environmental management system.

Benefit #3:increased reputation and loyalty

A company’s green reputation has a direct impact on consumers’ purchasing behaviour. If you want to increase your business growth, you need to pay special attention to your reputation and aim to increase loyalty.

What consumers are concerned the most with are ethical labour and fair working conditions. You need to engage your employees in green team activities, such as planting trees, attend eco-awareness sessions, and invest in sustainable warehouse workwear.

If you can prove your green credentials and show that you’re taking your environmental impact at heart, you stand a higher chance of attracting new customers. Vice versa, if you have flawed reputation, you can lose business and find it hard to rebuild your brand.

 

Companies are urged to adapt to the new requirement in today’s business environment: implementing a sustainable supply chain. Adopting small changes holds a wealth of benefits for your business, your employees, and the environment.

 

Sources

https://www.hbs.edu/faculty/Shared Documents/conferences/2015-strategy-research/Sustainable Supply Chains.pdf

https://image-src.bcg.com/Images/MIT_Sustainability_tcm9-125057.pdf

https://www.investopedia.com/terms/s/supplychain.asp

https://d306pr3pise04h.cloudfront.net/docs/issues_doc%2Fsupply_chain%2FSupplyChainRep_spread.pdf

https://graduateway.com/clockspeed-winning-industry-control-in-the-age-of-temporary-advantage/

https://compareyourfootprint.com/sustainable-supply-chains-important/#:~:text=A%20sustainable%20supply%20chain%20can%20massively%20reduce%20the,the%20process%20of%20bringing%20a%20product%20to%20market.

https://www.businessinsider.com/nike-saves-money-on-flyknit-2014-9?r=US&IR=T

https://www.pwc.de/de/digitale-transformation/connected-and-autonomous-supply-chain-ecosystems-2025-web.pdf

https://www.unilever.com/news/press-releases/2017/report-shows-a-third-of-consumers-prefer-sustainable-brands.html

https://pgsupplier.com/assets/content/Documents/Sustainability%20Scorecard/ProcterGamble_Supplier_Sustainability_Scorecard.pdf?la=ja-JP&v=1-201709290655&hash=784F83D42BBEF20AFB237B94853A27A541518F35

https://fortune.com/2020/06/03/business-corporate-social-responsibility-coronavirus/

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