Sustainable supply chain management has been on the business agenda for 20 years but recent events like the Rana Plaza collapse in Bangladesh have moved it to the top of the list.
Today many stakeholders expect corporations to take responsibility for their entire supply chain network, reaching back to farm, mine or other raw material levels to provide transparency about their business practices everywhere they do business. Even if manufacturing has been outsourced, it doesn’t make a difference. From the stakeholder’s perspective, what matters is how the products and services are produced.
How does a company manage all these stakeholder expectations, regulations and their own business needs? How does a company match these needs with the right approach and resources?
Simply put, the best way forward for any company is to be proactive and open to scrutiny of their supply chain. And taking a holistic view of the entire supply chain can uncover hidden value and business benefits for the company. Before we’ll look at the basic steps to build and implement a sustainable supply chain strategy, let’s look at risks and opportunities.
Based on our experience working with customers in multiple sectors we have identified these top supply chain risks and opportunities.
The top 3 risks are:
- Ensuring social & environmental compliance
- Tracing chemicals and materials
- Managing sourcing risks
The top 3 opportunities are:
- Standardization and efficiency
- Circular economy and innovation
- Cost reduction
So, we can see that there are not only risks, but also opportunities and benefits to explore.
A recent PwC study on sustainable supply chain found that:
- 43 percent of operations professionals attributed cost reduction to sustainable supply chain initiatives
- 35 percent of reported improvements in their company’s environmental impact
- 25 percent saw improved customer satisfaction as a result of programs tied to improving supply chain sustainability
Once strictly a compliance-oriented initiative, sustainable supply chain approaches are becoming business value creators. Therefore, a business value framework is important to outline from the start.
However, there are significant difficulties managing sustainability in the supply chain and these difficulties need to be overcome in order to be successful. Some of these difficulties are:
- Fast-moving supply chains
- Lack of regulation or enforcement of regulation
- Lack of harmonization
Supplier has to respond to multiple questionnaires and audits with different content
So, for any company starting out on the sustainable supply chain journey, or looking to improve or strengthen it, these challenges need to be addressed up front.
The basic steps are:
- First, accept the fact. The expectations from stakeholders and your own responsibility will not go away.
- Second, understand your business and your supply chain (screen).
- Third, understand the status, risks and opportunities (scope).
- Fourth, build a substantial supply chain strategy, build it into the DNA of the company, i.e. into the procurement business process, and execute (scale).
The overall goal should be to build a sustainable supply chain platform based on five pillars:
- Social & Environmental Compliance
- Supplier & Product Sustainability performance
- Chemicals & Materials Traceability
- Industry Collaborations
- Supplier Capacity Building
When you begin work building your own strategy, it is helpful to learn from peers. Engage with them and ask them questions, such as:
- What are the most critical success factors when you build and execute a supply chain management program?
- What are the most difficult issues to tackle? Challenges?
- How do you work with other buyers when you share the same suppliers / factories?
- What about capability building?
- Examples of measurable results?
- Which data do you collect?
Once you have done your research and identified your own risks and opportunities in the supply chain, you can begin to build out your plan and your sustainable supply chain strategy.