Blog
Contents
TradeBeyond Blog
November 12, 2021

An In-Depth Guide to the Sustainable Supply Chain

Global Supply Chain container ship

To truly make progress on environmental problems, companies and organizations must understand that they are part of a more extensive system. That’s why the sustainable supply chain is so important.

During this guide, we will discuss everything you need to know about the following topics:

  • Environmental suppliers
  • The green supply chain
  • Sustainable supply chain management
  • The ethical supply chain
  • Green supply chain management
  • The responsible supply chain
  • And more

What is a Sustainable Supply Chain?

What does sustainability in the supply chain mean? Sustainability in supply chain management refers to a holistic view of supply chain logistics, processes, and technologies that affect the social, legal, economic, and environmental parts of a supply chain’s components.

Having a sustainable supply chain means identifying the source of raw materials, reducing your carbon footprint, and ensuring excellent conditions for workers.

The supply chain was historically all about logistics and simply knowing where and when goods were moving.

However, with the rise of the digital supply chain and the analytics tools and visibility that come with it, companies can see data about how well each part of the supply chain shows corporate social responsibility and sustainability.

This access to data and transparency has encouraged more responsible sourcing and supply chain partners to create and share best practices for green logistics and operations.

It has also enabled prospective partners to comply with industry standards for business ethics, worker safety, and environmental protection.

Several factors impact supply chain sustainability. These include:

  • Waste
  • Air pollution
  • Carbon footprint and emissions
  • Labor violations
  • Deforestation
  • Workers’ safety and health

The sustainable supply chain is based on the idea that socially responsible practices and products are great for the planet and people.

Still, they are also great for increasing positive brand awareness, improving long-term profitability, and reducing the negative environmental impact. A supply chain analyst or sustainability officer is tasked with showing supply chain sustainability in larger companies and organizations through sustainable supply chain management.

This role is all about creating programs and processes that support sustainability, qualify new suppliers, support supplier diversity policies, and ensure that quality performance and delivery targets are achieved.

Exciting Trends in Supply Chain Sustainability

Here are some of the top supply chain sustainability trends:

  • Ethical sourcing. To create an ethical supply chain, one needs to focus on environmental, human, and animal wellness. Sustainability focuses on environmentalism and social and economic health, so for a material to be sustainable, suppliers need to get it by respecting natural resources and human harvesters.

Many humane and ethical sourcing techniques are available, including practicing selective tree harvesting, offering paid maternity leave, and raising farmers’ wages.

  • Green materials. Green materials are any sustainable materials that reduce resource depletion, decrease acquisition costs, and reduce carbon emissions.

For example, in the textile and construction industries, green materials can include linen, cork, bamboo, and Tencel. All of these materials are renewable and require less power to create and harvest.

A material’s embodied energy is related to how much energy is needed to make it, from the procurement process to the refinement process. Adding green manufacturing to your green supply chain management efforts reduces the environmental impact and embodied energy.

  • Reverse logistics. Reverse logistics systems address how companies handle the products after they fulfill their purpose. Typically, recycling and reusing are encouraged, but products might go through other disposal methods if recycling and reusing are impossible.

    This strategy is often referred to as a closed-loop system when materials go out then come back for repurposing. Customers return recycled or defective products to the manufacturer, and these products become either a new item or waste.
  • Just-in-time supply chain management. Just-in-time supply chain management, also known as JIT supply chain management, involves putting materials in the right place at the right time.

    Manufacturers only bring in the supplies they need to avoid or reduce excess inventory, and JIT supply chain management allows organizations to prevent overspending on their materials and overfilling their warehouses.

    While this strategy can take some time and practice to put in place, it can streamline production when used correctly.
  • Efficient transportation. Transporting goods over a long distance can contribute to greenhouse gas emissions by burning fossil fuels.

    Making transportation more efficient can offset this issue by helping manufacturers track emissions, choose sustainable freight carriers, and use fuel-saving technology in moving their goods.
  • Green certification. It’s essential to get certified by green initiatives like LEED, Green Globes, and Energy Star to guarantee a commitment to sustainability.

    These initiatives ask that organizations meet extensive criteria in measuring their adherence to green practices.
     
    Supply chain certification means that businesses employ more environmentally conscious methods of gauging and improving their production methods.

Common Supply Chain Sustainability Issues

Several common supply chain sustainability issues include the absence of management systems for environmental suppliers as well as the lack of procedures for handling social problems like hazardous labor conditions, retaliation by supervisors, and sexual harassment.

There are also many suppliers with a large percentage of temporary workers and high turnover rates. This makes it hard to create excellent safety, environmental, and health programs—suppliers with dangerous working conditions, chronic overtime issues, and marginal ecological practices.

Several suppliers in the United States have high airborne chemicals and inferior systematic accident reporting.

These suppliers are connected to multinational corporations that are working proactively to encourage and improve sustainability.

If these multinational corporations are having trouble making sure that their suppliers adhere to sustainable supply chain best practices, smaller domestic companies are likely to struggle even more.

However, these multinational corporations frequently place orders that exceed the suppliers’ capacity or impose unrealistic deadlines, which leads suppliers to demand heavy overtime from their workers.

First-tier suppliers rarely concern themselves with their own suppliers’ sustainability practices since they often struggle with their own sustainability problems.

There are particular problems for multinational corporations attempting to manage their lower-tier suppliers since there is no direct contractual relationship. A specific multinational corporation’s business usually does not mean much to a lower-tier supplier.

Most lower-tier suppliers are not well known, so they don’t get much attention or pressure from non-governmental organizations (NGOs), the media, and other stakeholders.

Even when they pay attention to chronic overtime demands or sexual harassment issues, they often do not feel the need to address the problems. They typically only act when multinational corporations intervene in the problems.

It’s also important to note that lower-tier suppliers are usually the least equipped to handle sustainability requirements and needs.

They often do not have the sustainability resources and expertise needed to handle issues, and they are usually not aware of the accepted environmental and social practices and regulations.

These suppliers are often located in countries where these regulations either don’t exist, are too relaxed, or are not enforced. And they usually don’t know much about the sustainability needs imposed by multinational corporations.

That’s why lower-tier suppliers often lack environmental management programs and other programs to dispose of toxic waste.

Multinational corporations often don’t know who their lower-tier suppliers are, their capabilities, or their location.

This means that lower-tier suppliers are the riskiest supply network members, so multinational corporations should include both first-tier and lower-tier suppliers in their supply chain sustainability programs.

Sustainable Supply Chain Best Practices

There are many best practices and measures that companies can take to achieve a more sustainable supply chain:

  • Identify critical problems and areas of improvement. We recommend identifying any critical issues and areas of improvement across the whole supply chain.

    The environmental effect of a supply chain is a culmination of every step in the operation and production process. Hence, companies and organizations need to understand where the most risks and emissions are located to improve.

  • Use supply chain management and measurement tools. We also suggest using supply chain management and measurement tools to track progress and find any weaknesses.

    Organizations like The Sustainability Accounting Standards Board, the World Wildlife Fund, and The Sustainability Consortium have developed guidelines and key performance indicators, also known as KPIs, to help businesses reach their environmental goals.

  • Set supply chain sustainability goals that reflect global sustainability goals. Companies and organizations should model their efforts around government regulations and scientific recommendations to contribute the most significant impact to the global sustainability agenda and reach the goal of being carbon neutral. In addition, when you implement a green supply chain, you will minimize waste while improving your bottom line. This is due to the fact that a green supply chain lowers waste disposal costs as well as the need for environmental permits. 

  • Collaborate with other sustainable suppliers. To create a responsible supply chain, one must consider business decisions through the scope of environmental impact. As such, we recommend that manufacturers collaborate and combine resources with other sustainable suppliers to help their organizations reduce their environmental risks, costs, and waste.

    For example, these organizations can share modes of delivery to decrease their pollution and ensure that multiple half-empty vehicles are not sent out in the same direction.

  • Maintain accountability throughout the process. It is essential to put strategies in place to ensure liability, including implementing sustainability programs and teams, routine audits, progress reports, customer-facing goals, and software tools that track impact.

  • Purchase carbon offsets. Suppose your organization has less control over your supply chain, or you simply want to start creating an immediate impact on sustainability. In that case, you should look into purchasing carbon offsets, which are credits that can help negate your organization’s carbon emissions by investing in environmentally friendly initiatives.