Sustainability in the supply chain goes beyond traditional criteria of profit and costs, and embraces environmental and social aspects such as:
- Labor conditions
- Waste disposal
- Carbon emissions
- Impact on people and communities
in and around a company’s operations.
While addressing the supply chain and sustainability is a complex undertaking, it is also a business opportunity that can reduce costs and increase competitiveness.
Benefits of supply chain sustainability
According to the UN Global Compact, there are three main business drivers for a sustainable supply chain.
- A reduction of sustainability-related risks, like supply chain interruptions or delays, which might be associated with suppliers’ practices with regards to human rights, labour standards, environment and anti-corruption, while protecting the company’s brand value and meeting investors’ expectations.
- A focus on sustainability-driven productivity in the supply chain creates efficiency and can save money by reducing waste in raw materials, transport, and energy.
- A sustainable supply chain can lead to sustainability-advantaged growth, helping companies to foster innovation and meet changing customer demands.
Therefore, while sustainability in the supply chain can be difficult to achieve, a more sustainable supply chain helps improve productivity while saving money: when a business achieves visibility for the workings of its supply chain – a necessary prerequisite to improving its sustainability -- it can accomplish the optimization of practices and processes that improve the bottom line.
Here is a look at re some of the concrete, measurable benefits:
- Lower costs: as energy prices soar, squeezing the waste from facilities and logistics makes sense not only for the environment but also for the bottom line.
- Attracting investors: According to financial services firm Morningstar, Inc., investors poured nearly $600 billion into sustainability-linked equity funds in 2021, an increase of 53%. A sustainable supply chain is one of the things investors and bank lenders look for when assessing a company’s long-term viability.
- Reduced regulatory risk: The extraction of raw materials, unfair labor practices, and corruption are often targeted by government regulations. A supply chain that is vulnerable to these kinds of risks is a potential hazard for a competitive business.
- Consumer appeal: Several studies show that consumers are increasingly aware of supply chain issues, and some are willing to pay more for responsibly-sourced products.
- Compliance: Governments are taking a closer look at supply chain imports because of concerns about unfair labor practices and environmental pollution. The European Union has adopted a proposal for a Directive on Corporate Sustainability Due Diligence that would require sustainable supply chains, driven by its goal of achieving the United Nations' Sustainable Development Goals by 2030.