Sustainability means meeting our current needs without endangering the future. Here are the three elements of the supply chains that move us closer.
Supply chains are incredibly complex systems that span the globe. Forming a sustainable one is not easy. According to the EPA, sustainability ultimately rests on the environment's integrity. We need systems that care for it and arrange conditions such that we can meet our needs without endangering our prospects for the future. So, what does a sustainable supply chain look like? This article will lay out its 3 essential elements.
The Environment Is on Borrowed Time
Businesses have a responsibility to the environment. Not only should they ensure their local operations do not pollute or consume excessive resources, but they must also be aware of their suppliers' impact. Every product has a lifecycle, and each stage, from mineral extraction to retail, has the potential to harm the environment.
There are three fundamental questions each business should ask of its upstream and downstream partners. First, how much waste do they produce, and how do they handle it? Next, how much water do they consume, and in what state does it return to the environment? Finally, what is the impact of their operations on the local flora and fauna? Depending on the answers, it may be necessary to consider finding new partners.
In addition, companies with international connections ought to familiarize themselves with general standards where applicable. For example, the Paris Agreement binds over 196 jurisdictions worldwide, pushing for carbon neutral and zero-carbon solutions. Likewise, CDP is a not-for-profit charity that runs an extensive disclosure system for governments, investors, and companies. As a result, they serve as the gold standard of environmental reporting and transparency.
Supply Chains Must Support Equity – Especially in Developing Nations
Many supply chains start on one side of the globe and end on the other, spanning different climates, cultures, and economies. Nothing is truly sustainable if it does not advance equity across all affected parties. Therefore, no link in a company's supply chain should violate the basic human rights of its workers and their families. Even better, employers should foster the well-being of their employees and respect and adhere to local laws and customs whenever possible.
Unfortunately, not all countries have equitable labor laws, so companies cannot always take their lead from local governments. Instead, they should adhere to international norms. For example, all workers should receive fair labor compensation and be free to bargain collectively for better pay. Furthermore, employees should be safe from harassment, violence, or discrimination based on gender, race, ethnicity, religion, or sexual orientation.
When possible, some businesses give back to local communities by donating money or time to build local infrastructure and invest in capital growth – financial and human. Engaging in these ways with a diverse roster of suppliers is crucial for advancing equity.
Moreover, geography is not the only determining factor of social inequity. So, genuinely sustainable supply chains include a wide range of suppliers from diverse communities that have faced discrimination. These businesses include, but are not limited to -
Businesses that take the time to build sustainable supply chains stand to reap many benefits.
Financial Practices Should Be Sound and Ethical
Although profit may be the least important element of a sustainable supply chain, it is the driver of growth once a supply chain has addressed environmental and social responsibility. A financially sustainable supply chain is one in which companies fulfill their financial obligations to all their partners, labor forces, and local communities. This outcome requires meticulous financial planning and risk management. Moreover, profitability cannot come at the cost of violating laws and regulations.
Navigating fiscal responsibilities is complicated, but the most common sustainable business practices fall into three domains. First, businesses should pay their suppliers in full and on time. Moreover, they must pay their employees and offer fair benefits. Next, companies should ensure they remain in compliance with all laws and regulations wherever they operate – no bribery, corruption, or fraudulent practices either. Finally, they need common-sense business fundamentals. Proper insurance, frequent audits, and operating within their means are great ways for businesses to ensure they stay solvent.
A Sustainable Supply Chain Yields Direct Benefits
Businesses that take the time to build sustainable supply chains stand to reap many benefits. For example, corporate stewards of the environment often cultivate incredible goodwill from local communities, especially in developing countries. In addition, financially sustainable businesses build trust along a nimbler supply chain.
Finally, and most importantly for individual companies, promoting employee equity makes it more likely they will remain in place, dedicating their skills and knowledge to the employers who treat them right. In fact, studies show that employees value social responsibility over a higher paycheck – an arrangement that can save money and increase performance.
3 Elements: Environment, Society, and Profitability
Companies that want to set up and participate in a sustainable supply chain have a lot of work to do. Good stewardship of the local environment is difficult for a single business, but a supply chain needs every stop along the way to do its part. Likewise, companies must ensure their partners meet social and financial obligations. Fortunately, the rewards for sustainability are huge, and companies that participate in an eco-friendly, equitable, and profitable supply chain will cement their place among the drivers of human progress.
Get Circular – Regardless of where your business sits in the chain, add reuse and recycle to your business plan. Every output from one process should be an input for another. For example, recycling plastic packaging into pellets for another industry.
Avoid Dead Mileage – If you have discretion over transport, ensure no vehicle moves from point A to point B without cargo. You can even rent out cargo space in your fleet for return trips!
Engage – If you have no discretion over transport, make sustainability a frequent talking point between you and your suppliers. Moreover, consider seeking out suppliers with an ISO-14001 designation for Environmental Management.