Developing a Sustainability Strategy for your Supply Chain
Sustainability is often seen as one of the most overused terms today, and quite rightly so. In the most basic form, sustainability refers to responsible practices across environment, society and commercial health of any business.
This definition is referred to as the Triple Bottom Line and is arguably the most important factor for any business’ health. From global warming to the decline of many “once successful” firms, to societal issues like modern slavery; it is important for businesses to have a focused sustainability strategy now more than ever!
Importance of being sustainable
One could probably write a few books on the benefits of running sustainable businesses. However, one can summarise the benefits under five specific areas
Environment – By reducing emissions, managing waste and reducing energy consumption, firms can play a big role in preserving the environment. This not only has a positive effect on our natural resources but it also makes the planet a better place to live.
Society – With supply chains growing into larger complex organisms, there are emerging concerns about fair and beneficial business practices adopted by corporations. Being sustainable ensures businesses are not exploiting the communities they are operating in and contributing to their growth.
Financial Health – Sustainable business practices not only help in preserving the financial health of firms, but they also save companies from financial losses from any improper practices, any product recalls or any other wastes.
Legislation’s and Regulatory Compliance – By being sustainable, firms ensure they comply with any requirements of the land. The UK has been at the forefront of sustainability legislations and this is only expected to get more stringent.
Competitive Advantage – Customers are getting more and more cautious about how their purchases affect the environment. By being sustainable and communicating the same to their customers, firms can differentiate themselves from the competition and establish their credentials.
Why are firms hesitant?
Though firms understand the benefits of being sustainable, there can be reasons for firms to not walk the path. Most of the firms will fall under the following five reasons:
- Lack of overall understanding of sustainability
- Unclear metrics to measure sustainability
- Sustainability does not fit into the business case
- Supply chain partners not driven by sustainability
- Wanting to do everything at once, paying the price of ambition without prioritization
So how to develop a sustainability strategy for your supply chain?
We at 4C Associates employ the following six-step process to help our clients develop their sustainability strategy
- Map your supply chain – As the first step towards sustainability, it is important to map your product, information and cash flow across the full spectrum of your suppliers and customers.
- Segment your supply chain – Once mapped, it is important to segment your supply chain based on three dimensions: product/service, customer and the delivery mechanism. This is important as each of these segments will vary in terms of process, performance, and expectations.
- Establish realistic expectations – Many times, firms tend to set up unrealistic expectations mostly not in line with their core supply chain strategies; making it not only difficult to focus on sustainability, but also very costly to do so. It is quite important to take a step at a time and chalk out a 3-5-year journey plan towards sustainability.
- Identify KPIs, Measure Performance and Agree to Baselines – It is rightly said that you cannot improve what you do not measure. It is important to identify KPIs and carry out “honest” measurements across the supply chain.
- Develop training programmes – It is important to educate your internal and external supply chain partners on what you are trying to achieve and why is it important to do so. Any such expense in sustainability training should be seen as an investment in their future.
- Implement sustainability programmes – It is important to work with your suppliers, customers and internal teams to consistently identify sustainability initiatives across your supply chain. It is also important to continuously measure and communicate any sustainability success factors, as you would for any cost improvement or customer service measures.
In times when leading firms are facing issues on all three fronts – environment, society and commercials, it has never been more important to make an honest attempt on sustainability. But in order not to fail, it is important for businesses to consider their priorities and include sustainability as a part of their supply chain strategy.
So, what are your top 3 priorities for sustainability this year? Let us know in the comments below!