January 26, 2024
What is Supply Chain Sustainability?

David Waterst rightly quoted

"Supply chain is like nature, it is all around us"

Correspondingly, supply chains are ubiquitous. From an international company to a conjugal family, each one of us contributes to a supply chain. 

For you to be able to buy a simple can of soda, there are multiple stages of production involving international transporters, export sellers and retailers who come together to deliver the product to you, the consumer. In simple words, a supply chain is a global network used to deliver products and services from raw materials to end consumers through a systematic flow of information, distribution and cash. It is a complicated network of global relationships and this very universality of the supply network is coming at a cost to the environment. Supply chains often involve energy-intensive production and transportation and so, for most companies this is where the bulk of their sustainability impact lies. Research suggests, a company's supply chain accounts for about 80% of its greenhouse gas emissions. Additionally, wasted water, wasted energy, wasted goods, pollutions, emissions, child labor, poor working conditions, environmental impact are all often a part of the supply chain. 

Conventional supply chains streamlined their efforts to master speed, cost and reliability of operations, but with growing awareness, companies are now inculcating goals to uphold their environmental and societal values. Sustainability is what draws a line between the socially responsible and irresponsible businesses. To keep up with the contemporary globalized economy, companies are directing this network to become a force of good with a triple bottom line: the people, the planet and the profit. 

Following are the benefits of having a sustainable supply chain:

Cost reduction:

With a sustainable supply network, the environmental impact is reduced exponentially, which results in increased efficiency of fixed assets and a reduction of waste, in turn, accounting for substantial savings. 

Walmart, a well-known retail giant, worked with its suppliers to reduce its greenhouse gas emissions as per its goal, which saved some major companies and its suppliers a combined $12.4 billion (2016). 

Nike achieved 0.25% higher margins, 50% reduced labour costs and 20% reduced material usage by just tweaking its supply chain.

Upholding a moral reputation:

In the current decade, where social media is usual, information regarding a company's supply chain is available easily which has a direct impact on the company's reputation. Supply chains with unfair working conditions, increased environmental impact etc, not only face monetary losses but are sometimes even boycotted.  

Growing with partnerships: 

A company with a sustainable supply chain attracts partnerships which can help the business grow in the long run. 

In 2011, major apparel and footwear brands like H&M, Adidas, Puma, Nike etc made a shared commitment to work towards the zero discharge of hazardous chemicals. They published a roadmap outlining their collaborative efforts in 2020. 

Sanisbury partnered with Vets to educate farmers with common health problems. This resulted in 55,000 cows producing 140 liters of milk which was more than the national average.

Continuity of supply:

In order to curb over-reliance on a single chain and to reduce cost downline, companies have multiple suppliers across the world to improve the continuity of supply. 

The 2011 floods in Thailand taught a lesson to hard drive manufacturers who were overly dependent on Thai companies. Many factories were idle during the time due to a lack of raw materials. As a result of which, the industry is now highly diversified with multiple suppliers. 

To accomplish the goal of having a sustainable supply chain, the following are the actions a company can take: 

  • By simplifying the supply chain and reducing waste, the quality of the supply chain can be enhanced and made more sustainable.
  • By bringing transparency in order to monitor and verify the working conditions and other environmental factors. 
  • Maintaining an accurate supply and demand plan in order to curb excess production.
  • By optimizing and laying out shorter routes in order to decrease fossil fuel consumption.

We, at Oren, are building technology to help you bring transparency to your supply chain. Our platform is the one-stop shop for all your company and supply chain ESG data. We help you bring efficiencies to your operations that'll make you a sustainability leader in your industry.

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