Supply chain sustainability: A norm for organizations
With the world's latest focus on environmental performance, supply chains worldwide are being watched, and demands for accountability are coming from both stakeholders and consumers. Blockchain-based supply chain traceability makes it possible to track the lifecycle of any product and allows companies to comply with new guidelines while backing up their claims and improving their efficiency.Blogs
Today’s supply chain leaders and companies are making their efforts to make their products and deliver their goods in a way that has less impact on the environment and doesn’t contribute to climate change, social inequalities, or injustice.
They are leaning towards the usage of Innovations such as blockchain-based traceability, which allows visibility along the value chain and is a top priority for 85 percent of global supply chain executives.
By doing this, companies are not only being accountable for their activities and helping achieve a more sustainable future, but they are securing their place on the table for the coming years since sustainable supply chain management is becoming a basic demand of consumers and a requirement to guarantee capital growth.
Read on to know why achieving supply chain sustainability is important, how to achieve it and why it is becoming a norm for organizations.
What is sustainable supply chain management?
Sustainable supply chain management addresses integrating environmentally and financially viable practices throughout the supply chain and product life cycle.
This includes the design, production, and development of a product; material selection (including raw material extraction or agricultural production); manufacturing, packaging, transportation, storage, distribution, product consumption, return, and disposal.
The last two decades have seen a worldwide push to improve the world´s focus on the environment. Companies and organizations worldwide are increasingly considering the environmental, social, and governance (ESG) performance of suppliers.
The concept of ESG, which was crystallized in 2000 by the UN Global Compact, has been followed by other initiatives such as the Kyoto Protocol in 2005, the UN Sustainable Development Goals (SDGs) in 2015, The Paris Climate Agreement in 2016, and the Glasgow Climate Pact in 2021.
Each of them underlies different sets of priorities, such as environmental stewardship, conservation of resources, carbon footprint reduction, and social responsibility. Still, the main focus remains on promoting sustainability for social equity and economic development.
The supply chain of a typical consumer company generates social and environmental costs far beyond those of its operations, accounting for more than 80% of greenhouse gas emissions (GHG) and more than 90% of the impact on air, land, water, biodiversity, and geological resources.
To walk towards a more sustainable future, the first step for any business is to know the level of environmental, social, and economic impact generated by its daily operations, and they should be able to answer these main questions regarding sustainable practices:
- Are my materials being sustainable? The answer lies in your suppliers and what goes into making their materials. Supply Chain Sustainability means looking at all the “ingredients” your product uses.
- Are my processes being sustainable? It is crucial to understand and measure your product’s current environmental performance footprint.
- Knowing how efficient your facility is and how to reduce its impact will enhance the overall efficiency of your processes. At the same time, you can benefit from cost reductions and be identified as an organization with a sustainability program.
- Can I confirm my sustainability commitment? Providing tangible proof of your sustainability commitments, endorsed by internationally recognized sustainability standards or Industry-specific sustainability certifications, will positively affect your standing in clients’
Why is a sustainable supply chain important?
To manufacture and sell goods, consumer companies need an affordable and reliable supply of energy and natural resources, as well as approval from consumers, investors, and regulators to do business. But due to environmental degradation and lack of accountability, companies can no longer take these factors for granted and are more likely than ever to face risks that directly impact them: water shortages, deforestation, air pollution, carbon emissions, child-labor violations, and worker health and safety issues.
The scientific consensus, along with pledges from governments and business leaders – including the heads of some of the largest consumer companies – are demanding dramatic improvements in sustainability performance.
According to a Mckinsey report, 90% of natural impact ( affecting air, soil, land) and 80% of greenhouse gas (GHG) emissions in most consumer-goods categories are in supply chains
Consumer companies will need to significantly reduce their products and services’ natural and social costs to continue growing without taxing the environment or human welfare.
These opportunities go beyond the obvious environmental, social, or governance benefits of a more ethically sound supply chain; they have the potential to create real value for your organization, your suppliers, and your customers. These practices are suitable for the planet but also support business growth.
According to a Lloyds Bank survey, almost two-thirds (64%) of small and medium-sized business owners want to improve their environmental sustainability, with financial savings being the primary motivation for doing so.
Regardless of the motivation, it is a fact that the drive to introduce green measures is not going anywhere. Becoming more sustainable is a gradual process in which organizations are increasingly being pushed to prove their contribution to the planet through sustainable practices to meet their corporate and social requirements.
To this end, some companies are leveraging new technologies such as blockchain-based traceability for their supply chains, allowing them to see their entire manufacturing process to know where they stand on sustainability requirements while enabling them to make smart data-driven decisions.
Blockchain-based supply chain traceability lets them operate resilient and sustainable supply chains and support sustainability claims.
How can I achieve a sustainable supply chain?
Resilient and sustainable supply chains offer a competitive advantage but require companies to have clear visibility along the chain and track both inputs and outputs. Blockchain technology makes it possible to see how materials and goods enter and move through the chain, from field to factory to customer.
The technology has been introduced at the most timely moment when supply chains worldwide face enormous customer demands in product sustainability assurance. Customers are eager to know if the product they buy is authentic, meets all standards, is legally sourced and manufactured, and has quality assurance.
Blockchain-based traceability has the potential to identify counterfeits or fake transactions, track product origin and supply chain activities while potentially facilitating paperwork processing, and examine and track product traceability.
Visibility and traceability can also help companies meet growing stakeholder demands for sustainable supply chains by ensuring that the sourcing of raw materials, their conversion into products, and their delivery to market do not cause any environmental, social, or economic harm.
Both resilience and sustainability are high priorities that executives cannot ignore. The pandemic highlighted the apparent dangers for any company with a supply chain that cannot operate in a crisis. But resilience also carries enormous benefits for companies that can continue serving their customers and meeting their ever-changing demands. Similarly, companies that lack sustainability can see their products penalized by regulators and face customers´ rejection, while companies that demonstrate sustainable practices and products are recognized and rewarded.
What is the difference between Green Supply Chain Management and Sustainable Supply Chain Management?
Green supply chain management: It aims to achieve zero waste, zero net emissions, and zero additional negative impacts in the supply chain. It seeks to ensure that the processes used to manage a supply chain keep a constant watch on improvements or any activity that can potentially decrease the environmental footprint of a process or product.
Today’s green supply chain management requires incorporating environmental focus at every stage of product and service in a supply chain.
Sustainable Supply Chain Management: In addition to the environmental dimension, which requires a paradigm shift in how supply chain networks are designed and managed, sustainable supply chain management includes the economic and social dimensions. A sustainable supply chain demonstrates excellence across the spectrum through design, governance, management, and best practices.
Economically, a sustainable supply chain ensures excellent customer experience, high efficiency, resilience, responsiveness, and accuracy; socially, supply chain leaders ensure safety, health, and development.
How can food companies control or govern a sustainable supply chain?
Consumer trends have driven rapid change throughout the food industry in recent years. They want to know where and how their food was raised. They are interested in the LATTE ideals of local, authentic, traceable, transparent, and ethical.
With sustainability at the heart of any food and farming enterprise, we are seeing a growing shift towards more value-based agriculture, such as sustainable agriculture and sustainable farming, taking sustainability a step further to not only “sustain” the land but to heal and regenerate it.
But however a food company seeks to strengthen its supply chain and processes through sustainability, it is critical to know its current performance; and the first step to achieving this is to ensure complete visibility and traceability in its supply chain.
Supply chain sustainability is now a tall order. It comes hand in hand with traceability of supply chains to become the new norm for organizations, if not already for many a formal requirement. Learn how TraceX’s supply chain sustainability is helping companies embrace sustainability demands through its blockchain-based traceability solution while improving their performance and preparing them for the future.