In today’s highly competitive environment, businesses are increasingly focused on balancing profit and quality customer service with a commitment to being sustainable and fostering environmentally responsible operations. One key component of this goal is devising specific strategies for greening supply chains. After all, supply chains often contribute about three-quarters of most companies’ greenhouse gas emissions footprint and have many other environmental impacts. In addition, growing demands for transparency from consumers and stakeholders alike are compelling change.
Building sustainability into a company’s supply chain isn’t necessarily easy nor without financial impact. Some supply chain owners and participants are able to maintain artificially low costs in the near-term by utilizing non-sustainable and poor management practices. Recycling and improving product quality, for example, may also incur additional expense. However, allowing these challenges to impede implementing a sustainable approach to one’s supply chain can present a serious business risk.
“Too often companies have fallen, or been greatly damaged in the marketplace, because of events that have taken place in their supply chain,” says Paul Anastas, assistant administrator for the EPA’s Office of Research and Development. “These events have run the range of environmental vulnerabilities (e.g. products or materials tainted with toxic chemicals), economic impacts (cost spikes of a feedstock), or social concerns (poor or illegal labor practices) by a supplier. Without designing sustainability into the supply chain of the company, the risk of significant adverse impact is high.”
Beyond mitigating risk, the upside of building sustainability into the supply chain can far outweigh the effort, having the same and in some cases greater potential return than internal initiatives alone. These benefits include “lower costs through greater efficiencies, better customer satisfaction through the use of quality processes and sustainable measures, a chance to operate as a truly sustainable and environmentally friendly business, opportunities to reduce risk and ensure business continuity, a differentiator for marketing strategies, and a powerful boost to any corporate social responsibility agenda,” says John Shawyer, director of Associated Pallets.
Walmart and Target take supply chain lead
Two retail industry giants, Walmart and Target, are taking additional concrete steps to improve supply chain sustainability. Recently, they co-hosted the “Beauty and Personal Care Products Sustainability Summit” in Chicago, where big-name suppliers — including Estee Lauder, Unilever, Proctor & Gamble, and L’Oreal — and retailers like CVS and Walgreen’s were in attendance.
The summit focused on designing greater transparency about product chemical components and better defining what constitutes a sustainable product. Earlier in 2014, Walmart notified product manufacturers throughout its supply chain of a new policy designed to eliminate hazardous chemicals from its consumer products.
In addition, late last year Target joined with Underwriters Laboratories’ product-rating website, Good Guide, to rate the sustainability and environmental impact of thousands of products. Target requested vendors of baby care products, household cleaners, and personal care and beauty to complete a UL Transparency Platform assessment. Target plans to “grade” each product up to 100 points based on their ingredients’ transparency and general environmental impact.
Strategies for greening your supply chain
So what can your small, mid-size or large company do to maximize sustainability throughout the supply chain? Here are some big-picture ideas:
- Review the entire supply chain. How well do you understand the present social and environmental impact of each of your suppliers and vendors? Conduct an inventory of top or highest spend suppliers, focusing on the environmental challenges they face, and design collaborative initiatives to help them address those challenges.
- Go after “low-hanging fruit.” For instance, look for ways to reduce the travel distance for materials and goods from suppliers to your business. Explore opportunities to cut out middlemen, thereby decreasing the overall carbon footprint.
- Establish a sustainability code of conduct. Suppliers need to understand the depth of your commitment to sustainable strategies. A “sustainability code of conduct” will help communicate your expectations and motivate suppliers to address this issue.
- Survey suppliers to create a baseline for performance. Major brands and the U.S. Government evaluate the performance of their suppliers by distributing questionnaires and surveys. Give your suppliers the opportunity to provide “sustainability self-assessments” and use the information they provide to establish baseline performance standards each supplier must then meet.
“In our experience, one effective way to transfer knowledge across the supply chain is to leverage the best practices and case studies from top-performing suppliers at annual vendor conferences, via online training modules and through capacity-building campaigns,” say Jessica Wollmuth and Velislava Ivanova of CH2M HILL, a global consulting firm. “By showcasing the success stories of selected suppliers, companies not only recognize their efforts but also demonstrate the practical benefits of sustainability initiatives to others in the supply chain.”
A number of recognized organizations have supply chain codes of conduct already in place. Here we’ve shared a few good examples:
The vendors that serve your business face the same customer-driven mandate to improve sustainability that you do. With prompting from you, they will be motivated to help design a comprehensive, organized approach to social and environmental performance throughout your company’s supply chain.