A sustainable supply chain is an essential element when it comes to improving your company’s ESG’s score. ESG is the acronym for Environmental, Social, and Governance, and it’s a concept that has been gaining increasing importance in the business landscape.
While it was once enough for a company to focus solely on profits and returns to thrive, this is no longer the case in today’s world, where making a positive impact on the world matters more than ever, allowing you to attract more investors and increase your customer base.
But despite the importance of ESG in business, the data shows that supply chain executives struggle to make their operations more sustainable, facing different challenges. For instance, around 40% of companies find it hard to identify and reach ESG targets, while 20% of ventures are completely unaware of supply chain sustainability and its importance.
If you want to improve your supply chain sustainability, you’re in the right place. In this blog, we will explore the 5 best practices to help you overcome common obstacles and create an eco-friendly supply chain that helps your business thrive.
What are the three pillars of a sustainable supply chain?
We can’t move on to the best practices to create a sustainable supply chain unless we take the time to first clarify what this concept is all about. Simply put, it’s about transmitting goods in a cheap and quick way while simultaneously reducing the negative impact on society and the planet, and it is based on three pillars:
Financial sustainability
Did you know that your business’ longevity is highly connected to sustainability? That’s right, and it’s imperative to strive to deliver a satisfying income to every stakeholder, from the owners and employees to the investors.
Environmental Sustainability
This is probably a no-brainer, but a sustainable supply chain should keep its greenhouse gas emissions to a minimum. Unfortunately, data shows that GHG emissions linked to the supply chain make up over 80% of consumer products companies’ overall GHG emissions, requiring immediate action to protect the planet, which is degrading day by day.
Social Sustainability
Achieving sustainability in your supply chain also means that you respect human rights through the entire value chain, and that you work with firms that don’t use forced labor.
How to enhance your corporate’s supply chain sustainability
Identify current pain points
Each product has a different carbon footprint, and you must begin by calculating it to understand your supply chain’s current pain points. This is a critical step in recognizing which area of your operations you must improve and thus, develop a strategy to achieve a sustainable supply chain.
Depending on the sector, the most significant source of embedded emissions could be at a different stage in the product’s life cycle. For example, when it comes to non-electric automobiles, around 80% of these emissions happen when the vehicle is used, while for textile products, they occur at disposal stages and during transportation.
Enhance transportation operations
In 2019, transportation operations made up over 30% of GHG emissions in the US alone, which means this is an area that companies should pay attention to.
Your business can take several steps to reduce its carbon emissions, such as distributing products from close distribution locations to the final location, loading ships to occupy all the space available, and adopting electric vehicles, especially in destinations where renewable energy provides most of the electricity.
Moreover, numerous tech solutions can assist your company in lowering transportation-related carbon emissions, such as 3D truck loading software, traffic, and route optimization techniques, and IoT devices, to name just a few.
Reuse waste
It’s no secret that businesses generate significant waste, and this is an issue that needs to be addressed for a greener future. The good news is that companies are taking action by choosing the best solutions, such as horizontal baler machines that can effortlessly make bales up to 450 kg.
It’s a large-scale recycling solution that helps businesses tremendously but is not the only one contributing to more sustainable operations. Your company can come up with very innovative solutions as long as you get creative and look for inspiration around you. For example, a 19-year-old wanted to reduce food waste and decided to recycle small amounts of it and transform it into organic fertilizer.
By using this as an inspiration, your business can also find an effective approach to dispose of its waste without harming the planet -as long as you commit to sustainability, it will be impossible not to find a solution!
Choose eco-friendly packaging materials
Research from the European Union suggests that only 1% of plastics are biodegradable, with most GHG-emitting products being petroleum-based. Plastic has a low recycling rate, and it can live in the wild for an extended period, penetrating the food chain and harming the environment and human health.
Despite the bad reputation of plastic, many businesses still use it for packaging, mainly because it’s cheap. However, if your goal is to achieve a sustainable supply chain, switching to biodegradable packaging materials is essential. You can use the Higg index, which provides information on GHG emissions in your business, allowing you to select carefully eco-friendly materials for packaging.
Also, consider budgeting for research and development for building new packaging methods and materials – this is particularly important if you run a consumer goods business due to the bigger negative impact on the planet. For instance, Coca-Cola launched such an initiative, and the company is aiming to utilize at least 50% of recycled packaging materials six years from now.
Partner with sustainable suppliers
Even if your business operates in the most sustainable way, it won’t matter if your business partners don’t follow the same principles. Why should you care about this? Well, it can have a detrimental impact on your company’s GHG emissions, as well as your brand image and human rights compliance.
Therefore, it’s imperative to make sure that your business partners are reliable business partners who take sustainability seriously, and one way to do so is to demand ESG reports, as well as carbon footprints, and to ask them if they have an ISO 14001 certification, among other things.
The bottom line
Making your supply chain more sustainable is by no means easy, but if you follow the practices discussed in this blog, you will position yourself as a responsible business. You will, therefore, gain the loyalty of your customers and ensure you align with the sustainable principles that matter in today’s world.
Supply Chain Sustainability article and permission to publish here provided by Mary Hall. Originally written for Supply Chain Game Changer and published on May 7, 2024.
Cover image by freepik.