Understanding sustainable supply chains and the benefits to organisations

How should we start a sustainable supply chain blog if not with the question; what is a supply chain?  The supply chain is the interconnected journey that raw materials, components, and goods take before their assembly and sale to customers. It includes different activities, people, entities, information and resources.

So, what is sustainability in the supply chain?

Sustainability in the supply chain plays a critical role in driving transformation through the entire chain, and businesses are increasingly realising the seriousness of integrating sustainability into their operations. The concept of  sustainable supply chains has gained significant importance allows the re-evaluating procurement, production, distribution, and disposal processes. In turn, companies can minimise their carbon footprint, enhance social welfare, and achieve long-term economic viability.

Sustainability in the supply chain refers to implementing environmentally friendly practices, socially responsible practices, and economically viable practices throughout the entire lifecycle of a product or service. This can include the processes of sourcing, manufacturing, transporting, and the delivering of goods or services.

Sustainable supply chains require collaboration among stakeholders, including suppliers, manufacturers, distributors, and customers. Forming strong partnerships based on shared values can help with the implementation of sustainable initiatives across the supply chain.

Components of a sustainable supply chain

Environmental sustainability in the supply chain aims to minimise resource consumption, conserve natural resources, reduce waste generation, and mitigate greenhouse gas emissions. Companies can achieve this by adopting practices such as sourcing raw materials responsibly, optimising transportation routes and implementing waste reduction and recycling initiatives. Additionally, incorporating eco-friendly packaging can further enhance environmental sustainability.

Social sustainability in the supply chain focuses on ensuring ethical and fair treatment of workers, by respecting human rights and promoting inclusion and diversity. This can be accomplished by partnering with suppliers who adhere to responsible labour practices, providing healthy and safe working conditions, supporting employee well-being, and encourage transparent communication throughout the supply chain. Furthermore, contributing to local economies can strengthen social sustainability and engaging in community development initiatives.

Economic viability is important to a sustainable supply chain, as it should have a balance between responsible practices and profitability. By improving operational efficiency, optimising inventory management, minimising waste, and reducing costs associated with energy consumption, companies can achieve financial stability while reducing their environmental impact. As well as by embracing sustainable practices, businesses can gain a competitive edge in the market, enhance their brand reputation, and attract eco-conscious consumers.

What are the benefits of having a sustainable supply chain?

The benefits of implementing sustainable supply chain practices are numerous. By adopting sustainable practices, companies can reduce their environmental footprint, mitigate risks associated with resource scarcity, and enhance their brand reputation.

Financial benefits to sustainable supply chains

Sustainable supply chain practices can contribute to improved financial performance and value creation for companies. Studies have shown that companies with sustainable supply chain practices tend to have better financial performance compared to those that don’t. Additionally, companies with high ratings for environmental, social, and governance (ESG) factors have a lower cost of debt and equity, indicating that sustainability initiatives can help create profits and business opportunities, making it a win-win for both the planet and the bottom line.

Reputational benefits to sustainable supply chains

Furthermore, companies that prioritise sustainability in their supply chains are often seen as more attractive to investors and customers. For instance, companies in the Carbon Disclosure Leadership Index have been found to have superior stock-market returns. This suggests that sustainability can enhance a company’s reputation and market position, leading to increased customer loyalty and demand.

Stability benefits to sustainable supply chains

Lastly, it can help to minimise risk and vulnerability through supply chain transparency and enforced digital security solutions. Not only can these measures protect businesses from unethical and environmentally irresponsible partners, they can track and document all the labour, handling, and materials components from source to destination.

In summary, implementing sustainable supply chain practices not only helps reduce environmental impact but also brings financial benefits. It can improve a company’s financial performance, attract investors and customers, create new business opportunities and reduce risk and vulnerability. By prioritising sustainability in the supply chain, companies can contribute to a more sustainable and prosperous future.

Sustainable supply chains: an industry example

A notable example of a business that has achieved environmental benefits through managing its supply chain is Patagonia, an American outdoor clothing company.  Their supply chain success is rooted in a handful of key tactics:

  • Transparency – Patagonia prioritises transparency through sharing information about their supply chain, including suppliers and factories on their website. One of the most effective initiatives that Patagonia has implemented is the push for 100% traceable down feathers in products where goose down is an essential material.  This openness fosters accountability by giving their customers visibility of where and how their products are made. Furthermore, this helps to build long lasting relationships, through which they achieve business stability.
  • Responsible sourcing – They carefully select suppliers who meet their ethical and environmental standards. This includes using organic materials and implementing fair labour practices. Patagonia have built long lasting, mutually beneficial partnerships with suppliers based on their shared trust and shared values.
  • Product lifestyle approach – In contradiction to the classic fast fashion model we have been so accustomed to see, Patagonia design products with durability in mind. They aim to create items that last longer and require replacing less often.
  • Repair and reuse – Patagonia encourage customers to repair and reuse their products. They operate ‘Worn Wear events’ where customers can attend to have their damaged garments brought back to life. This adoption of the circular economy ensures that clothes have an increased longevity, thus avoiding landfill.
  • Innovation – They persistently invest in research and development to ensure that they are at the forefront of technology and utilising the most sustainable materials. In particular, Patagonia use recycled polyester, organic cotton, and their denim  is dyed with Advanced Denim technology which uses 50% less electricity and emits 25% less CO2 into the environment.
  • Ethical marketing – Patagonia’s marketing emphasises on social and environmental responsibility. In 2011 on Black Friday, they ran a campaign called ‘Don’t buy this Jacket’, whereby the advertisement detailed the negative environmental impact of a one of their products (despite its superior sustainability credentials in comparison to competitors), and asked consumers to resist the urge to spend unnecessarily.  Following this campaign, their sales rose by 30%, and an important issue had been put centre stage.

Through this continual effective management of their supply chain, Patagonia have become role models in this field.  Adoption of similar tactics to Patagonia could yield multiple benefits for other companies, such as enhanced brand reputation, increased customer loyalty, cost savings, and of course environmental benefits.

A summary of sustainable supply chains

Overall, a sustainable supply chain is one that fully integrates ethical and environmentally responsible practices into a competitive and successful model. End-to-end supply chain transparency is critical; sustainability initiatives must extend from raw materials sourcing to last-mile logistics, and even to product returns and recycling processes.

Embracing sustainability in the supply chain can offer a myriad of benefits that extend beyond just being environmentally conscious. Sustainable supply chains also promote transparency and traceability, which can help build trust with consumers who are increasingly eco-conscious. In a world where consumers and investors alike are demanding responsible business practices, a sustainable supply chain isn’t just an option – it’s a pathway to long-term success. Supply chain sustainability benefits not only companies’ own interest and those of their stakeholders but also society and the wider environment.

How Energise support your own journey to sustainable supply chain engagement.

If you’re ready to build constructive relationships to make your own supply chain more sustainable, our expert team at Energise can help. With our in-house platform, the Net Zero Hub, you can easily access insight and oversight on your suppliers ESG impacts. We will also make tailored recommendations as part of your supply chain assessment.

Get in touch at gonetzero@energise.com and one of our team will discuss the next steps.

Array
Written By    Energise

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