This is an original article by Dora Hoong from Global Initiatives.
When it comes to corporate sustainability, a company’s supply chain cannot be ignored. For a company that is committed to sustainability efforts, the supply chain is a crucial aspect that needs to be managed. This includes the environmental impacts of suppliers and their labour practices.
Given how complex supply chains can get, especially for global brands, ensuring sustainability across the supply chain may be the trickiest part in a company’s journey towards sustainability.
Compared to its direct operations, a company’s supply chain is responsible for the greater part of its impacts on society and the environment.
This is especially so in the case of consumer companies, where their supply chains are responsible for greater social and environmental costs than their operations. This highlights the importance of tackling supply chain sustainability, given the level of impact supply chains can have.
Sustainability And Economic Gains Can Coexist
A company that focuses on supply chain sustainability can reap economic benefits from it. According to the Carbon Disclosure Project, emission reductions among suppliers in 2019 led to a total cost saving of US$19.3 billion. Such savings come from areas such as reducing energy and resource usage.
While striking a balance between efficiency, cost-effectiveness and sustainability can be tough, they are not necessarily mutually-exclusive. Furthermore, sustainability issues along the supply chain can have a significant impact on a company’s reputation.
News of labour issues surrounding suppliers of global brands are not uncommon and such occurrences can seriously damage a company’s image among consumers. Evidently, companies are not immune to the consequences of their suppliers’ sustainability practices.
Dealing With Complexity In The Supply Chain
For multinational corporations, supply chain management can be very difficult due to the sheer number of suppliers involved with the company. Lower tier suppliers are often overlooked when it comes to sustainability management, making them the highest risk suppliers. Hence, it is important for corporations to include lower tier suppliers in their sustainability plans.
One way to do so would be requiring higher tier suppliers to manage their suppliers, and this would require individual suppliers to implement their own sustainability programs, which may be difficult for smaller companies due to insufficient resources. Corporations, then, have to implement training programs that aid their suppliers in setting and achieving their own sustainability goals.
While cutting ties with unsustainable suppliers could be a way to show a company’s commitment to sustainability, it may not be the most effective way to drive sustainability. Dropping suppliers will not push the sustainability agenda as another company with a weaker commitment to sustainability could just take up the supplier. The way to really drive sustainability is to enact real change by pushing and enabling suppliers to be more sustainable.
Can Technology Achieve Our Sustainability Goals?
Image taken from The Innovator
Technology has made it easier for companies to keep track of their suppliers’ sustainability performance and corporations have been leveraging on technology such as blockchain to monitor their suppliers and identify weak links.
However, these technological applications would be pointless if the company has no commitment towards sustainability. While technology can provide tons of useful information, what companies do with this information is entirely up to their integrity.
The road towards a sustainable supply chain is a bumpy one, but one that cannot be ignored. It requires partnership and commitment across all members of the supply chain and this has to start with corporations at the top.