The concept of a “sustainable supply chain” is still relatively new. However, a consensus over best practices to follow when building a more sustainable supply chain exists. This article contains a recent survey that identifies current sustainable trends and future opportunities, as also a summary of best practices.
As part of the build up to the 10th Annual Sustainable Supply Chain Summit, Ethical Corporation gauged the top trends and issues both now and looking into 2016. Between the outcomes of this report, there are bits taken from an interview between Steven Prokesch and Peter Senge in Harvard Business Review, about the steps to a sustainable Supply Chain.
The key findings of the survey are as followed:
Peter Senge, founder of the Society for Organizational Learning and author of The Fifth Discipline and The Necessary Revolution, says to make progress on environmental issues, organizations must understand that they’re part of a larger system.
"To confront these issues practically, you need employees who are innovative—who have the skill and the vision to redesign products, processes, and business models—and who understand the business context. Most important, they need to be able to tell a story about why this is a meaningful journey."
"To me, it’s Leadership 101. It starts with “Who are we?” and “Why are we here?” In a great book called The Living Company, published in 1997, Arie de Geus described a study conducted by Shell in the early 1980s of companies that had survived for more than 200 years. What those organizations had in common was an understanding of themselves as a human community first and a machine for making money second."
Sustainability issues are often supply chain issues. How do you effect change across a supply chain?
"First, you focus on the nature of the relationships. In most supply chains, 90% of them are still transactional. If I’m a big manufacturer or retailer, I pressure my upstream suppliers to get their costs down. There’s very little trust and very little ability to innovate together. That must change, and it is starting to."
"Second, you learn to work with NGOs and other nonbusiness entities. They’ll give you access to expertise that you can’t grow fast internally. Water is a classic example. A few years ago, Coca-Cola decided to cut the water used to make a liter of Coke from more than three liters to 2.5 liters. But it was overlooking the 200-plus liters it took to grow the sugar that went into that Coke. The company found that out because it partnered with the World Wildlife Fund, which knew how to analyze the water footprint of the value chain. Coca-Cola now knows the difference between drip-irrigated sugarcane and flood-irrigated sugarcane."
What challenges must be overcome to make a business more holistic from end to end?
"The first challenge is to understand the larger system you’re in. The second is to learn to work with people you haven’t worked with before. Those two skills might seem distinct, but in practice they’re interwoven. The system is too complicated for one person to grasp. It crosses too many boundaries, both internal and external."
"The third challenge has to do with how you perceive sustainability. They might not say this, but most companies act as if sustainability is about being less bad. There’s certainly a need to reduce your carbon footprint. But people don’t get excited about incremental changes like that. They need a more ambitious vision."
The movement to a sustainable supply chain requires generally a large, upfront investment as well as a significant change in the culture of the organization. However, current research indicates that the business case for more sustainable business operations is quite strong. The noted benefits include the ability to reduce costs significantly with the potential to increase revenue through innovation and enhanced market demand.
The National Bureau of Sustainability, in conjunction with various corporations, summarized these best practices (which have been modified slightly):
Define Company Objective:
- Define ways management will communicate sustainable initiatives internally and externally
- Develop a business case that illustrates the costs and payback period. Highlight all benefits, even those where the financial benefit is less obvious but the sustainability value is clear.
Create Meaningful Expectations:
- Interview and leverage experience and opinions of all stakeholders to create relevant documents to enhance the applicability, legitimacy and efficacy of policies.
- Conduct appropriate environmental research, in the context of international supply chains, to better anticipate challenges and to allow for organization to pro-actively manage supply chains.
- Search for and assess the applicability of pre-existing standards that the company might adopt, thus improving efficiency and avoiding audit fatigue.
Select Suppliers and Agree to Targets:
- Create an interview process with qualitative measures to select and develop a supplier base, relying less on the traditional “tick box” selection scenario.
- Create a safe and open environment that allows for and promotes supplier-led solutions. This includes developing key performance indicators (KPIs) with suppliers, benchmarking KPIs across suppliers to guarantee that standards and metrics will stand up to external inspection and creating a set of clear and systematic processes to obtain performance data.
Evaluate and Develop Suppliers:
- Communicate effectively with suppliers regarding performance in relation to sustainability targets. Advise suppliers early if performance is not meeting goals.
- Create a development a program for suppliers as a means to understand supply chain failures and as a way to support and improve future performance.
Build on Past Successes:
- Cultivate and prioritize a culture of learning, highlighting the importance of transparency and accountability as imperative for success and persistent growth.
- Measure continuously the company’s performance against KPIs and metrics developed above.