Is Your Supply Chain Sustainable? Let’s Find Out

According to the United Nations Global Compact, “A company’s entire supply chain can make a significant impact in promoting human rights, fair labor practices, environmental progress, and anti-corruption policies.”

However, this level of sustainability requires diligence, an attention to quality over quantity, and the ability to find suppliers that align with these principles likewise. Unfortunately, this is often easier said than done. Depending on the industry, the company size, and the consumer demand, scaling and managing a supply chain with sustainability in mind only becomes more and more difficult. Now, with overseas supplies being disrupted and quality control being overlooked thanks to the unreasonable demands of a post-pandemic world, sustainability seems more of a pipe dream than ever before.

Fortunately, with the right data points being tracked, the right suppliers on your side, and the right team internally, you can achieve sustainability that helps you to empower your supply chain, expand your audience base, and stand out from the competition all at once. However, to truly understand how this goal can be achieved, let’s first take a closer look at the definition of a sustainable supply chain below.

What Makes a Supply Chain Truly Sustainable?

The UN Global Compact specializes in supply chain sustainability efforts. As such, starting with their list of important sustainable supply chain qualities is ideal. According to their content on the subject, selection, training, auditing, and remediation are crucial to developing a sustainable system as a company. To help with these efforts, they also developed the Decent Work Toolkit for Sustainable Procurement. As a business owner, this toolkit is truly a great foundation for your sustainability efforts — but does it go far enough?

The answer is unfortunately, no. As the yearly study on supply chain sustainability conducted by MIT explains, “Supply chain sustainability (SCS) means a range of different things to different people. Specifically, which areas should be included in a firm’s supply chain sustainability efforts? Which opportunities should be prioritized? Should climate change mitigation be included? What about diversity, equity, and inclusion (DEI)? From a scientific perspective, this poses a quandary: How can we ask people about a topic without first defining it? But conversely, how can we define it without unduly influencing their responses?”

These are the problems with defining supply chain sustainability definitively as a company leader. However, while SCS may not be perfectly defined even now, it can be defined well enough for most companies to begin taking action just as 2023 begins. As such, here are the data points that we at Stimulus believe should be considered for true sustainability moving forward as an industry expert and/or company leader:

• Selection

When selecting (sourcing) suppliers, companies should take into account their procurement and product development processes along with their dedication to sustainability and company decency initiatives likewise. Suppliers should not just offer affordable goods in a timely fashion but also take into account environmental, social, and economic impacts.

• Training

Internally, companies must hire teams that align with their sustainability initiatives and are trained to achieve them in their daily operations. This means hiring from a diverse and versatile candidate pool and training them on the important and execution of sustainability at every step of the supply chain process.

• Auditing

Conducting frequent supply chain audits is crucial for sustainability management. Audits allow brands to determine weak points, instill strategies for improvement regularly, and find various ways in which sustainability can be actualized at every ‘link’ along the supply chain.

A good supply chain sustainability audit should analyze your products and conduct LCAs, identify efficiencies and optimization opportunities, set better standards (and help your suppliers meet them), adopt and implement closed-loop and circular economy models, measure your environmental sustainability data, and make sure your organization isn’t sabotaging its own sustainability efforts.

• Remediation

With frequent auditing being conducted, it will be easy to remediate issues in your supply chain for sustainability’s sake. As Brightest.io puts it, “Often, less sustainable decisions happen inside organizations because the person or team making the decision doesn’t realize there’s a more environmentally-friendly alternative — or doesn’t have the right framework for a full cost-benefit analysis. Internal sustainability education and stakeholder engagement is just as important as your supplier communications.”

• DEI

At this point in time, having a DEI team is practically mandatory. The reason for this is that DEI efforts are some of the most in-depth yet highly important aspects of a truly sustainable supply chain that companies should be managing and improving. Both internally and externally, DEI initiatives are highly important for success and expansion as a brand. In fact, The Great Resignation was fueled heavily by a lack of DEI efforts from major companies worldwide. This also includes working with diverse and smaller suppliers locally as well as opting for higher quality suppliers that may cost a bit more but have more DEI power and scaling capabilities. As such, it’s about time companies of every size take this aspect of their supply chain more seriously.

• Decency and Empowerment

As you analyze your supply chain, you must also be willing to analyze your company’s overall decency along with the decency of your suppliers and other connections. Every hand involved in the supply chain should be ‘clean’ and also serving a greater purpose. Although you may only be selling things such as cosmetics or tech items, your ability to empower your industry and your customers through your brand and the sustainability of your supply chain transcends the services or products you aim to sell.

For example, while Stimulus may focus primarily on data for supply chain management and supplier procurement efforts, the Supply and Demand webinar hosted by the CEO & Founder of Stimulus, Tiffanie Stanard, goes far beyond that and empowers the industry and business leaders as a whole. These kinds of initiatives should be instilled in your company to create a more empowering and sustainable supply chain that benefits your customers and fulfills your team’s senses of purpose likewise.

• Global/Local Impact

Lastly, a truly sustainable supply chain should have a positive global and local impact. To understand what this means, take a look at the baby formula shortage dilemma from earlier this year and the unethical practices that led to it. As you analyze your own suppliers, you will want to take a close look at their image, their impact on the world, and their practices to ensure that you are working with sustainable suppliers and being a sustainable brand as a result.

Developing Your Supply Chain’s Sustainability

According to the Supply Chain Sustainability guide developed by the UN, there are several steps companies can take to create a more sustainable supply chain in the future. They are defined as follows:

Commit

• Develop the business case by understanding the landscape and business drivers.
• Establish a vision and objectives for supply chain sustainability.
• Establish sustainability expectations for the supply chain.

Assess

• Determine the scope of efforts focusing primarily on areas where there is the greatest actual and potential risk of adverse impact on people, environment, and governance.

Define and Implement

• Communicate expectations and engage with suppliers to improve performance.
• Ensure alignment and follow up internally.
• Enter into collaboration and partnerships.

Measure and Communicate

• Track performance against goals, be transparent, and report on progress.

Businesses can also follow the 10 principles of the global compact to develop a sustainable supply chain and business structure as well:

1. Businesses should support and respect the protection of internationally proclaimed human rights.
2. Businesses should make sure that they are not complicit in human rights abuses.
3. Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining.
4. Businesses should promote the elimination of all forms of forced and compulsory labour.
5. They should also fight for the effective abolition of child labour.
6. Companies must support the elimination of discrimination in respect of employment and occupation.
7. Businesses should support a precautionary approach to environmental challenges.
8. Companies must undertake initiatives to promote greater environmental responsibility.
9. They must also encourage the development and diffusion of environmentally friendly technologies.
10. Businesses should work against corruption in all its forms, including extortion and bribery.

As you begin to redefine your supply chain for the new year, taking into account these aspects of a truly sustainable supply chain can help you to improve your brand image, build a stronger company infrastructure, and work with other companies that align with your values likewise. After all, as former CEO of General Electric, Jack Welch, once said, “An organization’s ability to learn, and translate that learning into action rapidly, is the ultimate competitive advantage.”