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5 Benefits of Sustainable Supply Chains

innovationThe key to a sustainable supply chain is trust between customers and suppliers — and this can also create more profitable supplier relationships, according to Suhas Apte and Jagdish Sheth, the authors of The Sustainability Edge: How To Drive Top-Line Growth With Triple-Bottom-Line Thinking.

In an Industry Week column, Apte and Sheth write that many companies struggle to establish sustainable supply chains because they attempt to enforce sustainable supply chains solely through monitoring policies and compliance — a strategy that will fail “time and time again.”

Partnering with suppliers to create trust-based relationships, on the other hand, offers five main benefits:

Protecting Against Reputational Damage. Stakeholders including investors and customers are increasingly putting pressure on businesses to extend their sustainability policies into their supply chains. This is evidenced by a record number of shareholder resolutions related to supply chain sustainability in recent years, as well as social media pressure on companies to ensure they are viewed as committed to sustainable and responsible business practices. In response to this, we’ve seen Target launch a chemical safety and transparency policy across its operations and Ralph Lauren develop sustainable sourcing guidelines for wood-based fabrics.

Reducing Environmental Impact and Costs. Walmart is a good example here. When the retail giant announced its goal to reduce corporate greenhouse gas emissions by 20 million tons per year by 2020, it realized that its supply chain represented about 95 percent of Walmart’s overall carbon footprint. Walmart is working with suppliers to reduce their emissions, which not only reduces environmental impact but saves money, too. A CDP report published last month found Walmart and other major companies’ supply-chain emissions reduction initiatives saved suppliers a combined $12.4 billion in 2016.

Improving Continuity of Supply. “The auto industry learned this lesson when floods in Thailand brought a halt to the auto parts supply industry, idling factories around the world,” the column says. “As a result and after working with key suppliers, the auto industry supply chain is now much more diversified, which has resulted in benefits for their suppliers as well.”

Innovating Products and Services. Suppliers that understand a company’s vision and long-term plans are better equipped to suggest changes and ungraded to products and processes, which can improve operations and also help companies accomplish innovation goals.

Creating Partnerships or Global-Industry Standards. The authors point to a group of major apparel and footwear brands and retailers that in 2011 made a shared commitment to helping lead the industry towards zero discharge of hazardous chemicals (ZDHC). The group published a Joint Roadmap document outlining its collaborative efforts towards ZDHC for all products across all pathways by 2020. The ZDHC Joint Roadmap has grown from six founding brands (Adidas Group, C&A, H&M, LiNing, Nike and Puma) to a coalition of 22 brands.

 

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