How to improve the sustainability of your supply chain
We all know that developing sustainable supply chains is critical in the quest for decarbonisation.
It’s easy to see why when you consider that supply chains make up almost 90% of consumer companies’ emissions.
But sustainability isn’t the only driver for remodelling your supply chains. The pandemic proved that the winners in global commerce will always be the ones that can react fast, keep the goods flowing, and innovate.
By making your chain more sustainable, you’ll also be working towards making it more agile, resilient, and future-proof.
Here’s how to do it…
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What do we mean by sustainability?
The terms ‘responsible’, ‘green’ and ‘sustainable’ are often used interchangeably when we talk about supply chains, but they’re not the same.
A sustainable supply chain is one that’s holistic; using sound environmental, social, economic, and legal practices at every single stage across the entire chain. This includes your suppliers’ operations.
Why is it important to have a sustainable supply chain?
From CSR and resilience to staying on the right side of legislation (like the UK Modern Slavery Act 2015 and the Conflict Minerals Regulation 2021), supply chains have a knock-on effect on every part of your business.
By building a more sustainable supply chain, you’ll improve your ESG (Environmental, Social and Governance rating). The score you get for your ESG is publicly disclosed to inform consumers, investors and NGOs about your impacts, so it has a direct and real influence on growth and profitability.
Supply chain models that have a high environmental and ethical cost also have a higher economic cost. For example, until recently, Unilever estimated losses of €300 million a year due to a decline in agricultural productivity and water scarcity. How have they tackled this?
By developing a series of long-term sustainability initiatives, including: a pledge to make all of their product formulations biodegradable by 2030, water stewardship programmes around their manufacturing sites, and investment in water recycling systems and reservoirs.
McKinsey predicts that by 2030 demand for water will outstrip supply by 40%. Add to this political and social tumult and many current models become simply untenable. The pandemic, soaring inflation, and current war in Ukraine have demonstrated just how vulnerable supply chains can be – and why sustainability is the only answer if you want to future-proof your business.
How to improve the sustainability of your supply chain
Sustainable supply chains aren’t built in a day. It’s an ongoing, complex process that begins with the following steps:
Identify sustainability issues and vulnerabilities across your chain
Before developing a new strategy, you need to evaluate the one you’ve already got. Start with calculating your product carbon footprint (PCF); the total amount of GHG emissions that your product creates in its life cycle.
Once you know your PCF, you can determine exactly which parts of your supply chain need to be improved.
Your analysis should include all sustainability issues (deforestation, waste, working conditions, forced labour) as well as major vulnerabilities (relying heavily on one particular supplier, relying on suppliers in unstable countries, inadequate use of automation and digitalisation).
Some areas of wastage and weakness will be easier to spot than others, so make sure you get granular with your analysis.
For example, transportation and haulage will be an area with a high carbon footprint, but what about the less visible areas, like the safety of workers in a different location? Make sure your assessment is thorough and rigorous.
Focus on transportation
Focussing on your transport use is one of the most effective ways to improve the sustainability of your supply chain.
In 2019, transportation was responsible for 30% of US GHG emissions, so even a relatively small reduction in your emissions can have a significant impact on your overall footprint.
Effective ways to reduce transportation emissions include:
- Switching to electric vehicles where possible.
- Loading transport vehicles more efficiently by using all of the space
- Adopting tech to help you reduce carbon emissions (IoT telematic devices that remind drivers to use low rpm, drones for last mile delivery, smart sensor lighting, heating, and ventilating in warehouses).
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Make your packaging more sustainable
Packaging is a key component of improving sustainability across your supply chain.
The most obvious aspect is using more sustainable packaging materials. This means reducing plastics. EU figures show that only 1% of plastic packaging is biodegradable – but it’s cheap and convenient, so companies continue to use it. What’s the solution?
Launching initiatives with clear targets to reduce plastic or use recycled packaging is an effective strategy. This is exactly what Coca Cola has done; they’ve pledged to reach a minimum of 50% recycled packaging by 2030.
But sustainable packaging isn’t just about materials. The way in which you package your products for transportation is also critical.
If products need to be replaced or reshipped due to damage in transit, the impact on your carbon footprint can be huge – an average of 18.3kg of CO2 emissions per damaged product, to be precise. That’s why it’s crucial that you package your products in the safest, most protective way possible.
Pick your suppliers carefully
It may sound obvious, but when it comes to your supply chain, chain is the operative word.
You might be running the most ethical, environmentally sound, law abiding operation of all time, but if your suppliers are not, your emissions and ESG rating will be negatively impacted. That’s why it's vital to only work with suppliers who comply with international standards.
If you’re receiving raw materials from a country 5000 miles away, how can you be sure they’re not using forced labour – or child labour? How do you know what their carbon footprint is?
One way to make sure you’re working with ethical, climate conscious suppliers is to request proof that they’re meeting global standards. For example, ISO 14001 will let you know if a supplier is in compliance with environmental measures.
For fair labour, you can request that your suppliers are complying with standards like GRI 409.
Invest in innovation
Ultimately, the journey to a more sustainable future has to be powered by innovation. Climate change is the world’s biggest problem – and to solve big problems, you need big ideas. And you won’t just be investing in saving the planet.
Sustainability innovation can help you develop new, groundbreaking products, cost-effective solutions, and boost everything from retention to your bottom line.
One area of sustainability that can especially benefit from innovation is waste reduction.
Most supply chains end in waste. You receive raw materials, make your product, and once it’s used by the consumer, it becomes landfill. But what if your waste could be significantly reduced – or used to create something else? What if your rubbish could be someone else’s raw material?
Startups like Carbicrete are a great example of innovative sustainability. Their product – cement-free concrete – is made using carbon sequestration. This involves taking waste products from steel plants and combining it with purified CO2 to create a product that’s identical in use to regular concrete – without the environmental cost.
Improving the sustainability of your supply chain isn’t just good for the environment or social justice – it’s also good for business. While the overall aim might be Net Zero, even seemingly small changes can have a big impact on your emissions, your product innovation, and your brand credentials.
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