Companies need to ensure their supply chains are sustainable in order to fulfill environmental and social responsibility (CSR) commitments, enhance brand reputation and secure future success.
Begin by assigning someone from your procurement team the responsibility of implementing and monitoring sustainability policies, then require your main suppliers to set and measure goals as part of an audit schedule.
Environmental Footprint
Supply chain sustainability refers to making your company’s operations more environmentally-friendly, whether that means cutting emissions or reducing waste. Supply chain sustainability may also involve revamping how your do business with suppliers - which means avoiding companies that produce large volumes of greenhouse gasses - so taking this approach could save money on energy costs, reduce your environmental footprint, and make a positive difference on our planet.
Many retailers have made the conscious decision to work exclusively with suppliers that meet both social and environmental standards, then expect their first-tier suppliers to follow suit, creating truly sustainable supply chains.
This approach uses the “triple bottom line” framework, an accounting method which evaluates companies by considering financial, ecological and social considerations when evaluating them. This helps assess whether they treat employees fairly while considering any impact they might be having on the environment.
While many businesses are becoming increasingly aware of environmental sustainability, it can sometimes be challenging to know how best to improve. Calculating your company’s carbon footprint can be time consuming and complex; often leading to no 100% accuracy results.
Retailers tend to produce Scope 3 emissions, which include emissions that occur outside their business facilities such as fuel use, deforestation and long-term ecological damage. Unfortunately, retailers do not have direct control over these emissions since they rely on suppliers for raw materials and transportation of the finished goods.
Ethical Sourcing
Ethical sourcing refers to monitoring supplier business procedures to ensure workers involved in product production are treated fairly and in a healthy environment, such as checking that no child labor or human rights violations occur. Procurement professionals play an essential role in ethical sourcing as it accounts for much of a retail company’s environmental footprint; additionally, ethical sourcing may also serve to attract, retain, and boost morale among their own employees, who increasingly care about working for ethical organizations.
Retailers sometimes worry that sustainable and ethical sourcing will cost them more money in the short term, but this isn’t necessarily true. Reducing waste during production and using materials that can be reused or recycled helps cut costs significantly while protecting against environmental disasters such as floods that damage warehouses or roadways and disrupt supply chain operations.
Avoiding costly markdowns and lost sales on unsellable products by keeping stock levels lean is another cost-cutting measure that can save significant capital, storage and shipping costs, while simultaneously encouraging sustainable practices can bring long-term operational cost reduction. With appropriate technology investments and partnerships on their side, sustainable retailers may even see reduced operating costs down the road.
Tools to efficiently manage supplier data, provide credible transparency and promote sustainable and ethical practices are not only necessary but increasingly available. Software such as Taulia’s Supplier Portal helps retail organizations reduce operational risks by providing real-time information about supplier performance and compliance - empowering informed decisions to mitigate risk and boost overall business results.
Circular Economy
Contrary to the linear take-make-dispose production model that has long dominated production, circular supply chains aim to extend material use through product design innovations and consumer behavior change. Supply chain leaders face an important challenge: transitioning away from an attitude of taking resources for granted into viewing products as assets that need to be carefully managed, repaired, and reused in the circular economy.
Accenture estimates that adopting circularity could generate an estimated additional 35 billion USD in value from reduced costs alone. This is possible thanks to using less virgin materials for production costs while lighter and smaller products reduce transportation and packaging expenses. Furthermore, it reduces exposure to volatile raw material prices as well as providing resilience against geopolitical risks such as natural disasters or imbalances in global commodity markets.
Going toward a circular economy requires businesses to work closely with suppliers and manufacturers to develop sustainable business models, setting realistic timelines and KPIs while developing detailed tracking protocols for measuring progress. Regular check-ins with auditors will help ensure companies stay on track to meet their objectives.
Transitioning to a circular economy should take into account its effects on workers and communities as well as existing inequalities, with support provided for those reliant on traditional industries via retraining and new skill development programs. Furthermore, any transition should not disproportionally impact poorer communities and countries - these principles form the basis of any circular approach and require careful and collaborative planning processes.
Energy Efficiency
As customers become more mindful of environmental impacts and expectations, retailers have made greater efforts to make their supply chains more eco-friendly. This may involve anything from using renewable energy to sourcing carbon-free materials or eliminating greenhouse gases during shipping and distribution - this challenge demands taking an overall view from raw material production through retail sales while simultaneously collecting data at each stage.
Retailers can improve their energy efficiency in several ways, including upgrading to LED lighting; upgrading heating, ventilation and air-conditioning (HVAC) motors with more efficient models; installing on-site solar power generation and battery energy storage solutions; as well as reducing emissions from owned transportation fleets and store systems such as refrigeration. It’s also crucial for retailers to track Scope 1 and 2 emissions - produced directly through operations or purchased energy - as well as use procurement influence to drive partners towards more eco-friendly practices.
Companies can create more sustainable value chains and sourcing strategies by redesigning products for increased recyclability and using greener materials, and by choosing warehouse providers who prioritize sustainability with an eye to offering carbon offsets when possible.
Retailers can codify sustainability standards into supplier codes of conduct that align with their ESG goals and sustainability targets. While each company may customize the specifics of this code of conduct according to their needs, ideally covering waste management, water and energy use, biodiversity conservation efforts, human rights and labor practices practices as well as ethical sourcing issues.
Carbon Reduction
Environmental, Social and Governance (ESG) issues like forced prison labor in China and climate change present businesses with greater pressure than ever to integrate sustainability into their supply chain management practices. Failure to do so could tarnish brand reputations or cause regulatory headaches; to ensure sustainability is met throughout their supply chains, retailers and their suppliers must engage in an open dialogue based on mutual trust and transparency.
Since more than 90% of an organization’s carbon emissions come from its supply chains, it makes sense to prioritize sustainability initiatives here first. Unfortunately, many organizations lack visibility, technology and comprehensive programs in place to manage these efforts effectively - making the business case for investing in green supply chain initiatives challenging to make.
One way to establish a clear business case for supply chain sustainability is to set measurable goals that align with corporate purpose and vision. This will demonstrate to stakeholders, including investors and employees, that a company is taking proactive steps toward greener practices in its operations.
Supplier engagement and sustainability audits can help build a compelling business case for sustainable supply chains, by mandating that suppliers meet certain environmental standards such as reducing waste, improving energy efficiency and using recycled materials. This drives desired behavior down the supply chain into customers’ hands.
Companies can also minimize their environmental footprint by designing products with sustainability in mind, for instance by increasing recyclability or using greener materials. They can also design their value chain and sourcing strategies so as to be more eco-friendly - for instance by using local sources and reducing transportation emissions through strategic sourcing arrangements.
In Conclusion
Supply chain sustainability is not only a moral obligation, but also a smart business move. By taking a holistic approach to sustainability, retailers can reduce costs, improve their brand reputation, and secure future success. This includes everything from reducing waste and emissions to designing products with recyclability in mind and choosing suppliers that meet both social and environmental standards. The benefits of sustainable supply chains are clear, and with the right tools and strategies in place, retailers can make a significant difference for the environment while boosting their bottom line.
To truly make a positive impact, retailers must prioritize sustainability at every stage of their supply chain. This means working closely with suppliers and manufacturers to develop sustainable business models, setting realistic timelines and KPIs, and tracking progress in detail. It also means engaging with customers and employees to promote sustainability and ethical practices. With a commitment to sustainability and the right tools and strategies in place, retailers can elevate their brand and secure future success while making a positive impact on the environment and society as a whole.