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As consumers become more conscious of the impact their choices have on the environment and society, businesses are increasingly being held accountable for the sustainability of their global supply chain. With companies allocating upwards of 80% of their budget to procurement, supply chain sustainability has become a crucial aspect of corporate social responsibility.
Defining Supply Chain Sustainability
Supply chain sustainability refers to the environmental, social, and economic impact of the entire process of sourcing, manufacturing, and delivering goods and services. This includes the management of natural resources, labor conditions, and waste reduction throughout the entire supply chain, from raw materials to final delivery to the consumer. The goal is to minimize negative impacts and maximize positive contributions to society and the environment.
Sustainability in supply chains can be broken into three sections circulating environmental, social, and governance (ESG) compliance:
Environmental supply chain sustainability focuses on reducing the environmental impact of products and services by reducing emissions, conserving resources, and managing waste. It includes initiatives such as reducing carbon footprint, deforestation, and promoting a circular economy.
Social supply chain sustainability addresses issues such as working conditions, fair labor practices, human rights, and ethical compliance. It includes initiatives such as implementing a code of conduct, labor practices, and promoting human rights.
Governance supply chain sustainability focuses on ensuring compliance with laws, regulations, and industry standards. It includes initiatives such as implementing management systems, audits, scorecards, and certifications.
The Benefits of a Sustainable Supply Chain
There are numerous benefits to having a sustainable supply chain. First and foremost, it can improve a company’s reputation and consumer loyalty. Consumers are becoming increasingly conscious of the impact of their choices, and they are more likely to choose a company that has a good reputation for sustainability. Additionally, a sustainable supply chain can lead to cost savings by reducing waste and improving efficiency. It can also lead to improved performance, as sustainable practices can increase productivity and innovation.
The Challenges of Managing a Sustainable Supply Chain
Sustainable supply chain management involves identifying, assessing, and mitigating the environmental and social impacts of a company’s supply chain. One of the biggest challenges businesses face when working towards a sustainable supply chain is understanding the complexities of their supply chain. Businesses also face challenges when it comes to identifying and mitigating risks and disruptions in their supply chain.
How to Improve Supply Chain Sustainability
Here are nine best business practices to help get your sustainability strategy set in the right direction:
Conduct regular audits and inspections of suppliers:
This can help a business identify areas for improvement and ensure that suppliers meet the company’s sustainability standards. We recommend using Certainty Software’s Supplier Social and Environmental Compliance Checklist as a free resource to get you started in performing these audits and inspections.
Establish sustainable sourcing policies:
Setting clear sustainability standards for suppliers can help ensure that a business is sourcing materials and products from environmentally and socially responsible sources.
Implement sustainable practices in your own operations:
It begins with you. In order to set a level of expectation for your suppliers, you’ll need to set an example and be a leader in sustainability practices. This can include reducing a company’s carbon footprint, implementing circular economy principles, and reducing waste.
Set sustainability goals for supply chain partners:
Setting measurable sustainability targets for suppliers can encourage them to improve their own sustainability practices.
By involving employees, suppliers, and customers in sustainability efforts, a business can foster a culture of sustainability and gain valuable input on sustainability initiatives.
Implement management systems:
Measure and track sustainability performance:
Establishing a system for measuring and tracking sustainability performance can help a business identify areas for improvement and track progress over time.
Invest in technology:
Investing in technology specific to assessing, tracking, and reporting supplier compliance can improve supply chain visibility, traceability, and sustainability performance.
Continuously learn and adapt:
Continuously learning from industry best practices and adapting to changing sustainability trends and legislation such as the German Supply Chain Act (GSCA) is key for a business to stay competitive and meet stakeholder expectations.
Partnerships with other companies and organizations can bring in new knowledge, resources, and expertise to help a business achieve its sustainability goals.
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