Getting from A to B. A simple concept in theory, but one that has become increasingly complex in the context of the modern-day supply chain. As new businesses emerge, bringing product innovation and fresh problem-solving ideas, supply chains have expanded globally to take advantage of these new offerings. Whilst resilience and agility may be two of the biggest priorities for the future of supply chains, the importance of a cost-effective supply chain remains equally important in the present day.
However, recent global trends have seen supply chain sustainability emerge as an important aspect to consider in supply chain operations. With increased consumer pressure being placed on corporate social responsibility (CSR) goals, profit, as a catch-all measure of success, may have lost its unchallenged significance as THE measure of a company's success.
But what does it truly mean to develop a sustainable supply chain? Why have large organisations scrambled to fix issues that were previously deemed insignificant in order to achieve sustainability?
Supply chain sustainability places a focus on upholding environmental and societal values like climate change, human rights and fair labour practices, as well as corruption. Traditional supply chain management goals around speed, cost, and reliability of operations still remain a priority in addition to the sustainable goals. How these issues are addressed will differ between organisations. There isn’t specifically a correct way of approaching CSR goals, and there aren’t a minimum number of goals that need to be addressed to achieve supply chain sustainability. It’s a process that typically occurs over a lengthy period and involves multiple initiatives to achieve sustainability as well as the encouragement of others. However, there are also 17 sustainable development goals, produced by the United Nations, that organisations can implement in achieving supply chain sustainability.
Take the Subaru automotive assembly plant in Lafayette, Indiana for example. In 2002, the president of Subaru’s Japanese parent company issued a zero-waste edict, and the Indiana plant established a five-year plan to achieve a zero-landfill status. An achievement accomplished within two years by reusing manufacturing waste to produce alternative products for their suppliers and other organisations. These plant initiatives also saved Subaru $1-2 million a year. Subaru have also seen more than 500 companies visit their Indiana plant and learn from their experience to understand how they can implement sustainable changes to their own organisation.
Whilst not every business will have the ability to achieve a level of sustainability to the same scale as the 3.5 million square-foot Subaru factory in Indiana. Being sustainable doesn't always require grand gestures and plans to be made. Yes, the achievement of goals such as carbon neutrality and zero-landfill are important. But the necessity for encouragement and willful sharing of information between organisations to generate sustainability is arguably just as important. Perhaps, more so. The whole idea being that partnership and cooperation from everyone is required to achieve true sustainability, as demonstrated through Subaru's Indiana plant.
So why is sustainability important? Or more specifically, why is sustainability within a supply chain so important if multiple organisations that all have their own business goals and processes are involved?
The importance of sustainability lies in two parts. In a business context, the value is in the consistent nature of growth and continued operations. In an alternate environmental context, sustainability lies in reducing the depletion of natural resources and harm on the environment to support long-term ecological balance. Whilst each definition focuses on different contextual considerations, the importance of both lies within the long-term nature of their focus.
But that’s not where the importance of sustainability ends, especially when concerning supply chains. The environmental impact that supply chains have regarding the total emissions of an organisation is substantial when compared to the direct impact of the company. Upwards of 80% of all greenhouse-gas emissions and 90% of the environmental impact on air, land and water come from supply chain operations within a typical company’s supply chain. Figures that highlight the powerful impact supply chains have on the environment around them.
Supply chain sustainability has also had a large effect on consumer purchase behaviour. Although consumers have previously foregone questioning where their products come from and how they’re produced, that’s changed significantly over the recent past. Now customers are more concerned than ever, and their values have changed to reflect their new concerns. Whilst value and ease of purchase may still remain the primary drivers behind purchasing decisions, sustainability is now becoming a bigger factor. Consumers are now willing to spend between 2-10% more on products produced by companies with supply chain transparency. Consumers are also willing to stop purchasing products altogether. A survey led by Hotwire found 47% of internet users worldwide ditched products and services from brands that violated their personal values.
The key focus of sustainability has traditionally been on the giving to others at the expense of the company. In other words, sustainability was seen as an immediate sacrifice to protect the long-term environment. However, that's no longer the case. Instead of viewing sustainability as a sacrifice typically at the expense of profitability, the two can now to be achieved hand-in-hand. Remember the $2 million saved by Subaru each year? Lagunitas Brewing Co., also invested in sustainable practices within their organisation, by purchasing a wastewater treatment system to process the seven gallons of wastewater made with each gallon of beer. The results? Estimated savings of more than $1 million a year on their utility bills and the methane byproducts are used to produce electricity.
Now that's a good beer.
