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Why Is Supply Chain Sustainability Becoming Increasingly Important in Manufacturing?

Jul 25, 2016 River Logic Supply Chain, Sustainability

supply chain sustainabilityThe move to greater sustainability can be seen everywhere from small, local businesses to large multinational ones. While many companies identify the supply chain as the most difficult aspect of their business to make sustainable, it is also one of the most important.

This is largely due to the impact that a sustainable supply chain can have on the overall well-being of society and the environment. However, the benefits to the actual business should not be overlooked. One advantage is developed through increased brand value due to consumer concern with the environment, but there are other benefits as well.

Consider the fact that sustainable supply chains are, by their very nature, less resource intensive than their counterparts. A move to greater sustainability involves a move to greater efficiency, as the two go hand in hand. This means that despite upfront costs, investments in sustainability can actually significantly decrease expenses in the long term.

Governments are also putting an increasing focus on sustainability, drafting laws and regulations that businesses must follow to avoid penalties and fines. Proactive companies put themselves in a much better position to avoid regulatory and legal setbacks, setbacks that other companies who are slow to adopt sustainability measures most certainly will encounter.

With this in mind, the question that naturally follows is ‘what exactly constitutes supply chain sustainability?’

The Framework of a Sustainable Supply Chain

This is a controversial issue in itself, with many people fiercely advocating for one cause over another. It is important to set individual passions aside and look for a broader understanding of what it means to run a sustainable supply chain.

The United Nations Global Compact, an initiative with the goal to get businesses around the world to adopt socially responsible policies, has defined four general areas that all other sustainability issues fall under. These 4 issues are:

    1. Human rights
    2. Fair labor practices
    3. Environmental protection and progress
    4. Anti-corruption measures

Human Rights

If you thought the sustainability movement was only concerned with the environment, you are gravely mistaken. Human rights are included first on the UN’s list for a reason: they are now considered a “precondition” for sustainable development. The idea is that without empowering people with basic rights, sustainability is not possible.

A system that denies the basic rights of any human being is unsustainable, regardless of how well it may seem to be functioning in the short term. Problems relating to human rights in the supply chain (and workplace in general) typically surround:

    • Gender and race equality
    • Children’s rights
    • Human trafficking

These problems can be difficult to detect in global supply chains, so it’s important to do due diligence when choosing suppliers and developing business relationships.

Fair Labor Practices

While related to human rights, working conditions deserve their own category. The unfortunate reality is that many supply chains are exposed to worker exploitation through poor work conditions, wages below minimum acceptability levels and lengthy work hours. Ever watched the show VICE? How about the episode on the living conditions of workers building Trump International Golf Course? This is sadly only one example among hundreds.

In order to combat this, companies should take steps to identify potential sources of labor abuses in their own supply chain, whether they are currently realized or not. Measures should be taken to end current abuses and to protect against future abuses as well.

Environmental Protection and Progress

This is the topic that everyone thinks about when it comes to sustainability. While our society and economies rely on the environment to create energy and deliver the raw materials needed for industry, there is often a fine line between clever utilization and exploitation.

There are many ways that a supply chain can ‘go green’. Recycled materials can be sourced when possible. When recycled materials aren’t available, resources can be sourced from businesses that focus on and prioritize reducing environmental impact (and sustainability in general). Further, the optimization of transportation can reduce mileage which, in turn, can have a great impact on carbon emissions. Improved package design can even reduce the amount of plastic needed, which leads to less waste that ends up in landfills and oceans.

While all four aspects of sustainability are important, environmental awareness can most directly lead to short-term benefits for businesses through decreased expenses, improved brand value / appearance and tax benefits. (Stay tuned for a future post that will focus solely on environmental concerns relating to supply chain management).

Anti-corruption Measures

Corruption hinders both economic and social development and can manifest itself in many forms. The clearest example is when an individual or group siphons money or resources from the business, but the concept also includes bribery and extortion. The common theme is that money, resources, and/or value are delivered to individuals who do not deserve them. In this way, corrupt practices are by their very nature unsustainable.

Corruption is not easy to detect because it tends to occur within circles of power. This means that the very people who should be safeguarding against corruption are often the ones perpetrating it!

Within individual companies, corruption will increase expenses, slow growth, and greatly increase legal risk. On top of this, a company's reputation can easily be damaged beyond repair from a corruption scandal.

There are several ways a company can combat corruption within their supply chain. Empowering individuals with a voice that is heard beyond their immediate superiors can give early indications of corrupt individuals, and technology that increases supply chain visibility can be extremely helpful in the detection of money or resources flowing to the wrong people or places.

Final Thoughts

Sustainability is more than just a fad — all forward-looking businesses should be analyzing the value they stand to gain through implementing initiatives relating to the four issues discussed in this post.

Think of sustainability as an investment that pays out in multiple way:

    • Society as a whole will benefit.
    • Individual human beings who may be exploited or marginalized within your own supply chain will benefit.
    • You’ll likely find that your business’s bottom line even improves.

If you’re interested in learning more about sustainability and the supply chain, stay tuned for our next two posts in this series. One will deal with traceability and how it relates to a sustainable supply chain, and the other will focus on environmental concerns.

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Written by River Logic

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