Companies pushing toward sustainability often start by examining and improving their own internal processes. However, a recent report from CDP found that a company’s supply chain creates 5.5 times more greenhouse gas emissions than they do in-house.
There are big opportunities for companies to become more sustainable by directing their focus to elements beyond their walls. The question then becomes: how can you build sustainability into a supply chain that’s largely driven by third-party vendors?
The truth: you have more control than you might think.
Companies and their stakeholders can work with suppliers to reduce carbon emissions, boost eco-friendly practices, and create positive change. This pressure has significantly increased in recent years and is only becoming more impactful, along with the business cases that are making sustainability a greater priority in the first place.
Sustainability Data: Finding the Missing Link in the Supply Chain
When companies can manage and improve their performance throughout the supply chain, they are better positioned to conserve resources, lower costs, optimize processes, uphold corporate values, and improve consumer sentiment.
However, the scale and complexity of supply chains make it difficult for companies to improve the sustainability performance within these systems.
To overcome these challenges of complexities and scope, companies are starting to more closely scrutinize the environmental data provided by their suppliers. Many purchasers are refusing to work with suppliers with poor environmental performance and are sending a loud and clear message to other suppliers in the process. CDP’s global head of supply chain, Sonya Bhonsle, noticed an uptick in the number of purchasers using disclosure to spur positive action in the supply chain.
Regardless of the complexity of improving the supply chain, the implications of not finding more sustainable supply chain management processes could lead to two bigger risks — one to the environment, and one to the consumers they serve.
Here’s a closer look at some of the top supply chain sustainability practices driving the industry.
Map the Entire Supply Chain
What does the supply chain look like from end to end?
Before you can affect change within your supply chain, you need to gain a comprehensive understanding of how your supply chain looks and functions.
Start by gathering an inventory of your suppliers, then map out each supplier’s role in your company. What are you sourcing from them and for what percentage of your raw materials does that supplier account? How much do those raw materials cost? What are their social and economic challenges? From there, you can prioritize your sustainability efforts with each supplier.
For example, New Balance Athletic Shoe Inc. limited its number of suppliers (largely based on sustainability-related decisions) and reduced the size of its supply chain by 65 percent. With fewer suppliers, the company is now able to focus on building stronger partnerships with remaining partners.
Another example is CH2M Hill’s development of a supply chain sustainability strategy. The company classifies each supplier based on environmental performance-related criteria and will prioritize business with suppliers that value sustainability. In many cases, companies can start to set classifications and work with suppliers to get them up to speed with new requirements.
Set and Report on Key Targets
With compliance standards in place, you can begin to collect key environmental data from suppliers that will allow you deeper insight into your supply chain. Many retailers as well as the U.S. government are leveraging surveys and questionnaires to understand supplier performance, as well as communicate back to them to provide constructive feedback for future improvements.
In addition, companies are increasingly requesting information related to emissions, water risks, and deforestation activities (e.g. timber, palm oil, cattle, and soy). For example, in 2018, 115 major organizations requested environmental data from more than 5,500 suppliers. In turn, those suppliers reported a collective reduction of 633 million metric tonnes of carbon dioxide, resulting in a cost savings of $19.3 billion.
Requesting environmental data sends a clear message to suppliers that environmental practices are of the utmost importance, and poor performance won’t be tolerated.
Mandate Supplier Performance
Companies that build sustainability into their corporate culture are better positioned to emphasize its importance throughout the supply chain. Corporate values extend to customers, strategic partners, and suppliers and should be included in a supplier code of conduct to set the right expectations for suppliers.
There are numerous resources available to help companies create a supplier code of conduct, including the United Nations Global Compact’s Supply Chain Sustainability practical guide. Another tool created by the Global Environment Management Initiative can help you identify areas of opportunity and provide case studies of companies that have leveraged similar opportunities.
Collaborate with Industry Players
Share the responsibility with peer companies.
Companies that have explored sustainability efforts in the supply chain recognize the challenges are often too complex to be solved with individual attempts. Peer companies may find it beneficial to work together to create industry best practices and standards surrounding supply chain sustainability and evaluate suppliers based on similar metrics.
These collaborations can help to share the workload and prevent overwhelm from auditing, training, and paperwork, along with gaining and sharing knowledge regarding a supplier’s sustainability performance.
One example of this in action is Sephora’s “Clean at Sephora” initiative. Sephora has, for many years, enabled online shoppers to quickly check for unwanted ingredients in its online products with a ‘what it is formulated without’ section. But in 2018, the brand took the concept a bit farther down the sustainability path. Artemis Patrick, chief merchandising officer for Sephora, noted in an interview with Allure magazine: “Together with Sephora’s brands, industry experts, external council — including feedback from clients — Sephora has curated a partnership with its brands across cosmetics, skincare, haircare, and fragrance that stand behind the ‘Clean at Sephora’ category.” The new category and seal will clearly establish what Sephora and their customers consider clean beauty based on vetoed ingredients which were chosen due to concerns ranging from health to the environment.
Use Specification Data Management™ Software to Monitor Sustainability Progress
As sustainability management processes are being explored, companies may find it beneficial to dial in on their supply chain at the spec level to identify additional opportunities and track sustainability progress.
Specification Data Management can help you manage the DNA-level data throughout your supply chain. For example, you can track supplier certifications or agreements and link suppliers to the specs (raw materials, packaging, etc.) they produce. You can then verify material sources, identify material substitutions to save money and increase eco-friendliness, and pinpoint sources of waste. Furthermore, when you capture and map supplier locations to specifications, you can also measure the related CO2 impact. When you find sustainability issues in the supply chain, you can trigger bids to replace those materials and find the supplier that best fits your strategy.
When you can visualize specs across your supply chain at a granular level, you’re better able to analyze the materials you’re using and reveal potential bottlenecks that could be hindering sustainable practices. Through Specright’s analytics, you can prevent unwanted materials from entering your supply chain to begin with.
Traditionally, companies gave little thought to how their suppliers handled environmental activities, but change is here. Companies have come to appreciate the sustainability efforts made by their suppliers and are seeing their own benefits in the process. Those that continue to invest in improving their supply chains may be best positioned to build resilience as sustainability becomes more of a necessity.
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