Business drivers for sustainable supply chain

• Managing Risk
Companies can protect themselves from potential supply chain interruptions or delays associated with suppliers‘ human rights, labour, environmental and governance practices by ensuring suppliers have effective compliance programmes and robust management systems. For companies who have a single source for key inputs, managing risks is also critical to ensuring continued access to those resources. Increasingly, customer and investor expectations are driving companies toward more responsible supply chain management. Strong management of social and environmental issues can help companies address reputational risks.
Finally, companies also use supply chain sustainability to ensure that their suppliers can adapt to anticipated strengthening of environmental regulations, extended product responsibility legislation and to reduce potential future liability. Productivity and efficiency initiatives require a full understanding of the different steps of the supply chain and the key social and environmental impacts and cost drivers. By addressing the root causes of issues through strong communication capabilities, in-depth understanding of business drivers and sustainability trends and shared assessments and priorities for improvement, companies can drive improvements and derive the benefits.

• Creating Sustainable Products
Collaboration with suppliers on sustainability issues can foster product innovation. Companies embarking on such initiatives have added new features and performance characteristics to existing products and even generated new products. For example, sustainable products may result in fewer negative environmental impacts than traditional products or have improved end of life collection and disposal options. It is also possible for the sustainability of products to be a differentiating factor and to lead to increased sales for some companies.

• Realizing Efficiencies
A focus on realizing efficiencies in the supply chain can reduce your company‘s supply costs while also reducing the environmental footprint of your supply chain, including energy, water and natural and synthetic material use, as well as improving worker health and, motivation, and productivity.

Benefits include:

  • Understanding the External Landscape
    Beyond identifying business drivers, it is also important to understand the external landscape of supply chain sustainability including the approaches of peer companies, the expectations of stakeholders and opportunities to partner with others.
  • Benchmarking against Peer Companies
    Your peer companies may have already begun addressing supply chain sustainability. Benchmarking against your peers may provide you with a more sophisticated understanding of the business value as well as ideas to incorporate into the design of your supply chain sustainability programme.

You should seek to understand your peers‘:

  1. Business case for supply chain sustainability
  2. Understanding of human rights, labour, environment and governance risks, opportunities and impacts and the resulting supply chain focus
  3. Internal structure for managing supply chain sustainability
  4. Codes of conduct, and the topics included
  5. Use of their code of conduct
  6. Approach and programmes to engage with suppliers
  7. Metrics to evaluate the success of their programme
  8. Reporting practices

Some industries have established joint codes of conduct and undertake aspects of collaborative supplier engagement, such as cooperation to conduct audits and training. Benchmarking against peer companies can help you identify these collaborative approaches and industry initiatives. Finally, suppliers themselves can often provide examples of good practices and can communicate their needs to customers.

  • Understanding the Expectations of Stakeholders
    Companies should also invest in understanding the expectations of their stakeholders including national and local governments, workers‘ and employers‘ organizations, nongovernmental organizations (NGOs), advocacy and activist organizations, academic and issue experts and community groups, as well as suppliers themselves. Moreover, companies can also benefit from seeking input from customers and investors. Customer and investor demand is a primary driver for many supply chain sustainability programmes, and insights from these stakeholders can help shape programmes to ensure that they create the maximum return for the company. Engaging stakeholders early and regularly in the process of designing a programme can help companies identify relevant standards and approaches to sustainable supply chain management. Some stakeholders are knowledgeable about, and sometimes even involved in the development of, different codes of conduct and certifications for suppliers. They can help you evaluate the credibility of different options and identify which might be relevant inputs for your company‘s programme.
  • Emerging risks and opportunities in supply chains.
    From customers and employees to activists and NGOs, stakeholders are often the first to identify emerging environmental, social and economic issues in the supply chain. Companies who engage early and regularly with stakeholders have the opportunity to take a proactive approach to these issues and to partner with stakeholders rather than discovering the issues through an activist campaign. Early identification of issues through stakeholder engagement can also help companies take early leadership in comparison to peers.
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