Supply chain sustainability is a business issue affecting an organisation’s supply chain

Supply chain

A supply chain is a system of organizations, people, technology, activities, information and resources involved in moving a product or service from supplier to customer. Supply chain activities transform natural resources, raw materials and components into a finished product that is delivered to...

 or logistics network in terms of environmental, risk, and waste costs. Sustainability in the supply chain is increasingly seen among high-level executives as essential to delivering long-term profitability and has replaced monetary cost, value, and speed as the dominant topic of discussion among purchasing and supply professionals.

Background

Supply chains are critical links that connect an organisation’s inputs to its outputs. Traditional challenges have included lowering costs, ensuring just-in-time delivery, and shrinking transportation times to allow better reaction to business challenges. However, the increasing environmental costs of these networks and growing consumer pressure for eco-friendly products has led many organisations to look at supply chain sustainability as a new measure of profitable logistics management. This shift is reflected by an understanding that sustainable supply chains frequently mean profitable supply chains.

Many companies are limited to measuring the sustainability of their own business operations and are unable to extend this evaluation to their suppliers and customers. This makes determining their true environmental costs highly challenging and reduces their ability to remove waste from the supply chains. However much progress has been made in defining supply chain sustainability and benchmarking tools are now available that enable sustainability action plans to be developed and implemented.

One of the key requirements of successful sustainable supply chains is collaboration

Collaboration

Collaboration is working together to achieve a goal. It is a recursive process where two or more people or organizations work together to realize shared goals, — for example, an intriguing endeavor that is creative in nature—by sharing...

. The practice of collaboration — such as sharing distribution to reduce waste by ensuring that half-empty vehicles do not get sent out and that deliveries to the same address are on the same truck — is not widespread because many companies fear a loss of commercial control by working with others. Investment in alternative modes of transportation — such as use of canals and airships — can play an important role in helping companies reduce the cost and environmental impact of their deliveries.

Three Tiers of Sustainability

In 2008, The Future Laboratory produced a ranking system for the different levels of sustainability being achieved by organisations. This was called the Three Tiers of Sustainability:

Tier 1: Getting the basics right

This is the base level and is the stage in which the majority of organisations are at. Companies employ simple measures such as switching lights and PCs off when left idle, recycling paper, and using greener forms of travel with the purpose of reducing the day-to-day carbon footprint

Carbon footprint

A carbon footprint has historically been defined as "the total set of greenhouse gas emissions caused by an organization, event, product or person.". However, calculating a carbon footprint which conforms to this definition is often impracticable due to the large amount of data required, which is...

. Some companies also employ self-service technologies such as centralised procurement

Procurement

Procurement is the acquisition of goods or services. It is favourable that the goods/services are appropriate and that they are procured at the best possible cost to meet the needs of the purchaser in terms of quality and quantity, time, and location...

 and teleconferencing

Teleconference

A teleconference or teleseminar is the live exchange and mass articulation of information among several persons and machines remote from one another but linked by a telecommunications system...

.

Tier 2: Learning to think sustainably

This is the second level, where companies begin to realise the need to embed sustainability into supply chain operations. Companies tend to achieve this level when they assess their impact across a local range of operations. In terms of the supply chain, this could involve supplier management, product design, manufacturing rationalisation, and distribution optimisation.

Tier 3: The science of sustainability

The third tier of supply chain sustainability uses auditing and benchmarks to provide a framework for governing sustainable supply chain operations. This gives clarity around the environmental impact of adjustments to supply chain agility, flexibility, and cost in the supply chain network. Moving towards this level means being driven by the current climate (in which companies recognise cost savings through green operations as being significant) as well as pushing emerging regulations and standards at both an industry and governmental level.