Rigorous policies are the first step toward incorporating sustainability into the supply chain, but they must be underpinned by transparent and efficient monitoring.
Summary: With sustainability high on the corporate agenda, companies are under regulatory pressure to develop robust policies on issues from the ethical sourcing of raw materials to carbon reduction measures, human rights and waste management.
Clients, shareholders and investors are also pushing organizations for public commitment to sustainable operations. Many companies understand that failure to engage with sustainability can leave them exposed to financial loss, serious reputational damage and tarnished brand equity.
The success of sustainability initiatives hinges on a holistic approach that covers every part of the product and service life cycle. It is also conditional upon engagement from leadership that stretches across all business functions including R&D, product development and procurement.
Questions for supply chain executives
- Strategic planning: Are the right supply chain leaders fully integrated into the organization’s strategic planning efforts for climate change and sustainability?
- Performance management and reporting: Are supply chain leaders involved in the organization’s external reporting and disclosure efforts on climate change and sustainability?
- Risk management: Does the organization fully understand the strategic implications of climate change risks for the supply chain?
- Involvement: Are the right team members involved in researching, designing and developing new products and services?
The success of any sustainability program lies in visibility of sustainability and climate change risks throughout the supply chain and standards to mitigate them.
Sustainability risk begins not with a company’s products, but with its suppliers. Organizations may miss unethical working practices or unsustainable processing, packaging or transportation activities that could damage their reputation by association.
The environmental impact of both inbound and outbound logistics is also under scrutiny, with companies keen to streamline factors like distance, transportation, number of shipments and batch size when sourcing and developing relationships. Companies can also realize financial savings by exploring tax rebates and incentives for using alternative fuels, production technologies and energy-efficient appliances.
Rigorous policies are the first step toward incorporating sustainability into the supply chain, but they must be underpinned by transparent and efficient monitoring. Companies must develop effective ways to communicate performance both to internal stakeholders and to the market in order to build trust, confidence and credibility.