Supply chain sustainability
Supply-chain sustainability is the management of environmental, social and economic impacts and the encouragement of good governance practices, throughout the lifecycles of goods and services.[1] There is a growing need for integrating sustainable choices into supply-chain management. An increasing concern for sustainability is transforming how companies approach business. Whether motivated by their customers, corporate values or business opportunity, traditional priorities such as quality, efficiency and cost regularly compete for attention with concerns such as working conditions and environmental impact.[2] A sustainable supply chain seizes value chain opportunities and offers significant competitive advantages for early adopters and process innovators.[3]
Drivers for supply chain sustainability[edit]
As of 2021, a growing number of companies see supply chain sustainability as a strategic business matter. A business strategy for supply chain environmental performance can deliver measurable environmental benefits for the company and its stakeholders.[21] A sustainable sourcing strategy positions the company for increasing demands of higher disclosure and investor scrutiny, more environmentally focused consumers, and scarce resources. Sustainable procurement is a key concern for investors, through movements such as socially responsible investing. Leading investment firms such as BlackRock use their influence to bring supply chain sustainability on the agenda.[22] Customers and consumers also demand supply chain responsibility and sustainability as part of a company’s value proposition under a growing ethical consumerism movement.[23] Consumers’ purchasing behaviors reflect this trend as 70% say they are willing to pay a 5% price premium for products produced by more-sustainable means.[24] During global supply chain disruptions following the COVID-19 pandemic, sustainable supply chains have been shown to be more resilient and have lower supplier risk.[25]
Recent research in the Indian manufacturing sector underscores the importance of sustainable innovation in supply chains, highlighting 'financial availability for innovation' and 'technical expertise availability and investment in R&D for green practices' as key factors. This study emphasizes the need for broader, empirical research to understand the evolving role of sustainable innovation in enhancing supply chain sustainability, especially in emerging economies.[26]
Challenges in achieving supply chain sustainability goals[edit]
Despite companies being increasingly focused on working with suppliers that help them achieve their sustainability goals, challenges continue to persist.[34] Suppliers further up the supply chain generally lack the maturity, tools, and capabilities to manage and drive environmental and social improvements.[34][35] When faced with workplace issues such as sexual harassment, retaliation by superiors, and a hazardous environment, lower tiered suppliers typically have a poor response plan, or no plan at all. In cases where a plan is established, suppliers are unable to implement it and train their employees accordingly due to a workforce consisting of nearly 50% temporary workers. As you move further upstream in the supply chain, a company loses more oversight over suppliers. Companies do not directly operate with lower tiered suppliers, and there is generally no contractual relationship in place between the two. This makes it increasingly difficult for companies to manage sustainability upstream. Additionally, lower tiered suppliers operate in relative obscurity compared to the companies they supply, so they tend not to face the same level of scrutiny if failing to meet sustainability standards.[34]
Many companies have thousands of suppliers, making it difficult for those in charge of driving supply chain sustainability to know where to begin and focus their efforts. They may not have access to the right data or may lack the authority to effect real change. Additionally, in striving to be more socially responsible, a company can inadvertently make it harder for smaller, diverse suppliers to compete with the larger, more established ones. Generally, the larger suppliers are better equipped to drive sustainability improvements compared with smaller ones. In rewarding the larger suppliers with larger contracts and reducing business or even severing ties with the smaller ones to achieve sustainability goals, companies make their supplier base less diverse and put the smaller suppliers at a disadvantage.[35]