The voices calling for responsible business practices to extend to the value chain are many and urgent. One could easily think this is solely because of the inherent social and environmental risks, as well as governmental challenges, but there is also a strong business case for supply chain sustainability. Sustainable supply chain management can be a driver for success and value, both for businesses and for society.
With the global reach and span of many businesses and their supply chains today, committing to sustainability raises the potential of contributing positively to inclusive markets and sustainable development.
What is Supply Chain Sustainability?
Supply chain sustainability is the management of economic, environmental, and social impacts, as well as encouraging good governance practices, throughout the life cycle of your goods and services. The aim is to create, protect, and grow long-term economic, environmental, and social value for all stakeholders involved in bringing your goods to market.
Thus, it becomes clear that a sustainable supply chain is a means through which companies can protect the long-term viability of their business models and secure the social license to keep operating.
Committing to sustainability in today’s globalized economy means taking charge of the responsibilities and risks that come beyond the market where the product and service is purchased. That’s why companies at the forefront of supply chain sustainability are adopting views and mindsets that cater to the entirety of the product life cycle — from manufacturing and delivery to use and disposal — which, in turn, reflects positively on their brand, business continuity, and operational costs.
Supply chain sustainability rests on three main pillars:
- Economic sustainability: This relates to the company’s long-term profitability and how the sustainability of the supply chain supports that.
- Environmental sustainability: This focuses on the impact a business has on the environment and how sustainability can help turn that into a positive.
- Social sustainability: This pertains to how a company supports stakeholders like employees, suppliers, customers, shareholders, regulators, and the community at large, and how supply chain sustainability plays into that.
In the quest to build the pillars of supply chain sustainability, it would be easy for a business to succumb to the temptation of raising one factor over the others. However, each of these pillars is equally important to a healthy, sustainable supply chain and must be treated as such.
With global awareness shifting towards sustainability across the board, companies are finding that committing to sustainability for the supply chain supports their business objectives.
Businesses can rightly consider this empowering, and forward-thinking buyers and regulators are initiating a U-turn by asking questions like:
- How can we encourage suppliers to leverage environmentally sustainable practices?
- How can we help suppliers survive the heavy impact of rapid geopolitical and economic volatility?
- How can we promote better labor practices and crucial finances in developing countries that supply our businesses?
And so, businesses are now more empowered than ever to commit both to their profitability and the values by which they define themselves.
The Business Case for Supply Chain Sustainability
The business case for building a sustainable supply chain for any specific company depends on many factors, including industry sector, supply chain footprint, business strategy, organizational culture, and stakeholder expectations. That said, the most common business drivers for sustainability include:
1. Managing business risks: A sustainable supply chain helps manage business risks by:
- Minimizing business disruption from environmental, social, and economic factors
- Protecting and bolstering the company’s reputation and brand value
2. Realizing efficiencies: A sustainable supply chain helps realize efficiencies by:
- Reducing the cost of material inputs, transportation, and energy
- Increasing the productivity of labor
- Boosting and fostering efficiency across the entire supply chain
3. Creating sustainable products: By committing to sustainability, a business can:
- Meet evolving customer and business stakeholder requirements for more sustainable products
- Innovate fast enough and efficiently enough to meet the demands of a changing market
There are enough benefits that supply chain sustainability management practices can maximize value to the business. For example, unless a business is ready, willing, and able to track the history of its products (including material and labor inputs), the brand cannot make a compelling claim of being sustainable — a risky proposition in today’s culture of conscious consumerism.
Traceability and its ties to supply chain sustainability can no longer be ignored thanks to the fact that tens of millions of Gen-Zers in the U.S. alone, in tandem with similar numbers around the world and future generations to follow, are categorically stating their desire for sustainability by choosing to patronize only businesses that can prove their commitment to it.
Consider this to be more than a fad. These changes are here to stay, and forward-thinking businesses are already putting in place the policies and infrastructure to ensure they stay competitive in the long term.
How Logility can help
Logility is leading the charge towards a sustainable digital supply chain. With over 45 years as a global leader in the industry and more than 1,000 customers located in 80 countries, we are uniquely positioned to leverage our expertise in helping customers respond to changing market dynamics in ways that are economically, socially, and environmentally sustainable.