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Sustainability as a matter of resilience
As far as supply chains are concerned, the overriding theme to emerge from the pandemic is the need for greater resilience. In truth, that has always been the case – it’s just that risk factors, disruption and global supply haven’t been so mercilessly exposed at any other point in recent history. It’s also true that what mattered for supply chains prior to the pandemic also matter during and after it too; that’s most certainly the case as far as sustainability is concerned.
In my view, we’re at an inflection point as far as both resilience and sustainability are concerned. There’s a pressing need and desire from the business community to work toward both and it just so happens that sustainability begets resilience, more often than not. Moreover, we now have the technology to deliver insight, visibility and transparency into areas that need addressing, and to build strategies that develop robust supply chains that serve people, planet and profit.
So where do our priorities lie?
Towards a strategy
Taking ownership for the resilience and sustainability of your supply chain is crucial for the long-term viability of your business. The starting point should always be to establish goals that are aligned with the company strategy and to map and scale those in line with the long-term corporate agenda. Benchmarking your targets against industry standards (Science Based Targets for GHGs for example) and taking a zero-tolerance stance on human rights transgressions will ensure that you are heading in the right direction.
Make sure to engage stakeholders. Often, simply opening dialogue with suppliers about your plans and the need to collect and share data will lead to greater transparency, and in turn collaboration and partnerships. Establishing expectations with suppliers sets both parties up for success too. Keep in mind that your targets may not be immediately realisable for every company in your value chain. But with commitment from you, a clear programme of support and development, and embedded KPIs you can reasonably expect improvement over time.
Decarbonisation
According to CIPs, around 90% of an organisation’s environmental impact comes from its value chain. The majority of that impact comes from scope 3 emissions – those which are indirectly associated with the company through their supplier’s environmental impact. These typically include things like distribution and transportation, waste disposal and purchased goods and services. Initially these can be hard to get a handle on, but once you do so there are some significant gains to be made from cost savings and from reducing your environmental impact.
Like most modern business problems, it’s one best solved by using data. Mapping your supply chain at a granular level (going beyond tiers 1 and 2) will help you to assess where your emission hotspots are and to identify resource and energy risks. Doing so will also help to you to identify which of your suppliers and vendors are working to a coherent sustainability strategy and which ones aren’t. Those that aren’t, may require some additional support. Providing that support should, in my view, be a priority for your organisation but only if doing so is in line with your overall strategy. We are, after all, working for the greater good.
Ethical standards
Gaining visibility over your supply chain also improves your ability to monitor and improve your supplier’s social and ethical standards. In regions where no standards exist, or where human rights are harder to manage, this is especially important. In industries like clothing, electronics and food & drink, transgressions have been common. To that end, organisations must maintain visibility into and combat instances of worker exploitation. Calls for transparency in that respect have been on the rise and have led to governments in the UK, Germany and Australia introducing mandatory reporting periods for supply chain transparency and penalties for non-compliance.
Regardless of what the law says, it is incumbent on modern businesses as good corporate citizens to ensure the highest possible social and ethical standards throughout their supply network. That the opposite exposes you to financial and reputational risk should be a secondary consideration.
This is partly a matter of visibility and also one of rigorous due diligence. Your suppliers should be able to demonstrate that they meet human rights standards and are aware of what violations look like. If necessary, as part of your contractual agreements have them commit to minimum training and reporting requirements. If they’re operating in high-risk areas, it may be necessary to make site visits, conduct interviews and consult third parties. This should be ongoing.
A path forwards
The extent to which sustainability fosters resilience in the supply chain is profound. Through better visibility in their networks and value chains, organisations can identify and remedy blindspots, prepare for threats and disruptions, and adjust to challenges accordingly.
Moreover, in adopting policies and processes that effectively manage resources – both environmental and corporate – future availability is safeguarded and environmental impact is greatly reduced. What that means is that we are able to meet the demands of the current generation without compromising the ability of future generations to do. That, in my view, is the very nature of a resilient system.
Perhaps most importantly, sustainability initiatives foster a collective effort. They prioritise partnerships and collaboration which are hotbeds for innovation. Every organisation is at a different stage of their development; but by helping those that have work to do, first movers and industry leaders help to raise standards across the board. In so doing, there is a genuine sense of network and of community, and a sense of harmony developing between people, planet and profit. That sense of togetherness, I think, is where true resilience lies.
