Sustainability is becoming increasingly important for businesses around the world as customers, investors, and governments are placing more emphasis on the importance of their supply chain sustainability efforts. As a warehouse and 3PL manager, you’re likely aware of this growing focus on environmental and ethical supply chain practices and how they could relate to your business. This is why understanding what it means to be “sustainable” in the supply chain has become an integral part of operating competitive warehouses and distribution centers.
In this blog post, we’ll look at sustainability in the supply chain from various angles — including environmental impacts, economic factors, and ethical considerations — so that you have a complete picture of how being “green” benefits the circular economy as well as your bottom line.
What are Sustainable Supply Chains?
Simply put, a sustainable supply chain is one comprised of companies, like warehouses and 3PLs, that are dedicated to the environmental, economic, and social impacts of their business operations. They minimize environmental damage to the planet by reducing outgoing waste and resource use, optimize operating costs by streamlining processes for maximum efficiency, and support ethical labor practices by ensuring fair wages, safe working conditions, and respect for human rights.
Why is Supply Chain Sustainability Important?
Supply chain sustainability has been a hot topic at the World Economic Forum and is vital to the circular economy for a variety of reasons.
- It helps to reduce costs by improving the efficiency of the supply chain, creating better labor conditions, and reducing emissions and product wastage.
- It promotes social responsibility and ethical practices, which can help to foster trust and transparency between companies, their customers, and their suppliers.
- By understanding the impact that each step in the supply chain has on the environment, businesses are able to make informed decisions that lead to a positive impact on the green supply chain.
- Companies that adopt sustainable supply chain practices are more resilient since they are less prone to disruptions caused by external events such as natural disasters or political instability. This supply chain resilience can be critical in times of crisis when access to resources may be limited.
As supply chain leaders continue to focus on sustainability practices, it is essential that they consider the impact of their warehouse operations on their overall supply chain sustainability goals. Taking steps to ensure a more sustainable supply chain can ultimately benefit everyone along the value chain.
Three Components of a Sustainable Supply Chain
Supply chain sustainability can be broken down into three components that often overlap: environmental protection, social responsibility, and economic success. By managing their business activities with these three criteria in mind, companies can ensure that their practices are sustainable in the long term.
Environmental protection involves managing resources responsibly to minimize pollution and waste and reducing energy consumption throughout the supply chain. This covers everything from the reduction of carbon emissions and using renewable energy at your facility to recycling scrap from raw materials and installing LED light bubs.
Social responsibility refers to abiding by fair labor practices, promoting human rights, instituting anti-corruption policies, and providing safe working conditions and fair wages.
Supply chain sustainability doesn’t mean thriving companies should go bankrupt. An important part of the sustainability standards process includes economic success. It involves ensuring your warehouse or 3PL and other businesses in the supply chain are able to generate enough profit to operate responsibly long-term.
How Does Sustainable Supply Chain Management Work?
Sustainable supply chains involve a number of different strategies and practices that aim to ensure the long-term sustainability of every business in the supply chain through end-to-end visibility. Sustainability improvements include reducing energy usage, recycling materials, and utilizing renewable sources of energy such as solar or wind power. Additionally, companies need to ensure their suppliers are meeting certain ethical standards, such as providing safe working conditions and fair wages for their employees and not participating in forced labor situations.
Companies should also be sure that supply chain transparency is in place to track and analyze key performance indicators regularly. This helps to identify weak areas that need improvement or new areas for sustainability programs. Businesses should also make sure they are proactively communicating with their supplier sites and customers so everyone involved in the circular supply chain is fully aware of the company’s sustainability performance and initiatives.
Top Three Benefits of a Sustainable Supply Chain
The top three benefits of a sustainable supply chain are increased efficiency, better customer loyalty, and improved cost savings. For example:
- By reducing energy consumption and waste, companies can save money on their operations.
- Customers will be more likely to do business with a company that is seen as committed to social and environmental responsibilities.
- Sustainable supply chains can also decrease the risk of supply chain disruption by reducing vulnerability to external factors such as natural disasters or political instability.
All these benefits can ultimately lead to greater cost savings and improved customer loyalty for companies that prioritize sustainability in their supply chain management.
Technology Components to Improve Sustainability
Technology is an important part of any sustainable circular supply chain. By leveraging technological industry advancements, companies can better track and analyze their supply chains in order to identify areas for improvement. Additionally, technology can also be used to automate processes and improve efficiency throughout the entire supply chain, like warehouse management system software (WMS) from Logimax. Lastly, distributors can use new technologies to communicate with suppliers more effectively to ensure they are practicing sustainable procurement and that ethical standards are being met.
Challenges of Supply Chain Sustainability
The most common challenge in supply chain sustainability is the lack of enforcement or clarity around environmental responsibility and ethical standards. A key corporate goal in the supply network must be to assess risks during collaboration efforts and ensure suppliers are meeting all necessary environmental, social, and profitability criteria when it comes to sustainable supply chain operations. Additionally, many companies struggle with measuring the success of supply chain sustainability initiatives due to a lack of data-driven analytics. Finally, communication between different stakeholders in the supply chain can also be an issue that needs to be addressed.
Sustainable Supply Chain Examples
Another example is Unilever’s Sustainable Living Plan, which is designed to
reduce the environmental impact of its operations while still meeting customer needs. As a matter of fact, the company has committed to reducing its carbon footprint by vowing to hit its goal of zero emissions by 2030 and net zero emissions by 2039. Not only are they dedicated to the planet, but they are also committed to supply chain sustainability in many forms as noted on their Planet and Society page.
Apple has implemented a comprehensive sustainability plan that covers all aspects of its supply chain from sourcing materials to end-of-life disposal. The company reached zero emissions in 2020 and is on a pathway to remove carbon from all of its products by 2030. Apple’s sustainability plan can be seen here.
One example of sustainable supply chain management is Nike’s Reuse-A-Shoe program, which collects old and worn-out shoes from customers and recycles them into materials used in the production of new products under the Nike Grind brand. However, the company has been accused of not abiding by social responsibility standards. They reportedly faced scrutiny in the past for violating human rights in their overseas manufacturing plants because of child labor, low wages, and poor working conditions. Nike denied this claim but has since instituted a code of conduct and regularly welcomes human rights groups to tour their facilities.
How Your Warehouse Can Increase Its Sustainability in the Supply Chain
Your warehouse or 3PL can take a number of steps to increase its supply chain sustainability.
- Evaluate and understand supply chains. From sustainable procurement to delivering products to customers, it’s essential to understand the impact your business partners have on your own sustainability efforts. Be aware of your suppliers’ operations as they relate to sustainable practices like environmental impact, workers’ rights, and raw materials sourcing.
- Review your company’s progress toward sustainability. Have you taken steps to reduce waste or switch to recyclable packaging? Have you implemented sustainable options regarding your facility’s energy usage to combat climate change to protect the environment or sustainability training on fair workforce practices? This step is vital to helping you identify areas you can impact for a more sustainable supply chain.
- Implement change. Once you’ve identified areas for sustainability improvement, implement changes. Some examples include using renewable energy sources wherever possible, reducing waste, and tracking and reporting on the progress of your sustainability initiatives.
- Establish ethical standards for suppliers. Unfortunately, this is often overlooked by many businesses in the supply chain and can become a real nightmare. Ensure that they are following workplace safety standards and labor laws, as well as practicing environmental sustainability. Always encourage communication between stakeholders in the supply chain.
By taking these steps, your warehouse can increase its supply chain sustainability and ensure a brighter future for all involved.
By understanding the importance of the supply chain’s environmental, financial, and social responsibilities and implementing sustainable practices into your supply chain management, your warehouse or 3PL can benefit from cost savings, improved customer loyalty, and reduced risk of disruption. That way you can be sure that your company is meeting both its short-term sustainability goals as well as creating a more respectable future for all.
To learn more about how Logimax can help your company achieve your supply chain sustainability goals for a better world, contact us today!