How to Build a Sustainable Supply Chain

It would not be an overstatement to assert that supply chains play a crucial role in driving the current global economy, as they facilitate the transportation of goods and services across regions. In recent years, sustainable supply chain management has become an integral aspect of corporate sustainability initiatives.

Sustainability in supply chain management encompasses the management of the environmental, social, and economic impacts of the production and distribution of goods and services, as well as compliance with regulations that promote sustainable business practices.

To foster sustainable supply chains, businesses must actively engage with all their stakeholders, including raw material producers.

Here are five ways that companies can work toward sustainable supply chain management:


Step 1: Detailed Supply Chain Mapping

Businesses should have a clear understanding of their entire supply chain, including all the different stages, suppliers, and logistics involved. This can be done by creating a detailed map of the supply chain, which will help the company identify areas where they can improve sustainability and make more informed decisions. 

Additionally, it is crucial to understand where and how the raw materials are sourced, which will enable companies to evaluate the environmental and social impacts of their supply chain and take action to mitigate any negative impacts.

Step 2: Engage Your Suppliers

For a truly sustainable supply chain, it is essential that all suppliers within the network also adhere to sustainable practices. To achieve this, businesses should engage with their suppliers to promote sustainable practices by setting compliance standards, establishing performance metrics, and conducting regular audits.

In addition, companies should collaborate with their suppliers to help them implement new processes that align with the overall sustainability goals of the supply chain. To maintain consistent engagement with suppliers, businesses may also consider implementing the following actions:

  1. Providing training programs on best practices for sustainability
  2. Clearly defining and communicating expectations for sustainable supply chain operations
  3. Establishing recognition or rewards programs for achieving sustainability goals.

By working closely with suppliers, businesses can not only improve the sustainability of their own supply chains but also encourage the broader adoption of sustainable practices throughout their entire network.

Step 3: Define Goals and KPIs

After identifying the key focus areas for sustainability, the next step is establishing metrics and key performance indicators (KPIs). To effectively determine these KPIs, sustainability benchmarking is crucial. Benchmarking allows businesses to identify areas for improvement and set KPIs/KRAs that challenge them to strive for top-tier performance.

Once sustainability benchmarks have been established, a governance mechanism should be put in place to track and monitor the progress of sustainability initiatives. This can be accomplished by measuring key metrics, such as revenue, profit, waste, etc., over a specific time period. 

Regular monitoring of KPIs/KRAs allows the company to identify areas of the supply chain that may be underperforming. Through the use of metrics and audits, the company can monitor progress, measure growth and assess the effectiveness of its operations by comparing results against the defined metrics.

Step 4: Leverage Modern Technology

Due to the scale and complexity of global supply chains, the use of technology is necessary in order to identify potential weaknesses and opportunities for improvement in supply chain management. For example, software tools for inventory management can be utilized to streamline the procurement process and minimize inventory carrying costs.

When a company has a large number of first-tier suppliers, gathering information about their performance can be a challenging task. Cloud-based software tools can simplify the process by enabling the collection of real-time data for evaluating supply chain performance. Data analytics and AI/ML-powered tools can help companies identify the most efficient and sustainable shipping routes. 

These tools can also help identify the challenges of sustainable supply chain management, such as enhancing process efficiency through resource sharing between supply chain partners (e.g., shared shipping/warehousing), which can significantly contribute to sustainability goals by reducing emissions.

Step 5: Promote Collaboration

The environmental benefits of a single business implementing sustainable practices can be amplified through collaboration among businesses in the same industry or even across industries. Many businesses within the same industry often share common supply chains. By working together on sustainability issues in supply chain management, they can drive the development of more environmentally-friendly standards and processes.

Collaboration across industries can also aid in the recycling and repurposing of products once they have reached the end of their useful life. This helps to promote a sustainable supply chain by reducing waste and reusing materials.

Creating a sustainable supply chain is not a one-time effort but rather an ongoing process that requires constant review and improvement. Benchmarks must be updated, metrics need to be refined, training must be ongoing, and the process must be repeated regularly. Implementing sustainable supply chains not only has a positive impact on the environment but also provides cost savings to the business.