Written by Marijn Overvest | Reviewed by Sjoerd Goedhart | Fact Checked by Ruud Emonds | Our editorial policy

The Importance of Sustainability in Supply Chain

By the very nature of the supply chain, it usually involves energy-intensive production and transportation as goods are made and moved around the world. Thus, organizations can make the biggest difference by making changes to their supply chain instead of other business operations. 

The complex system of the supply chain such as the numerous supplier relationships and border crossings make sustainable supply chain management challenging. 

The complexity of the supply chain can hinder visibility into crucial operational considerations such as labor conditions at a supplier’s factory that is miles away. Focusing on a sustainable supply chain is the key not just to contributing to the world but also to improving productivity and optimizing costs. 

How can Supply chains be Sustainable?

Many companies around the world have taken various steps to decrease their carbon emissions, cut back on waste, and improve labor conditions.

By tracking sustainability metrics in supply chain management systems, it monitors multifaceted programs that encourage greater environmental and social responsibility among suppliers. 

Additionally, companies can use artificial intelligence and pre-defined rules to make sure that their products are not being shipped unnecessarily. 

In order to build a sustainable supply chain, companies must identify the issues in their supply chain management. 

The common thing to do is to break down the supply chain into various segments where a company can focus on adopting a circular supply chain where the raw materials are recycled back into the production process. 

The reduction in waste by reusing and recycling the materials establishes a balance where input is equivalent to output. 

Additionally, managing sustainable procurement is another important factor in making a sustainable supply chain. 

Adopting a sustainable procurement model helps to understand day-to-day involvement with your suppliers. Companies must also be aware of sustainable procurement tools to fully adopt the model. 

What are the Challenges that Companies Face in Supply Chain Sustainability?

The primary obstacle for companies, especially the small ones, in achieving a sustainable supply chain is cost. Obviously, it is difficult for small companies to afford the upfront costs of making the supply chain sustainable. 

Although the cost of a sustainable supply chain is high, small companies can still invest in some things such as procuring compact packaging. This packaging enables the company to reduce the size and number of shipments as well as lower its environmental footprint. 

On the other hand, some companies are struggling to achieve a sustainable supply chain as there are no sustainable options for components or their organizational structure hinders them to do so. 

Although these challenges can be overcome, 20% of the respondents in a study have reported that customers are just simply uninterested. Thus, making it difficult to justify the additional costs and efforts. 

Technology Components of a Sustainable Supply Chain

Listed below are the technology components of a sustainable supply chain that you should know about!

1. Artificial intelligence (AI)

Artificial intelligence technologies allow the analysis of multiple different data sets across the supply chain. 

It brings the capacity for synchronized intermodality and collaborative shipping in the sustainable supply chain. Thus, taking advantage to combine shipments or use less resource-heavy logistics. 

2. Machine Learning

Machine learning uses large data to help systems and connected devices adapt in real-time to find patterns, learn from experience, and automate agile and responsive workflows.

3. Robots and automated devices

Many customers are expecting fast or next-day delivery nowadays. Thus, companies are pushing the existing capacity of warehousing and logistics to its breaking point. 

Electronic drones and inventory management robots can be optimized to help improve workflow efficiency, optimize energy, and save on fossil fuel usage in logistics.

4. Blockchain

Blockchain is useful for sustainable procurement due to its ability to act as a single source of truth. Through the use of sensors, products can be accurately tracked back to their source to remove any thoughts as to their origin, quality, and handling.

5. Sensors

RFID devices and other inexpensive small sensors can easily be put into products and raw materials. When parties involved in the supply chain comply with mandatory sensor attachment, it creates a high level of transparency.

6. Databases and ERP

The best sustainability solutions run on databases and ERP systems that can handle large data and complex processes. 

The technologies and automated things of a sustainable supply chain are reliant upon the predictive and advanced analytics made by these modern centralized business systems. 

Benefits of Sustainability in the Supply Chain

If you’re still on the fence when it comes to sustainability in the supply chain then take a look at some of the benefits you can get from it.

1. Cost control

A survey by PWC between 2019 and 2020 revealed that there is almost a 7% drop in supply chain operations costs as a direct result of digital transformation. 

50% of the respondents have indicated that investment in supply chain sustainability and transparency will be their utmost priority more than ever.

2. Compliance

Governments all around the world are pressuring and mandating greater supply chain sustainability to meet the United Nations 2030 deadline for achieving sustainable development goals such as clean water for all. 

Government regulations cover various areas which include the traceability of pharmaceuticals, avoidance of conflict minerals, and disposal of electronics.

3. Creates loyalty and reputation

Forbes magazine has recently published statistics showing that up to 88% of consumers are more likely to be loyal to companies that have strong environmental and social responsibility. 

Consumer awareness for sustainable businesses has been increasing even before the pandemic. Now, the demand for a transparent supply chain and business practices has skyrocketed. 

A reputation for sustainable and transparent supply chain practices gives companies a competitive advantage during difficult times and among their competitors. 

4. Minimize risks

When supply chain transparency is applied and implemented with digital security software, deceitful suppliers and manufacturers cannot hide. 

These measures protect businesses from unethical and environmentally irresponsible partners. Furthermore, it can track and document all the handling, labor, and material components from its source to its destination.

Conclusion

As the global focus on environmental and social responsibility intensifies, companies are adopting sustainable supply chain practices. This ultimate guide explores the intricacies of sustainable supply chains, emphasizing their significance, implementation, challenges, and technological components.

By understanding and incorporating sustainable supply chain management, companies can achieve corporate social responsibility goals and contribute positively to the world.