Overview of sustainable supply chain

A sustainable supply chain is one that fully integrates ethical and environmentally responsible practices into a competitive and successful model. End-to-end supply chain transparency is critical; sustainability initiatives must extend from raw materials sourcing, to last-mile logistics, and even to product returns and recycling processes.

Digital transformation and the growing sophistication of digital supply chain technologies are playing a major role in the evolution of supply chain sustainability. Big Data management, advanced analytics, artificial intelligence (AI), and security tools, such as blockchain and RFID sensors, have brought unprecedented visibility and accountability to modern supply chains. Companies now have a much greater ability—and obligation—to demonstrate corporate social responsibility and to share best practices for green supply chains and sustainable logistics.

As ethical supply chain practices become a greater and more immediate priority for businesses, compliance goals and sustainability benchmarks are also becoming more standardised. The United Nations Global Compact has set out 10 criteria for measuring supply chain sustainability. These cover areas of environmental responsibility, labour practices, human rights, and corruption. These principles are based on the realisation that socially responsible practices and products are not only beneficial for people and the planet, but are also advantageous for building positive brand awareness, competitiveness, and long-term profitability.

Sustainable supply chain management for a changing world

For many businesses, it took the disruption of COVID-19 to deliver the sharp jolt of realisation as to just how outdated and vulnerable their supply chain operations were. However, even before the pandemic, some fundamental changes to consumer behaviour had been causing global supply chain managers to begin re-evaluating their operations.

One such change has been the rising demand for ever-faster delivery times. On one hand, your customers value green and sustainable logistics and packaging practices yet on the other, they prioritise same-day delivery options. It presents a significant supply chain challenge when you wish to deliver on both speed and sustainability in a meaningful way. It requires the ability to have real-time access to third-party logistics networks and comprehensive, end-to-end visibility into your entire supply chain operation, including the most remote low-tier suppliers.

Three components of sustainable supply chains

Twenty years ago, the word sustainability was almost completely synonymous with eco-friendliness. Today, it is a much more holistic term. Green, transparent, and circular supply chains are all components of a modern sustainable supply chain.

What is a green supply chain?

A green supply chain is achieved by successfully integrating environmentally responsible principles and benchmarks into supply chain management. This includes product design, materials sourcing, manufacturing, logistics, and end-of-life product management. With the rise of e-commerce, there are more product and shopping choices than ever before. To compete, businesses need to find resilient solutions to making their supply chains more environmentally friendly while still increasing profit. Supply chain technologies such as AI and machine learning can help businesses identify risks, patterns, and opportunities—enabling them to minimise waste and improve efficiency.

What is a transparent supply chain?

Supply chain transparency refers to the ability and willingness of a business to openly disclose information about the origin of goods and labour and end-to-end supply chain practices. Many businesses invest significant time and resources into establishing and maintaining ethical and environmentally responsible standards. The problem is, even with the best of intentions, this has traditionally been very difficult to enforce and reliably implement. Fortunately, through the use of digital technologies such as blockchain and RFID sensors, supply chain managers can now obtain an accurate and irrefutable record of all the products and suppliers along the entire supply chain journey.

What is a circular supply chain?

In a circular supply chain, products are disassembled or reduced to their raw materials form, and remade into saleable products—thus allowing businesses to achieve the environmental benefits of recycling while recouping costs in the process. Some of the modern technologies that support these initiatives include the use of recycled plastics in 3D printing, and the ability for advanced analytics to map out the most efficient logistics journeys for returning products into the supply chain loop. Furthermore, businesses are increasingly using circular product design principles to incorporate waste reduction into the very DNA of products and their component parts.

How do sustainable supply chains work?

• Sustainable supply chains operate through collaboration. A surprising number of the world’s largest companies use the same raw materials and lower-tier suppliers. Often, it has been difficult to prove that these suppliers adhere to green and ethical operating standards. If supply chain managers are to combat this, they can best do so by working together, sharing information, and sending a message that sustainability compliance is essential to doing business. The Fashion Revolution movement began in 2013 and is an excellent example of many major—and highly competitive—fashion brands choosing to work together to combat unethical suppliers in their industry. Despite some initial scepticism, a 2022 Fashion Transparency Index report shows that 10 years on, supply chain transparency has overwhelmingly improved in the fashion industry, and that far from damaging their competitiveness, the collaboration and sharing of data allowed all players in the industry to benefit from the improved public sentiment this brought to their brands.
• Sustainable supply chains operate by utilising the best available technologies. Supply chain sustainability presents a challenge due to the complexity and wide distribution of the many links in the chain. Agile sustainability is driven by a connected network of systems, people, and technologies that are brought together in the cloud – allowing for the integration and analysis of multiple data sets and real-time access to insights and customised reports. The best systems start with cloud ERP and leverage AI-powered supply chain solutions to manage end-to-end tasks, from sustainable sourcing, to greener manufacturing and logistics.

• Sustainable supply chains operate by establishing consistent standards. For a strategic supply chain sustainability plan to be effective, it is important that benchmarks, targets, and guidelines are clearly set out. They must then be shared—and agreed to—among all the stakeholders and suppliers across the chain. Fortunately, today we have numerous bodies that help businesses set these goals and criteria, and digital technologies that make it easier than ever to track and manage compliance. There is also an increasing amount of data and intelligence to demonstrate the bottom-line value of sustainability benchmarking. A recent paper from the Harvard Law School Forum on Corporate Governance suggests a positive correlation between companies’ improved ESG (environmental, social, and governance) records, and their profit and growth.

• Sustainable supply chains operate by communicating their successes. Your customers can’t know what you don’t tell them. When you achieve your sustainable supply chain goals, it’s important that you share the good news, or you risk wasting the powerful reputational benefit of that news. A well-earned reputation as an environmentally friendly corporation is always beneficial for your brand and can help to improve your reviews and customer loyalty. But that’s only part of it. Businesses have the opportunity to lead their industry by example, and to demonstrate how supply chain sustainability initiatives can bring measurable benefit—both financially and environmentally. By sharing your achievements and best practices, you associate your brand with innovation and thought leadership in the sustainability sector.

Top three benefits of a sustainable supply chain

For companies that invest in more sustainable and transparent supply chains, there are potential benefits across the entire business, including:

1. Cost control

At the heart of any sustainability initiative is a commitment to increasing efficiency and decreasing waste. And of course, using raw materials more efficiently, recycling, and reducing packaging, helps you reduce both your carbon emissions and your costs. But with smart, cloud-connected supply chain and business solutions, you can go one step further—you can build greener methods into your products and manufacturing process all the way from the designer’s drawing board to the customer’s front door. Sustainable product design helps you control costs and reduce waste by:

• Creatively minimising design using fewer superfluous parts
• Developing product styles that reduce complexity in manufacturing and assembly
• Building circularity into products, with constituent parts that are designed to be easily disassembled and recycled
• Using your customer and marketing data to generate excitement around products that are designed for durability—and celebrating the shift away from a disposable culture

2. Building brand loyalty and reputation

It’s no secret that your customers are more likely to be loyal when they can see that you demonstrate strong social and environmental responsibility. Consumer awareness and preference for sustainable businesses had been steadily increasing for decades—but now, public demand for transparent supply chain and business practices is at an all-time high. A recent report from the US Environmental Protection Agency (EPA) delves into this issue to determine a growing correlation between competitiveness and profitability, and a company’s proven reputation for taking a stance on ethics and sustainability.

3. Minimising risk and vulnerability

It seems that every few years, we hear a story about how a contaminated or dangerous product slipped through the cracks and made it into the supply chain. Quite apart from the devastating consequence of anyone getting injured, a product recall has the potential to damage a company—sometimes beyond repair. Often what isn’t lost in costs and legal fees is taken away through reputational damage. When supply chain transparency is enforced and implemented with digital security solutions, unscrupulous suppliers and manufacturers have nowhere to hide. Not only can these measures protect businesses from unethical and environmentally irresponsible partners, they can track and document all the labour, handling, and materials components from source to destination.

Technological components of a sustainable supply chain

Digital transformation in the supply chain enables you to meet and exceed sustainability benchmarks whilst also innovating and growing your business.

• Artificial intelligence: AI technologies enable the curation and analysis of multiple, disparate data sets across the supply chain. A particularly powerful benefit that AI brings to the sustainable supply chain is the capacity for synchromodality and collaborative shipping. This means tracking the status and location of parcels to take real-time advantage of opportunities to consolidate shipments or utilise less resource-intensive logistics if time permits.
• Machine learning: As an application of AI, machine learning uses Big Data to help systems and connected devices adapt in real time—to discover patterns, learn from experience, and automate agile and responsive workflows. For supply chain managers, the operational optimisation measures that come out of this process can significantly reduce waste and energy usage.
• Robots and automated warehouses: Online shopping has increased by over 149% since the beginning of 2020. With many customers expecting fast or next-day delivery, we are pushing the existing capacity of warehousing and last-mile logistics provision to breaking point. Electronic drones and inventory management robots are examples of automated devices that can be optimised with intelligent automation to improve workflow efficiency, optimise energy, and save on fossil fuel usage in the logistics network.
• Additive manufacturing: Also known as 3D printing, additive manufacturing enables companies to maintain virtual inventories and to manufacture stock on demand. The ability to manufacture on-site and on-demand eliminates the use of fossil fuels and other resources consumed in overseas shipping and packaging. It also has the potential to use recycled plastics from within the supply chain loop as the base material for 3D manufacturing.
• Industrial Internet of Things (IIoT): When connected devices and machines within a business are fitted with unique identifiers and the ability to send and receive digital data, they become part of an IIoT network. Asset intelligence in a sustainable supply chain can help to optimise machine performance and automate maintenance to reduce energy usage and eliminate redundancies in workflows.
• Blockchain: In sustainable supply chains, blockchain is particularly useful in its ability to act as a single source of truth. Through the use of sensors, products and materials can be accurately traced back to their source to remove any speculation as to their provenance, quality, and handling—at any stage across the supply chain.
• Sensors: RFID devices and other small, inexpensive sensors can easily be fitted to products and raw materials—at their source or anywhere along the supply chain. When partners and suppliers comply with mandatory sensor attachment, an unprecedented level of transparency is achieved—especially in regions that may previously have been somewhat difficult to monitor reliably.
• Modern databases and ERP: The best sustainability solutions run on in-memory databases and ERP systems that can manage Big Data and diverse, complex processes. The technologies and automated components of a sustainable supply chain depend on predictive and advanced analytics, as well as on the real-time insights made possible by these modern, centralised business systems.

Sustainability customers in action