This article was recently published on Environmental Leader.
Environmental managers and chief sustainability officers are increasingly looking to their supply chains to conserve natural resources and reduce carbon emissions.
Considering supply chains are responsible for up to four times the greenhouse gas emissions of a company’s direct operations and many suppliers operate in water-stressed areas of the globe, this makes sense from an environmental savings standpoint.
To this end, we’ve seen major corporations like Apple push for more rigorous environmental standards and renewable energy use across its supply chain — and publish regular supply chain audit reports detailing suppliers’ progress — and Nike creating an entirely new apparel supply chain company that will “embed sustainability and transparency into the business.”
It’s also a way to manage risk.
Climate-related regulations, the cost and availability of materials and human resources are all supply chain risks. Working with suppliers to improve sustainability can help mitigate these, as well as reputational risks.
As transparency and accountability become increasingly important to investors, consumers and other shareholders, sustainable supply chain shortcomings can also be a blow to a corporation’s sustainability cred. This is something Disney found out in recent weeks with environmental protection groups accusing Disney of using polluting suppliers in China and it’s actually what spurred Apple to monitor its suppliers’ environmental, health and safety performance in the first place.
“There is growing awareness in business and society about sustainability risks and opportunities related to supply chain,” Veli Ivanova, EY US partner, told Environmental Leader. “Workforce health and safety incidents, labor disputes, environmental incidents, auto industry product recalls and recent legislation such as the UK Modern Slavery Act are all contributors. As a result, companies are increasingly recognizing that they need to invest in sustainability beyond their direct operations and create resilient and responsible supply chains to be successful in a globalized, fast-changing world. Sustainability leaders also recognize that sustainable supply chains can offer competitive advantages such as improved efficiency, innovation and market differentiation.”
EY and the UN Global Compact have published a report, The State of Sustainable Supply Chains, which explores how companies are embedding sustainability into their supply chains. After conducting interviews with 70 companies, the report authors categorized companies’ approaches to building sustainable supply chain into five groups: basic, improving, established, mature and leading. Most of the companies interviewed are in the improving or established categories, the report says.
Leading companies, however are experiencing several benefits — product differentiation, increasing market share and growing consumer support, among them — from embedding sustainability in their supply chains.
“While operational, financial, regulatory and reputational risks continue to be the major drivers for supply chain sustainability, companies increasingly invest in resilient and responsible supply chains to conserve resources, cut costs, enhance reputations and create shared value with stakeholders.” Ivanova said. “Mature companies are aspiring to unlock strategic opportunities and business benefits beyond regulatory compliance and ‘policing’ of suppliers, as they recognize that products with sustainability attributes can result in increased sales, growth opportunities in new markets, and stronger long-term relationships with customers.”
To read the full article, please visit the Environmental Leader website.