What is Supply Chain Sustainability?
Corporations are under more significant pressure than ever before as we collectively strive for a more sustainable future. They increasingly recognize that much of the work to be done extends far beyond the four walls of factories and retail locations. We have learned that procurement decisions made locally can have far-reaching sustainability impacts involving distant suppliers or downstream, directly contributing to product end of life waste streams. According to CDP’s Global Supply Chain Report 2019, companies generate 5.5 times more emissions throughout their supply chain than they make from internal operations.
We now know that the best way to ensure sustainability is to take a supply chain approach. Our perspective must consider the sustainability impacts for input suppliers as well as for customers and society.
Supply chain sustainability has been described as “a holistic view of supply chain processes, logistics, and technologies that address the environmental, social, economic, and legal aspects of a supply chain’s components.” SCS is mindful of variables such as solid waste generation, carbon footprint, pollution, deforestation, and the welfare of workers. Companies now recognize that an SCS emphasis is not only good for the planet but also essential for building positive brand awareness and improving longterm profitability.
Origins/History of Supply Chain Sustainability
Corporate sustainability efforts generally predated supply chain initiatives. The latter approach has become more important in recent decades. Company-specific sustainability practices date back to the 18th and 19th Centuries. In 1853, Sir Titus Salt, a U.K. industrialist, created a model village for his mill workers called Saltaire. Likewise, the Cadbury and Rowntree dynasties of that time were involved in similar schemes, providing parks, hospitals, museums for their factory employees.
By the 1980s, corporate social responsibility had gradually become part of mainstream corporate strategy, with the introduction of transparency and traceability considerations, especially regarding labor rights. In the 1990s, the importance of taking a broader perspective continued to grow. Several examples of international corporate exploitation surfaced, requiring businesses to address sustainability through a supply chain lens.
The 1990s and beyond also saw the introduction of third party certification and fair trade schemes to help companies make more informed sustainability decisions. The Forestry Stewardship Council was created in 1990, and the Marine Stewardship Council was launched in 1997. Such groups brought together non-governmental organizations and businesses alike to establish responsible resource management practices.
SCS management continues to evolve from the aspirational to the quantitative. Companies increasingly look to achieve sustainability metrics such as “Zero to Landfill” as well as “Net Zero” CO2 reductions. Ongoing advances in technology have made it easier for participants to achieve transparency in their supply chains as well as to track their progress toward meeting quantifiable targets.
Examples of sustainable supply chain practices
Companies have developed several practices aimed at improving their SCS performance. Popular approaches, as outlined in Introduction of Green Supply Chain Management, include the following:
Green procurement – People call it “the power of the purse.” Companies can boost a supply chain’s overall sustainability by purchasing materials and components that have positive characteristics such as renewability, reusability, and recyclability, when purchased from vendors that meet required sustainability requirements.
Green manufacturing – The implementation of SCS accountability measures and practices help mitigate the harmful effects of manufacturing activity.
Product design improvements – Products can be designed to use less material, to use recycled content, or to last longer. According to the European Commission, nearly 80% of a product’s environmental impact can be improved through eco-design.
Green transportation and reverse logistics – According to the U.S. Energy Information Administration, transportation is the single largest source of Co2 emissions, generating 1.9 billion tons annually. As such, initiatives to reduce emissions through electric vehicles or renewable fuels, as well as improved freight optimization, can make a difference. Effective reverse logistics has also become increasingly important as we look to increase reuse and recovery of products and materials in support of a circular economy.
Renewable energy and biofuels – Supply chains rely heavily on fossil fuel, which is the leading cause of global warming and greenhouse gas emissions. A transition to renewable energy and biofuels can help propel companies toward their environmental targets.
Industries best suited to SCS practices
Industries best suited to SCS practices are those that can most easily transition from the “take-make-waste” model so prevalent today. Every sector, however, can reduce its environmental impact through the implementation of sustainable practices, as outlined in the section above. Generally speaking, supply chains that utilize renewable resources are best suited, such as sustainable forestry and agricultural practices, for example. The exploitation of non-renewable resources poses a significant challenge to SCS and requires the implementation of mechanisms such as sharing, reuse, refurbishment, and ultimately material recovery to promote sustainability.
Top SCS performers are found in several different industries. For example, Supply Chain Digital’s Top 10 largest sustainable supply chains worldwide includes Accenture (professional services), Apple (technology), Coca Cola (food and beverage), Rolls-Royce (manufacturing), Tokyo Gas (energy), Sky (entertainment and communications), NRG Energy (energy), Microsoft (technology), Sodexo (food service), and Taiwan Semiconductor (technology). Approaches common to successful supply chains include transitioning to renewable energy, eco-friendly product design, and enlightened procurement practices that help improve overall SCS.
Wood packaging and SCS
And speaking of enlightened procurement practices, solid wood packaging selection helps support sustainability in several ways. It is sourced from renewable forests and sequesters carbon, while pallets and packaging are in use. Additionally, it requires less energy to produce than most commonly-used building materials and possesses a negative carbon footprint. Another bonus is that wood packaging is typically made from less popular low-grade lumber, thus ensuring full utilization of harvested trees. Wood pallets are widely reused and refurbished, and recovered components are used to build new pallets. Meanwhile, damaged material is ground into wood fiber material to serve a variety of end-use markets. Overall, wood pallets enjoy an enviable recycling rate of 95%.
The SCS opportunity for wood packaging continues to improve as technology offers new opportunities. Technologies aimed at reducing empty freight miles are helping supply chains reduce the cost and greenhouse gas impacts of empty pallet re-positioning. Additionally, the increasing development of IoT technologies for tracking promises to unlock novel insights into supply chain processes and fresh opportunities to make further SCS gains.