The benefits of supply chain sustainability go beyond just doing the right thing. Here are six more ways that it’s helping companies be more competitive and efficient in the current business environment.
Buyers across all industries are putting supply chain sustainability at the top of their priority lists this year, and for good reason. Not only does it position companies as both conscientious and attentive (both upstream and downstream in their supply chains), but it also helps them cut costs, improve efficiencies, and become more resilient.
“Most companies’ risks and opportunities are often in their supply chains,” BSR’s Tara Norton writes in “How to drive value through supply chain sustainability,” “and companies with supply chain sustainability programs have a leg up against competitors to mitigate risk, find cost savings through resource efficiency, drive innovation through supplier collaboration, and access finance and improve working capital.”
More Responsible Sourcing, Please
Also called responsible sourcing, sustainable sourcing, responsible supply, or sustainable procurement, supply chain sustainability has shifted from a largely compliance-based approach into one that literally transforms supply chains. “These trends align with overall management trends in the evolution of procurement and supply chain management,” Norton adds, “and companies need to navigate them [in order to] evolve with the times.”
Along with benefits to people and the environment, advancing supply chain sustainability can unlock business value and build competitive advantage against a backdrop of increasing consumer, regulatory, and investor expectations, BSR reports in “The Supply Chain Leadership Ladder 2.0: BSR Maturity Model for Supply Chain Sustainability.”
6 Reasons to Act Now
As the gaps between the leaders and the laggards on the sustainability curve become increasingly obvious, BSR says the former will capture value in the evolving regulatory environment and expectations put on companies. Of the various benefits that come along with implementing a supply chain sustainability program, here are six that procurement professionals should be thinking about:
- Mitigate supply chain risk. Investing in climate resilience and supply chain human rights and working conditions will continue to climb in importance over the next few years, according to BSR. By 2030, for example, productivity losses related to heat-related workplace disruption and injury could rise above $2 trillion. It notes that several countries have introduced legislation to tackle forced labor in supply chains. This, in turn has disrupted supply chains where companies have been unable to assure the avoidance of forced labor in the production of their goods.
- Save money through improved resource efficiency. Reporting from the Carbon Disclosure Project’s (CDP) supply chain program reveals that 99 participating companies saved $19 billion while reducing greenhouse gas (GHG) emissions by 633 million tons of CO2-equivalent.
- Eliminate supply chain inefficiencies. Sustainability not only mean making choices and building processes that are better for the environment; it also means eliminating inefficiency, finding solutions that are more cost-effective, building brand equity, developing competitive advantage, and managing risk. “Indeed, by working together with their suppliers for such sustainable outcomes, leading organizations are increasingly turning supply chain sustainability into a driver of competitive advantage,” Marc Wins writes in “5 Steps to drive value into the supply chain.” “Ultimately, such practices lead to a value-oriented supply chain.”
- Drive more innovation. Businesses in the supply chain economy are a major source of innovation, BSR states, including sustainability innovation. “Such innovation can be harnessed to capitalize on evolving consumer preferences for sustainability attributes,” the firm notes, “such as organic, local, and recycled inputs.”
- Gain better access to financing. Sustainable business practices can also translate into better and cheaper access to capital. “Ninety percent of the studies on the cost of capital show that sound sustainability standards lower the cost of capital of companies,” BSR reports. “And investors are challenging companies on a swath of sustainability issues, including climate disclosure, deforestation, and antibiotics use in animal supply chains.”
- Maintain market competitiveness. Calling competition one of the “direct drivers for incorporating sustainability into the supply chain,” Muhammed Saaed, co-author of “Drivers of Sustainable Supply Chain Management,” points out that under the influence of external and internal pressures, more organizations are adopting sustainability practices to gain a competitive advantage. “Implementing sustainable product and process initiatives has become an important consideration in ensuring a global competitive advantage,” he writes. “In this regard, companies implement sustainability initiatives and manufacture sustainable products to meet their customers’ requirements as well as to maintain competitiveness in the market.”