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How to Build Sustainable Supply Chains

Expect customer focus on supply chain sustainability to “increase significantly” over the next few years.

Defined as development that meets the needs of the present without compromising the ability of future generations to meet their own needs, sustainability is a hot topic right now for individuals, organizations, and governments. This attention is impacting global supply chains, where the movement of goods around the world can have both positive and negative impacts on sustainability efforts.

“By managing and improving environmental, social, and economic performance throughout supply chains, companies can conserve resources, optimize processes, uncover product innovations, save costs, increase productivity, and promote corporate values,” writes EY’s Velislava Ivanova in 6 steps for a more sustainable supply chain. “Research shows the business case for supply chain sustainability is growing.”

Sustainability Takeaways
Recently, UN Global Compact worked with EY to learn more about the actions companies are taking to develop more sustainable supply chains, their primary reasons for doing so, and the main challenges they are facing in this quest.
Published in The State of Sustainable Supply Chains, their findings paint a picture of an organization that is embracing resiliency and responsibility in its supply chain management approach. 

 Here are six more takeaways outlined in the report, which can be read in its entirety here.

  1. Supply chain sustainability can no longer be ignored. Supply chains have become global, highly complex, and of significant scale. Building and maintaining resilient supply chains is a key success factor for business in a globalized and fast-changing world.
  2. Companies are predominantly risk-driven with aspirations to unlock strategic opportunities and benefits. Operational, financial, regulatory, and reputational risks continue to be the major drivers for supply chain sustainability.
  3. Companies tailor their approaches and governance to create sustainable supply chains. Sustainability requirements, key performance indicators (KPIs), and assessment criteria are increasingly integrated in the business processes for selection, monitoring, and incentivizing of suppliers, and are managed by procurement and sourcing functions.  
  4. Leading companies are establishing a shared commitment with suppliers. Companies demonstrate different levels of maturity in their relationships with the supply chain, from basic communication to considering suppliers as an extension of their business.  
  5. Technology enables visibility and influence beyond Tier 1.  Technology helps companies get a better understanding of the current performance of their suppliers, track that activity, and benchmark performance over time.
  6. Collaboration is critical for companies to achieve greater impacts. Complex supply chain challenges require teaming up with peers, academia, standards setters, and non-profit organizations.  

Tips for Buyers
Looking ahead, UN Global Compact and EY expect the customer focus on supply chain sustainability to “increase significantly” over the next few years. As that evolution takes place, buyers will need to hone their procurement approaches in a way that aligns with these expectations.

“We expect that by 2025, consumers will consistently give preference to products or services whose impacts have been found to be less damaging to the environment, human health, and society,” the authors write, “when compared to competing products or services.”

To help procurement professionals establish new or hone existing sustainability strategies, the organizations offer these tips for success:

  • Align resources, structures, and processes focused on supply chain sustainability across the entire organization.
  • Integrate sustainability criteria into the procurement process to signal commitment across the organization (and to stakeholders).
  • Train management and suppliers on market practices—capacity building and knowledge sharing across the organization (and with suppliers) help establish the business case for sustainability and lead to innovation.
  • Invest in diverse and inclusive supply chains—working with small and diverse businesses results in regulatory compliance in some geographies.
  • Deploy technology to increase accountability, transparency, and traceability.
  • Create a shift toward supply chain sustainability by leveraging buying power and influence.

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