Saturday, August 30, 2014
Supply Chain Sustainability - How do we achieve it?
Supply chain strategy is an integral part of a company’s business strategy as it determines the operation, distribution and service of a product. As an Environmental Engineer looking to build a career in Sustainability, I was overwhelmed to see how companies are going a step further, incorporating environmental stewardship and implementing sustainable supply chain strategies. Supply chain sustainability is the management of environmental, social and economic impacts, and the encouragement of good governance practices, throughout the life cycles of goods and services.
What are the ways to achieve supply chain sustainability?
1. Evolving procurement strategies and a cross-functional approach
Sourcing of raw materials by exercising best practices results in mitigating greenhouse gas emissions and reducing energy consumption, thereby lowering costs. Companies have initiated an efficient recycling program that contributes to cost reduction as well. Nespresso, a popular coffee capsule brand belonging to the Nestle Group recently announced their plans of investing $550 million over the next six years on ‘The Positive Cup’ strategy, aiming to achieve carbon neutrality as well as 100% responsible sourcing of coffee and other raw materials. In December 2013, Nestle introduced ‘The Nestle Supplier Code’ and ‘Nestle Responsible Sourcing Guideline’ for their raw materials.
Sustainable sourcing focuses on the social aspect as well. Apple experienced challenges when it was claimed that workers in a Chinese factory were working in substandard conditions. Nestle addressed similar labor issues by mapping their cocoa supply chain in the Ivory Coast to assess the labor risks and establish labor standards eliminating child labor.
2. Moving from compliance to performance improvement
Majority of the Fortune 500 companies annually release a sustainability report declaring their carbon management information. However, mere publishing of a sustainability report is not enough. The key lies in identifying opportunities to improve their supply chain.
A good example to consider is Nestle’s “farm to fork” supply chain, which involves working closely with farmers in rural areas, helping them improve the quality of their produce and encouraging them to adopt environmentally sustainable farming practices. The company has collaborated with the Swiss College of Agriculture to help develop the Response Inducing Sustainability Evaluation (RISE), which assesses sustainability holistically across multiple ecological, economic and social dimensions. The RISE tool identifies the potential areas to improve based on the data assimilated at the farm level with the help of a comprehensive questionnaire. Factors such as soil use, fertilizer use, water and energy consumption are taken into account and the effects on climate change, bio diversity and crop production are evaluated and they work on these issues.
3. Building on communications for better decision-making
Building an efficient communication in a supply chain is always a challenge and it s necessary to maintain databases and exchange information with suppliers, distributors and customers. The representation of decision-making authorities in the company in meetings with suppliers and other entities is very important. For example, Wendy’s International schedules business reviews with their suppliers depending on the level of importance. Quarterly business review meetings are scheduled with top tier suppliers to keep them in loop regarding the status review and joint objectives. Suppliers at the next level of importance have semi-annual business reviews and all other suppliers have an annual business review. In this manner the communication can be structured.
With the above strategies, companies can endeavor to achieve a more efficient, sustainable and socially responsible supply chain.