The power of sustainable supply chains: Everything you need to know to take action and lead the way

None of us work alone. We’re all part of global supply chains that stretch from Shanghai to Sheffield and from Sydney to San Francisco. And that’s why it’s so important for everyone involved in manufacturing, shipping, and distribution to play their part in making their segment of those supply chains as sustainable and environmentally responsible as possible. 

It’s no small task though. Even the most switched-on and visibly sustainable companies out there have plenty of work to do – because cleaning up direct carbon emissions is just a drop in the ocean compared to tackling the indirect emissions from your supply chain. 

In fact, a large-scale McKinsey study in 2016 found that “the typical consumer company’s supply chain creates far greater social and environmental costs than its own operations, accounting for more than 80 percent of greenhouse-gas emissions and more than 90 percent of the impact on air, land, water, biodiversity, and geological resources.”

So although many companies have switched to renewable energy and other sustainable ways of operating within their premises, the overall effects of their operations may not have changed very much at all. 

Luckily, it’s not all doom and gloom. Companies are taking responsibility for their supply chains. Cleaning them up and making systematic changes to keep them that way. 

New sustainable supply chain management technology is helping by making it easier to track, report and reduce your carbon footprint. There’s never been a better time to make the adjustments that will change our world for the better. 

Sustainable supply chains are no longer optional

While we all like to think companies do the right things for the right reasons, there are still costs associated with driving sustainability in supply chains. In the past, that might have meant it would fall down a company’s list of priorities – and that’s totally understandable. Deciding between an investment in sustainability and something else like opening a new factory or expanding into a different region is never an easy choice. 

A few years ago, a lot of companies may have gravitated towards the latter options. But that’s changing. Ernst & Young’s 2022 survey of supply chain leaders reveals that “visibility throughout the supply chain is the top priority for supply chain executives”, up from second place in the two years before. 

This is partly because there are cost-saving and revenue growth benefits to more efficient supply chain management. But another common theme from the survey is that supply chain visibility is becoming a much greater priority as businesses face added pressure from customers, employees, and government regulators. Particularly when it comes to carbon emissions, sustainable sourcing, and labor conditions. 

Who is demanding more sustainable supply chains? 

In the court of public opinion, sustainability has never mattered more. If a company isn’t seen to be taking appropriate steps, there’s a real risk that its customers might take their business to a more responsible partner. 

That same Ernst & Young survey shows that pressure from customers is the fifth-strongest motivator for improving supply chain sustainability, with higher expectations from employees sitting just behind it.

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Input from partners and suppliers also plays a part. But aside from the potential savings that are always going to be the biggest driver of change, the dominant influencing factor is new regulations that are forcing the hands of even the most resistant companies. 

For example, the EU is in the process of introducing new sustainability standards that require companies to audit their full global supply chains including every single one of their direct and indirect relationships. The goal of this is to make sure organizations in the EU are fully compliant with not only environmental protocols, but human rights and governance standards too.

Similar regulations are either in place, in progress, or being discussed all over the world. It’s only a matter of time before they become the norm, so the conversation is now a matter of ‘when’, not ‘if’, the evolution happens. 

Plus, the more companies that prioritize sustainability in supply chains, the easier it becomes for others to follow in their footsteps – taking advantage of the new tech and ways of working that the leaders are pioneering. 

That’s the knock-on effect at play. Once enough of us decide to make a change, the people we work with will be empowered and incentivized to do the same. 

To get there though, we all need a thorough understanding of what sustainable supply chains are, and the tools that can be leveraged make them a reality. 

What is supply chain sustainability?

You might think sustainability is solely about the environment. That’s obviously a huge part of it, but for anything to be truly sustainable, there’s a lot more that has to happen at every step along the way. 

In supply chains, sustainability is broken down into three core focus areas: environmental, social, and governance. 

This is ESG, and nothing new to most of us. But it’s worth recapping how those three pieces of the puzzle work together in relation to a supply chain. 

Environmental supply chain sustainability

It’s impossible to underplay the environmental importance of sustainability in supply chains. That’s because the consequences are some of the most severe – ranging from toxic waste leaks and water pollution to deforestation and long-term damage to the ecosystems our planet relies on to thrive. 

To avoid these, there are a lot of different pieces of the supply chain to consider. It’s not just about reducing emissions – although that’s vital. 

You’ll need to think about the materials used along the way (like plastic or anything else that’s potentially hazardous to the environment). You’ll also need to work out whether your supply chain is wasting or polluting water – and even if it’s contributing to a loss of biodiversity indirectly through deforestation. 

That’s a lot to keep track of, which is why better supply chain visibility is vital. The more you can see and measure, the more you can change and improve. With the right data at your fingertips, you can start benchmarking performance and looking for ways to make a difference.

Social supply chain sustainability

Supply chains are about people too. If every single piece of the process is working in an environmentally friendly way, that’s not worth very much if workers’ health, safety, or human rights are being compromised. 

That’s what the ‘S’ in ESG stands for – social. And it means taking ownership of the effects our supply chains have on the lives of everyone involved with or affected by them. 

Some of these responsibilities are obvious, like maintaining the very best labor and human rights standards, along with appropriate health and safety measures. But others are slightly more complicated, like ensuring everybody in your supply chain is getting fair pay, and working in environments that support diversity, equity, and inclusion. 

Responsible partners will care just as much about these things as you do. So when you start having conversations with suppliers about the importance of sustainability in your shared supply chains, make sure how people are treated is front and center. 

Governance supply chain sustainability

Governance is an umbrella term for the way that organizations are managed and run. In supply chains, it refers to all the different rules, regulations, systems, and structures to follow as best practices. 

That means having proper risk management tools in place to protect your partners, avoid corruption and bribery, and stick to whatever codes of conduct your organization is obligated to follow. It also means prioritizing transparency, and regularly reporting on different areas of your operations so that partners and customers can see the proof behind your claims about sustainability. 

These are all things that you should be expecting your partners to do. If you’re not sure whether they’re following the rules, then it might be time to have a conversation or start rethinking those relationships. 

When ESG is a priority, sustainability follows

For a supply chain to be truly sustainable, every person and company involved has to be doing their bit at an environmental, social, and governance level. It can be a lot to manage. But when it happens, supply chains do a lot better for people and the planet. 

Even though there are all sorts of factors involved, a lot of them are intertwined and interrelated. A company following a clear code of conduct and managing risk sustainably is going to naturally treat employees better and look for ways to reduce its environmental impact. Just like how making sure a manufacturing process isn’t polluting waterways will have a positive effect on the data you collect – incentivizing greater transparency in reporting. 

Little by little, ESG flows through the full supply chain, ultimately making every stage more cost-effective and more sustainable.

Best practices for supply chain sustainability – step by step

Because the ESG elements of supply chains are so interwoven, it doesn’t always make sense to use them as a starting point for your sustainability plan. Instead, it’s often easier to simply break the full supply chain down into different chunks, and then target those specific areas.

So let’s take a look at the key segments of a supply chain and how you can drive sustainability in each of them. 

Procurement and purchasing

Before any supply chain can start moving, you’ll need something to move. That’s the procurement stage, when you’ll source the products, materials, or services you need to get things up and running. 

Traditionally, companies with a focus on sustainability in supply chains might have focused less on procurement and more on transportation or warehousing. But a recent survey from the Institute for Supply Management shows a growing emphasis on this first step, with leaders from all sectors realizing that better purchasing practices can “create a long-term competitive advantage for their company."

So what does that look like? Well, it all starts with better, more responsible resourcing and stringent vetting before deciding to work with a particular partner. That might include audits, checking qualifications and certifications, or providing incentives that relate to sustainability performance. 

But this isn’t just about onboarding new partners. Sustainable companies should also take stock of their existing procurement network, and apply all the same strategies to make sure a long-term partner isn’t compromising your overall supply chain. 

Transportation and shipping

We all know that transportation is the foundation of a supply chain. 

It’s also one of the most challenging areas of sustainability to address, with air, sea and land transportation making up 15% of greenhouse gas emissions globally.  

This is a major focus area at the international regulatory level, so it’s no surprise that almost all supply chain transport providers are investigating and investing in alternate ways of doing things. Those range from investing in alternative fuels all the way through to more energy-efficient ship designs, and the knock-on benefits can be a real boost to your supply chain sustainability. 

That gives you options, making it easier to pick and choose providers who are prioritizing sustainability – but only if you’ve got the right information to make those decisions with. 

Beacon’s carbon tracking tools are a great place to start, empowering cleaner, greener shipping by making it easy for you to see the full picture of any emissions associated with your shipping. 

Once you’ve got that, the ways you reduce your impact are up to you. More strategic route and partner planning is one option, choosing transport companies that use renewable energy or take various steps to limit pollutants. But you can also look at balancing your emissions with carbon offsetting for true net zero. Beacon lets you do that too, thanks to industry-leading offsetting tools powered by our partnership with Lune.

Storage and warehousing

No matter what your supply chain is moving, you’ll need somewhere to keep it. Storage is one of the areas of the supply chain that you might have more control over if it happens on premises that you manage directly. And that makes it a clear opportunity for improved sustainability.

Investing in warehouse fit-outs that reduce their carbon footprints should be your first step. BREEAM’s third-party certified standards are the benchmark for sustainable built environments, and using those standards as a guide can help you reduce your carbon footprint and increase operational efficiency – meaning you’ll save money on running costs too. The standards cover everything from water and energy use to pollutants and waste disposal, so work your way through the list and make sure your facilities are reaching as high a level as possible. 

You can also invest in non-building factors like electric fleets and multi-use forklifts, which lower your carbon footprint further. Alternatively, optimized warehouse storage systems make it possible to reduce inventory and minimize the amount of product that’s shifted around unnecessarily. 

Ensuring the right health and safety measures are in place is just as important as the environmental side of things, to make sure your sustainability efforts are improving and protecting the lives of team members as well as the world around them. 

Of course, a lot of us store goods and products off-site, but all the same steps apply. You’ll just need to spend a bit more time in discussions with your warehousing partner to make sure they’re pulling out all the same stops that you would in their position. 

Technology

While technology isn’t an area that necessarily hurts sustainability, it can create enormous potential for positive change. 

More and more companies are making the move to renewable energy in their warehouses, plants, and offices – installing solar panels that reduce their carbon impact and limit reliance on fluctuating energy prices.  

The benefits of technology are also visible in new types of supply chain sustainability software, which work to make every part of the process more visible, and therefore easier to optimize for ESG. But the benefits don’t stop there. New tech like Beacon is also disrupting the ways that companies track, plan, and report – empowering people at every stage of the supply chain with richer data and the insights they need to improve. 

Packaging

Sustainability is nothing new in packaging. These days, we’re all familiar with recyclable materials and circular manufacturing processes that produce less waste and make what we produce easier to get rid of safely. 

But there’s always room to do more. With increased levels of online shopping driving more paper, cardboard, and plastic packaging than ever, it’s an area of the supply chain that can always be improved. 

Cutting out as much plastic as possible helps, as it is more pollutive and harder to recycle than other alternatives. But you can go a step beyond by exploring fully recycled packaging, or introducing plant-based materials made from natural, biodegradable sources like sugarcane or cornstarch.

From carbon-neutral cartons to sachets made of seaweed, those products are out there, and making the switch is a simple way to instantly and significantly cut down waste. 

You may also want to run a packaging audit and rethink your designs entirely – looking for ways to do more with less by reducing weight and size, or eliminating unnecessary elements or purely cosmetic layers. The trade-off you get in looks is easily outweighed by the positive benefits you’ll be able to shout about to your customers and partners. 

Reverse logistics

Supply chains usually focus on getting something, somewhere. But what about getting it back? Reverse logistics are a bigger part of our industry than ever, with higher volumes of online shopping naturally leading to knock-on higher returns levels.

What you do with those returns can have a critical impact on sustainability. So look for ways to innovate by repurposing and recycling returned or faulty goods – or by refurbishing and reselling. 

You can go further by offering to take back products that have already been used and turn them into something new. That’s already happening in certain sectors like clothing, and it’s a great way for forward-thinking companies to gain an edge both on future production costs and in the minds of their customers.  

If any of your materials are perishable, look for ways to shift expiring product earlier, or to safely dispose of it on-site rather than sending it to landfill. There may be up-front costs linked to introducing these sorts of processes, but over time the savings will add up. Plus, you’ll be able to rest easy knowing you’re already a few steps ahead of whatever regulations around waste may come in the future. 

How else can you make your supply chain more sustainable?

Even if you’re following all the best practices for supply chain sustainability, there are still plenty of other ways to keep yourself ahead on the road to responsibility. 

Set clear, realistic objectives and measure your progress

You won’t be able to make a lasting change if you don’t have the historical information and regular benchmarking to see where you’re making progress. That’s where data comes in, giving you a clear, up-to-date picture of your overall supply chain sustainability and any areas within it where there’s still work to do. 

Your first step should always be a thorough audit of your full supply chain using dedicated sustainable supply chain management tools like Beacon, which you can then build into specific targets and goals. Those might be based on what your competitors are doing, or you may want to sign up for a certain target through a program like the Science Based Targets initiative. 

Whatever goal makes the most sense, once you’ve got it, you’ll need to make sure you know how close you are to achieving it. That’s another area where software helps, giving you real-time insight into how your adjustments are adding up to real change. 

Engage and communicate with partners and customers

Last but not least, lasting sustainability means taking all of the information you have and the progress you’ve made and making it accessible to others. That could be through direct conversations, or publishing regular, transparent reports that show your journey from A to B – and the steps you took to get there. 

Some of your supply chain partners might not be as aware of the ways they can improve their performance. But by sharing your expertise, you can help them implement similar checks and balances into their own operations. 

That’s nothing but good news for you as part of their supply chains, because the benefits really do flow both ways – giving everyone in your supply chain sustainability performance to be proud of. 

Plus, transparency is something your end-customers will value just as much as your partners. Nobody wants to be accused of greenwashing – talking the talk about sustainability without backing it up with tangible change.

But if you can show that you’re making a concerted effort to do better at environmental, social, and governance levels, your customers will know that continuing to choose you is a responsible option for the long term.

Make sustainability a priority and lead the way in your supply chain

There are hundreds of different ways to prioritize sustainability. But it’s only by embedding it into your organization from the top down that you’ll be able to take all the steps needed to become a leader rather than a follower. 

That’s what’ll keep you ahead of the regulations that are only going to become stricter as time goes on, while helping you stand out and stand prouder in a market where morals matter more than ever. 

There’s no better time than right now to put a plan in place that makes your supply chain a more sustainable one. 

Following all the steps in this guide will give you the right foundations, and investing in cutting-edge technology means you’ll be ready to build on them. So start measuring your carbon footprint today and making your supply chain more sustainable for tomorrow.