6 steps toward more sustainable supply chain practices
In the quest toward greater supply chain sustainability, leaders must get strategic about operations and take the long view. Here's what to do.
Supply chains have a major impact on corporate sustainability goals.
Organizations have a negative impact on the environment from the time they source raw materials for their products until they deliver those products to customers. But environmental impact doesn't end there, since waste has a considerable impact on the planet. To lessen some of that impact, supply chain leaders can implement more sustainable practices.
Fifty-four percent of CEOs from all over the world view sustainability as a more important priority than they did a year ago, according to the 2024 CEO Outlook Pulse survey by EY. Actions that supply chain leaders can take to improve their company's sustainability are creating an overview of their supply chain, securing executive buy-in, setting supply chain sustainability goals, figuring out what data is needed for supply chain sustainability analysis, looking into nearshoring opportunities and getting employees on board.
"[Supply chain sustainability] is now mainstream," said Çerağ Pinçe, associate professor at Loyola University Chicago, who focuses on supply chain management and sustainable operations. "Every company has to think about sustainability in general and sustainability in the supply chain in particular."
6 steps to a more sustainable supply chain
As with any strategic endeavor, creating a more sustainable supply chain requires that stakeholders take a multipronged approach. Here are six ways to create a more sustainable supply chain.
This article is part of
Guide to supply chain management
1. Identify supply chain sustainability issues, opportunities
Supply chain leaders must first get a general overview of the organization's supply chain and how sustainable it is before taking action.
Supply chain leaders should complete a materiality assessment to determine sustainability-related opportunities and problems, said Lisa Ellram, professor of supply chain management at Miami University.
"Organizations are often surprised by where their problems are," Ellram said.
Regulatory requirements, stakeholder demands and operational risks can all lead to supply chain sustainability issues, she said.
For example, consumers may not want to buy a company's product because the product is made of plastic and many consumers are trying to cut down on plastic use.
Gaining a clear view of overall supply chain operations is also crucial for improving supply chain sustainability.
Supply chain leaders should ensure they understand all their company's supply chain processes, said Lindsay Azim, director analyst in the talent and sustainability team at Gartner. Mapping the supply chain -- an exercise that documents the flow of materials, information and money -- can help leaders gain insight.
2. Secure executive buy-in for supply chain sustainability
Supply chain leaders can't succeed with supply chain sustainability efforts without help. The C-suite must be on board as well.
"Sustainability must be something that the organization has decided is critical," said Chris Sawchuk, global procurement advisory practice leader at The Hackett Group, a business consultancy located in Miami. "It has to be an enterprise objective, and supply chain management has to know how sustainability fits with the other organizational priorities."
Executive buy-in for sustainability efforts helps ensure that supply chain leaders receive the resources required to examine and address sustainability issues and are able to implement needed changes, Sawchuk said.
3. Set specific supply chain sustainability objectives
Supply chain sustainability goals can help center efforts and enable leaders to take specific action.
Leaders must establish goals for supply chain sustainability so the supply chain function can work toward those objectives, Ellram said.
Supply chain leaders should also work with the organization's suppliers to set specific sustainability goals, as improving suppliers' sustainability practices is an essential part of improving the organization's own supply chain sustainability.
Leaders should start with clearly defined, achievable goals, such as asking suppliers to cut their Scope 1 emissions, Ellram said. Then they can add more complex or ambitious goals, such as asking suppliers to collect and report on Scope 2 emissions.
However, supply chain leaders must avoid asking suppliers to improve their sustainability records if their company has not already made those improvements, Ellram said.
"You have to [be] doing things yourself, because suppliers can smell that hypocrisy a mile away," she said.
New suppliers should meet the company's sustainability requirements as well.
Supply chain leaders should add environmental impact and other sustainability considerations to the company's supplier selection criteria, Azim said.
4. Identify needed data for measuring progress
The right data will help shed insight on whether a company is meeting its supply chain sustainability goals.
Supply chain leaders should identify the data they need to collect to measure supply chain sustainability, then implement tools and processes for collecting that data if needed, Sawchuk said. They must also identify and collect relevant data from suppliers.
Publicly available sustainability guidance can help leaders decide what to measure as well as help them learn more generally about sustainable business practices.
Supply chain professionals should avoid reinventing the wheel when making their business practices more sustainable and instead lean on established practices and standards, Ellram said.
Organizations that supply chain leaders may be familiar with have already released sustainability guidance.
Industry groups such as the Association for Supply Chain Management are creating frameworks, scorecards and other tools to define and promote sustainable supply chains, said Deborah Dull, global supply chain sustainability leader at Genpact, a business consultancy located in New York.
5. Look into nearshore outsourcing opportunities
One popular supply chain sustainability strategy is nearshore outsourcing, which reduces the distance between suppliers, manufacturers and customers. Supply chain leaders can consider including nearshoring in their sustainability plan.
Supply chains becoming shorter improves sustainability because companies don't have to transport materials as far, Dull said.
This strategy also reduces company costs because of the reduced travel, making it a win on multiple fronts, she said.
6. Make sustainability goals part of everyone's job
Sustainability should not just be the purview of certain leaders.
Organizations must embed responsibility for creating more sustainable practices into every worker's job, Azim said. Employees should know that part of their job description includes identifying opportunities for improved sustainability and sharing those ideas.
Companies should measure employees' efforts and reward them for ideas that yield positive results, she said.
Mary K. Pratt is an award-winning freelance journalist with a focus on covering enterprise IT and cybersecurity management.
