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3 Essential Elements of Supply Chain Sustainability

Learn about the three elements of supply chain sustainability and how they can help companies succeed in impact initiatives.
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Supply chain sustainability is the process of achieving business success while minimizing environmental degradation and minimizing ethical issues. The key is to ensure that sustainable goals are on a company’s radar.

Moreover, companies must clearly understand how supply chain sustainability fits within their overall business strategy. Sustainability comes from a market that wants to see that companies are not only interested in keeping the supply chain healthy for their business but also the planet and its people. To make a lasting impact on the world and sustain your supply chain long-term, you need to enact sustainable operations.

What are the 3 Elements of Supply Chain Sustainability?

“Sustainability” is a three-pronged social, environmental, and financial system. When you try to understand supply chain sustainability, you need to look at all three of these elements and ensure that your company’s actions align with the ideals of sustainability.

The social aspect of sustainability looks at how your company treats its employees and the community. Does your supply chain produce conflict minerals? Does it have a human rights policy in place? Do your company’s supply chain operations create any hazardous waste?

The environmental side of sustainability looks at how a company’s actions impact the environment. Are you looking for carbon offsets? Are you implementing a sustainable renewable energy policy? Do you be sure to use recycled materials?

The financial aspect of sustainability is probably the most important. As a financial professional, you need to make sure that your company is financially healthy, which applies to your supply chain. How do you ensure that your supplier’s costs are not putting undue strain on their finances? How can you encourage your suppliers to be financially sustainable?

Supply chain sustainability: Environmental

As noted, supply chains often span long distances, which means that the way you source your products can directly impact the environment. According to the Sustainable Supply Chain Management initiative, 90% of supply chain issues have environmental origins.

However, most companies never realize this due to their lack of understanding of the connection between their supply chain and the environment. Supply chains must be continuously monitored to ensure that there’s minimal impact on the environment.

This is especially important for companies whose suppliers are not located within close proximity to one another. Read the supplies that you purchase very carefully, as some suppliers may have several levels of factories or distribution plants located far from one another, leading to a lot of trash and pollution.

Companies should be careful about their resources and whether their suppliers are using environmentally friendly methods when producing their goods. Furthermore, companies should consider the environmental impact that comes from their packaging and the transportation used to bring the supplies to the final destination.

The more you can find ways to reduce your carbon footprint, the more successful you’ll be in ensuring that your company positively impacts the environment. Therefore, it’s important to make sure you have a supply chain strategy in place to do this well. This should include key resources, interested parties, and critical stakeholders.

Supply chain sustainability: Financial

Stricter anti-trust laws are being put in place to ensure that companies think very carefully about their supply chains. As the global economy continues to become more complex and tighter, businesses that do not have a good supply chain strategy will find themselves struggling to compete against other suppliers. In addition, certain financial regulations are becoming much stricter, which means that companies must ensure that they meet these regulations to minimize any potential fines or penalties. Supply chains are frequently the source of safety violations, making it more difficult for companies to get loans.

To better prepare yourself for financial sustainability, you should read all contracts very carefully before signing them. This is especially true if your company has a new supplier or is purchasing a new product line that requires a lot of materials. Another good way to ensure your financial stability is to ensure that your supply chain strategy is financially sustainable.

Conclusion

When considering the three elements of supply chain sustainability, companies that look all aspects of their supply chain and assess the impact their actions have on the environment and the communities surrounding them are more likely to be successful. Companies should clearly define the priorities they want to achieve with their supply chains, including minimizing waste, minimizing any negative impacts on the environment, and reducing resource consumption.

If a company can recycle many of its products, that is a good way to show its commitment to sustainability. Companies that go the extra mile to reduce their carbon footprint in every way possible will be more successful than others.

April 18, 2022