Five benefits of a sustainable supply chain

posted by Mark Nutburn
29 July 2019

The supply chain connects your customers with products and services across the world, but this is coming at a cost to the environment.

A typical consumer company’s supply chain accounts for more than 80% of its greenhouse-gas emissions.

It's not just the environment that is losing out. This lack of sustainability is having a significant impact on companies' profitability. Unilever estimated natural disasters, directly associated with climate change, created annual losses of €300m.

To achieve a sustainable supply chain, a company has to address environmental, social, economic and legal concerns across its entire supply chain. By taking a holistic approach, this reduces waste and environmental footprint, while also improving labour conditions and health and safety — stopping worker exploitation.

A fully sustainable supply chain is one that ensures socially responsible business practices. These practices are not only good for the planet and people who live here, but they also support business growth.

The benefits of a sustainable supply chain are:

1. Reduced environmental impact

There is a common misconception that reducing the environmental impact of a business comes at a cost. In fact, it can lead to big savings. By reducing waste and increasing the efficiency of buildings, vehicles and machinery, you can quickly see returns.

John Mitchell Ltd invested in driver training for its haulage fleet and reaped savings of over £650,000. Nike changed the way it manufactures some trainers, reducing labour costs by up to 50% and reducing material usage by 20%, which resulted in 0.25% higher margins. 

2. Improve continuity of supply

Diversify your supply chain to avoid over-reliance on a single link in your chain. There have been many cases over the years of suppliers being unable to fulfil a service or product, which has then had knock-on effects for other businesses.

Having multiple suppliers in different parts of the world can help improve the continuity of your products or services, preventing costly downtime and reputation damage.

In 2011, a harsh monsoon season (that was attributed to climate change) in Thailand caused global prices of hard drives to rise. Two of the world’s largest hard drive manufacturers were overly reliant on their Thai suppliers who found themselves unable to fulfil orders, leading to delays, shortages and steep costs.

3. Protecting against reputational damage

With information readily available online, your supply chain also affects your brand reputation. It's important to protect your reputation to enhance business growth.

Ensure your strategy for sustainability enhances the lives of every worker throughout the chain. This includes ensuring fair working conditions, pay and minimising environmental impact. Never subject workers to unnecessary risk.

Apple has fallen foul of this in recent years with the working conditions of their Chinese factory coming under scrutiny. There were concerns their new cheaper iPhone was being produced under illegal and abusive conditions.

Between 2016 and 2018, the tech brand lost 27 places, from 2nd to 29th, in the Reputational Quotient Poll, which will have had detrimental effects on their profits. The latest reports from Apple shows they’ve had the worst performing quarter since 2016, losing market share in China and Japan.

4. Potential for new partnerships

This one may be less obvious. A business with a sustainable supply chain, is also an attractive prospect for other companies looking to partner with it. Your environmental credentials will likely align with the values of another brand. In turn, this opens up potential partnership opportunities.

Take Sainsbury’s as an example. The company partnered with vets to support its dairy farmers, teaching them how to find and deal with common health problems. This has led to each of the 55,000 cows producing 140 litres of milk more than the national average. Healthier cows means happier cows, which leads to less cows being required to fulfil demand.

5. Win more business

A sustainable supply chain can land you more business as you prove your green credentials. You can further support this through internationally recognised standards, such as ISO 14001. Often a requirement in business tenders, ISO 14001 is a management system that helps you identify gaps in your business where you could make green efficiency savings.

With an accreditation to support your environmental efforts, you are showing potential clients that you’re taking essential strides to reduce your impact on the world.

If your business reviews its supply chain and can make changes, the rewards are plentiful. Taking positive action can lead to big savings and better margins, along with reducing the damage we are doing to the planet.

☛ Mark Nutburn is chief technology officer at the British Assessment Bureau 

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