A sustainable supply chain is one that fully integrates ethical and environmentally responsible practices into a competitive and successful model. End-to-end supply chain transparency is critical; sustainability initiatives must extend from raw materials sourcing, to last-mile logistics, and even to product returns and recycling processes. 

Digital transformation and the growing sophistication of digital supply chain technologies are playing a major part in the evolution of supply chain transparency and sustainability. Big Data management, advanced analytics, artificial intelligence (AI), and security tools, such as blockchain and RFID sensors, have brought unprecedented visibility and accountability to modern supply chains. Companies now have a much greater ability – and obligation – to demonstrate corporate social responsibility and to share best practices for green supply chains and sustainable logistics.

As ethical supply chain practices become a greater and more immediate priority for businesses, compliance goals and sustainability benchmarks are also becoming more standardized. The United Nations Global Compact has laid out 10 criteria for measuring supply chain sustainability. These cover areas of environmental responsibility, labor practices, human rights, and corruption. These principles are built upon the realization that socially responsible practices and products are not only good for people and the planet, but are also good for building positive brand awareness, competitiveness, and long-term profitability.

Supply chain sustainability in a changing world

For many businesses, it took the arrival of COVID-19 to deliver the sharp jolt of realization as to just how outdated and vulnerable their supply chain operations were. However, even before the pandemic was upon us, some fundamental changes to consumer behavior had been causing global supply chain managers to begin reevaluating their operations.

One such change has been the huge rise in demand for next-day shipping. This is known as the Amazon Effect, and it has created something of a paradox as it relates to supply chain sustainability. In a 2019 survey of over 1,500 U.S. consumers, delivery speed was ahead of all other factors when it came to choosing a retail channel. Yet, in many other surveys, such as this recent report, Nielsen indicates that customers are willing to pay more for products that ensure green logistics practices and transparent supply chains.

If companies are to deliver on both speed and sustainability in a meaningful way, it will require the ability to have real-time access to third-party logistics networks and deep, end-to-end visibility into their entire supply chain operation, including the most distant, low-tier suppliers.

A recent article in the Economist calls COVID-19 “the new normal” and suggests that we will have to restructure our lifestyles and businesses in the long term. Part of this will mean decreased reliance on overseas suppliers and manufacturers. Added to the uncertainty we’ve seen in the past few years regarding global trade and tariffs, we will be looking at increased reliance upon modern supply chain and manufacturing technologies to help us bring our supply bases closer to home. But, realistically, ours is a global economy and we will always have to rely on some international sources for certain raw materials and manufacturing capabilities.

Three components of sustainable supply chains

Twenty years ago, the word sustainability was almost completely synonymous with eco-friendliness. Today, it is a much more holistic term. Green, transparent, and circular supply chains are all components of a modern sustainable supply chain.

Components of a sustainable supply chain
Components of sustainable supply chain (green, transparent, circular)

How does a sustainable supply chain work?

Top three benefits of a sustainable supply chain

For companies that invest in more sustainable and transparent supply chains, there are potential benefits across the entire business, including: 

  1. Cost control: Between 2019 and 2020, over 6,000 senior supply chain executives were surveyed by PWC. Based upon their level of investment and implementation of digital supply chain technologies, they were ranked from Digital Novices to Digital Champions. The Digital Champions reported an almost 7% drop in supply chain operations costs as a direct result of digital transformation. And a full 50% of the Digital Champions indicated that investment in supply chain sustainability and transparency would be a higher priority than ever. When businesses successfully green their supply chains, they successfully lower their costs
  2. Building brand loyalty and reputation: Statistics recently published in Forbes magazine showed consumers to be up to 88% percent more likely to be loyal to companies that demonstrate strong social and environmental responsibility. Consumer awareness and preference for sustainable businesses had been steadily increasing even before the pandemic. But now, public demand for transparent supply chain and business practices is at an all-time high. This sentiment is echoed in a 2020 article in Fortune magazine, which states that “Companies are under an intense microscope during the COVID-19 crisis. […] A company’s social footprint is taking center stage in an unprecedented way.” More than ever, a reputation for sustainable and transparent supply chain practices can give businesses a competitive edge during difficult times.
  3. Minimizing risk and vulnerability: It seems that every few years, we hear a story about how a tainted or dangerous product slipped through the cracks and made it into the supply chain. Quite apart from the devastating consequence of anyone getting hurt, a product recall has the potential to damage a company – sometimes beyond repair. Often what isn’t lost in costs and legal fees is taken away via reputational damage. When supply chain transparency is enforced and implemented with digital security solutions, unscrupulous suppliers and manufacturers have nowhere to hide. Not only can these measures protect businesses from unethical and environmentally irresponsible partners, they can track and document all the labor, handling, and materials components from source to destination.

Technology components of a sustainable supply chain

Digital transformation in the supply chain allows companies to meet and exceed sustainability benchmarks while also innovating and growing their businesses.

Sustainable supply chains in action

By combining innovation, creativity, and modern supply chain technologies, these companies have developed sustainable solutions to keep their supply chains green, transparent, and more competitive than ever.

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