Building a Sustainable Supply Chain

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Building a sustainable supply chain requires a holistic approach that includes the company as well as their suppliers and their suppliers, suppliers – downstream and upstream. To ensure goals and objectives are achieved, sustainabilty must be a part of strategy, applying measurement metrics solidifies executive level sponsorship. Sustainable supply chains are typically viewed from a 3BL (3 bottom line) approach which includes People, Planet and Profit dimensions.

Companies and their partners within the supply chain who fail to include sustainability as a strategic direction face significant risk to their bottom line and future viability. Building a Sustainable Supply Chain To build a sustainable business companies, along with their supply chain channel partners, must develop strategies and tactics that will ensure their products, processes and manufacturing functions address environmental concerns while maintaining financial profitability.

Sustainable Supply Chain Management (SSCM) involves integrating environmental and financial practices in the complete supply chain lifecycle, from product design and development, to material selection, manufacturing, packaging, warehousing, distribution, consumption, return and disposal. (Sustainable Supply Chain Foundation, 2013) The supply chain lifecycle includes actions of the company, their suppliers, as well as the supplier’s suppliers, both downstream and upstream within the chain.

Supply chains consist of a network of relationships and to be successful, long-term and highly collaborative relationships between all participants in the supply chain is necessary. (Rota, Reynolds & Zanasi, 2013) Supply chain sustainability is broken into three dimensions which are; environmental (planet), social (people), and economic (profit), also termed “the triple bottom line” or “3BL”. (Faisal & Akhtar, 2011) 3BL sustainability can be further understood by identifying some of the underlying issues within each of the dimensions; (Thatcher, Delaye, Ambekar, Ciccolini, 2012)

Environmental Issues: Emissions to air (e. g. greenhouse gases such as carbon dioxide and other pollutants), Releases to water (chemical), releases to land (e. g. fertilizers), use of raw materials and natural resources (e. g. sustainable forestry, biodiversity), use of energy (efficiency, renewables), energy emitted (heat, radiation, noise), and waste and by-products (recycling and waste prevention).

Social issues: Encouraging a diverse base of suppliers, promoting fair employment practices, promoting workforce welfare (e. . health and safety), enabling training and skill development, community benefits and fair trade and ethical sourcing practices. Economic issues: Job creation (green technologies, markets for recycled products, etc. ), understanding total cost of ownership, supporting small and medium size enterprises, reducing entry barriers (open competition), ensuring operating business remains a viable operation able to provide employment, ensuring suppliers agreements are at fair and viable margins and ensuring business continuity (e. . supply chain resilience).

Sustainability issues permeate throughout the supply chain and must be viewed strategically. Sustainability cannot be viewed as a project, handed off to an internal corporate department, there must be a corporate-wide and supply chain commitment to successfully achieve goals. A company (and their partners) that truly desire to achieve long term success must integrate sustainability into their overall business plans and by doing so embed the culture of sustainability into their corporate culture. Glover, 2009) A 2007 study by the Canadian consulting firm Stratos found that best in class companies incorporate senior level sustainability mandates into their long term strategic planning. (Stratos, 2007)

Establishing key performance indicators (KPIs) that align with corporate and supplier sustainability objectives will assure integration of a “green” mindset within the supply chain. Although there are no set governing metrics, the Supply Chain Council has proposed environmental metrics which include carbon and air pollutant emissions, liquid and solid waste generated, and percent recycled waste. Supply Chain Council) As the saying goes, “what gets measured, gets managed. ” It is an immediate imperative that companies and their supply chain partners embrace sustainability, failure to do so will result in significant risk both short and long term.

Some of these risks include: * Brand erosion (demand risk): This occurs when companies are found negatively affecting climate, water, communities, employees, or any number of other resources and stakeholders. (Smith, 2013) Included in brand erosion are social safety and labor practice issues which include use of child labor and human trafficking.

* Operational and physical risks (operations and security risk): These types of risks include resource constraints (our shrinking planet), interruption risk (e. g. , terrorism, political unrest, theft, etc. ), and economic uncertainty (unstable economies and fluctuating currencies). Supply networks often fail to address the risks of disruption and the costs incurred during attempts to continue operating during a crisis (Smith, 2013) * Environmental risks (supply risk): These include climate change and related extreme weather events such as forest fires and floods.

These extreme natural events are increasingly responsible for substantial indirect losses related to business interruptions and rerouting of materials. (Smith, 2013). As a critical part of developing strategic plans, cross-functional teams (company and suppliers) should identify risk factors and develop contingency plans for mitigating/minimizing the impact of risk.

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