The Supply Chain and Its Impact On The EnvironmentBy Steve Syverson Read Time: 6 min.
The supply chain is a vital part of modern business, but it can have an impact on the environment. Business leaders should prioritize the sustainable supply chain to be successful while having a positive global impact.
In recent years, the environmental impact of the supply chain has become an increasingly popular area of interest and discussion for scientists and politicians. As climate change becomes a larger concern, we continue to seek ways to lessen its impact, while still giving organizations the opportunity to grow.
However, this issue extends far beyond researchers and policymakers. The effects reach industry leaders in the business world who are in a position to build a more sustainable supply chain by searching for new, innovative solutions. Organizational leaders understand the unique challenges of supply chain management, and the specific ways they can make improvements to it. Not only will this allow businesses to reap the benefits of a sustainable supply chain, but greener best practices also stand to make a positive impact.
Does the Supply Chain Affect the Environment?
Because it is so far-reaching and complex, the supply chain has a large effect on the environment. The supply chain encompasses the entire process of creating and distributing goods. While value chain modeling may encourage businesses to keep costs low and processes fast-moving, it can lead to unintended consequences. From sourcing raw materials to create products, to how finished products are transported to their final distributor, the supply chain can utilize many valuable, non-renewable resources during each step of the way.
Negative Impact of the Supply Chain
The impact of the supply chain on the environment is primarily negative. According to a report from the McKinsey Institute, over 90 percent of the environmental damage caused by companies that package consumer goods (CPG) comes from their supply chains. This greatly outweighs the damage done by all other forms of business operations. There are two specific areas and effects of the supply chain that are concerning: the greenhouse gas emissions released during the shipping process and international travel through oceans.
Greenhouse Gases in Shipping
Greenhouse gases have long been at the forefront of conversations about climate change, and they are still an issue in the context of supply chain sustainability. The report from the McKinsey Institute notes that the supply chains related to CPG organizations account for more than 80 percent of a given company's greenhouse gas emissions. In fact, these organizations would have to “lower their carbon intensity — the amount of greenhouse gas emitted per unit of output — by more than 90 percent between 2015 and 2050” in order to properly meet the goals of the Paris Agreement.
International Travel Through Oceans
Ocean travel is one of the primary ways to transport goods internationally; in fact, it is responsible for facilitating about 90 percent of world trade. This popular mode of transportation has contributed to the pollution and decline of our world's oceans. Scientists estimate that only 13 percent of the world's oceans have not been damaged by human activity. In addition to climate change, they attribute this deterioration to global trade, as well as polluted land runoff and commercial fishing practices.
What Is Supply Chain Sustainability?
The United Nations (UN) defines supply chain sustainability as “the management of environmental, social and economic impacts, and the encouragement of good governance practices, throughout the life cycles of goods and services.” This involves improving business practices and organizational processes to reduce negative environmental impact, waste and cost with lean supply chain management.
What Is Triple Bottom Line?
Also called TBL or 3BL, the triple bottom line framework looks at “people, planet, and profit” — or various financial, social and ecological or environmental factors — when assessing the performance of a business. While profit looks at financial growth, the social bottom line helps to determine how fairly human laborers are treated and the environmental bottom line measures how environmentally friendly the business is.
Looking at social and environmental bottom lines can help companies show their customers that they care about more than just money, which can then drive more business. More customers value sustainability and thus prefer to support organizations that are environmentally conscious. Businesses of all sizes must account for these ratings, but they are especially important for younger organizations. As newer companies develop and increase their logistics network from a local to a global market, they must keep sustainability in mind to appeal to as many customers as possible.
How To Create a Sustainable Supply Chain for Businesses
Discussing the importance of a sustainable supply chain and actually creating one are two entirely separate enterprises. However, with proper forethought and planning, it may not be as challenging as it seems. Here are the necessary steps to building a sustainable supply chain:
Step 1: Map Out the Supply Chain
Understanding the specific challenges and areas for improvement within an organization is necessary before improvements can be made. What risks, red flags or obvious issues need to be addressed? First and foremost, you'll need to identify vulnerabilities or potential problems in the supply chain.
This may be more difficult for some businesses than others, and smaller ones in particular. Often, this requires some creative problem-solving; for example, inventory tracking can help small businesses oversee their suppliers' acquisition and production methods to ensure all goods come from sustainable sources.
Step 2: Address Concerns and Communicate Value
Next, it's important to address any concerns and communicate all expectations to those involved in the supply chain. This includes suppliers, employees and customers. A sustainability code of conduct that clearly explains values and best practices can help ensure everyone understands what is expected of them, as well as the consequences that will be rendered in the case of any potential violations.
Step 3: Suggest Improvements to Suppliers
Be upfront and honest about any suggestions, recommendations or requirements suppliers need to meet in order to maintain a business relationship. Collect data and feedback to get a clearer picture of performance and how well they are meeting sustainability standards. If needed, help them create a plan to become more sustainable and provide constructive feedback to suppliers as needed.
Step 4: Audit and Survey Suppliers to Track Improvements
Pay close attention to suppliers to track improvements and determine if they are meeting baseline sustainability expectations. This can help drive performance, provide valuable insights and ensure the steps taken toward sustainability are actually working. Again, straightforward and respectful communication is needed when auditing, tracking and interacting with suppliers. Use this data to advance and develop supply chain sustainability.
Step 5: Collaborate and Discuss Sustainable Practices Within Your Industry
Finally, collaborate with other industry leaders by attending conferences, sharing insights, fostering connections with others and working together. Discuss supply chain sustainability best practices, go over what works well and explain what doesn't and why.
Supply chain sustainability is a complex issue, and the more people who are working to solve it, the better. Building a sustainable supply chain isn't easy, but it is possible — and necessary. We owe it to the world, and each other, to make these changes to the way we approach the environmental impact of the supply chain.