Supply chain management (SCM) is the comprehensive process that encompasses inputs sourcing, product and services manufacturing, and product delivery to the consumer by adding value at every transaction. As the name connotes, sustainable SCM refers to the process of embracing environmentally and socially viable choices while implementing resilient practices to achieve profitable outcomes. The concept resonates with the Triple Bottom Line perspective.
In other words, sustainable SCM is defined as the systematic and strategic coordination of critical organizational processes across the business units while deriving inputs from three pillars of sustainable development; economic, environmental and social to accomplish a viable growth from the customers’ and stakeholders’ point of view. The inclusive goal is to maximize the triple bottom line performance by making a responsible SCM.
Why a shift towards sustainability in Supply Chain Management?
Considering the fact, that supply chain is the major contributor towards carbon footprints of the companies, it has become crucial to introduce streamlined actions to reduce the overall environmental and societal impact of the activities like product designing, inventory management, logistics, manufacturing, product returns, reverse logistics and waste management, energy use, and emissions reduction. According to Forbes, Eco Vadis, a company that rates the environmental, social and ethical performance of the global supply chains has accepted the fund of 30 million euro to help organizations in creating responsible, profitable and sustainable chains globally.
The consumers, investors, shareholders, and citizens all are demanding from companies to invest in sustainable practices. For example, they expect organizations to remain transparent about their sourcing mechanisms and are also inclined to know how animals and environment were treated during production. To win the confidence of stakeholders, firms are on the mission to improve their green credentials. They are committed to displaying higher sustainability standards while expecting the same from their suppliers.
Another interesting fact is that sustainable supply chains are no longer the privilege of large players, but also smaller and mid-size companies are equally investing in making their SCM greener and sustainable. The eco-friendly practices create brand equity in the market, which in turn generate more sales and fetch higher revenues, thus creating a favorable impact on profits and shareholders value.
How Sustainable Supply Chain Management strengthens the bottom line of the business?
The portfolio of sustainable SCM includes practices like Internal Environment Management, Green Purchasing and Marketing, Green Customer Cooperation, Eco-friendly designs, Investment Recovery, Socially driven initiatives, and Resilient practices.
By adopting these practices, companies can safeguard scarce resources, optimize methods and processes, introduce innovative products, bring cost efficiency, enhance production capabilities, and foster cherished corporate values.
Here are some of the concrete benefits that enterprises can capture from the sustainable supply chain.
1. Reduction of carbon footprints: The companies significantly save non-renewable resources on implementing sustainable processes.
2. Improved Adaptability: The firms not only respond to unexpected events and disruptions strongly but also recover from them.
3. Competitive Advantage: The organizations enjoy improved relationships with supply chain partners resulting in the long term and viable collaborations.
4. Technological Innovation: The companies invest in R&D and innovate regularly to bring eco-friendly policies and tools in practice.
5. Higher Productivity: The firms enjoy a significant improvement in production metrics as the manufacturing process becomes leaner and greener.
6. Cost Saving: The organizations save on costs by implementing eco-friendly designs and raw materials and reducing the packaging waste.
7. Higher Adherence: The firms strictly implement environmental regulations to ensure proper adherence.
8. Enhanced Reputation: The companies attract customer loyalty, investor confidence, and suppliers trust.
A study conducted by Oracle with The Future Laboratory to diagnose the current situation and predict the upcoming opportunities for the development of sustainable supply chains reveals three tiers of sustainability:
1. However, businesses have implemented the lean supply chain; they lack the greener aspect as a result of which they need to correct their basics first as the primary step towards sustainable chains.
2. However, the businesses have started realizing the significance of sustainable chains; they have not been able to gauge the process and assess its impact on their bottom-line. It is the time that they should revisit their supply chain strategies by mapping the impact of sustainability on suppliers’ relations, design, manufacturing, logistics, and distribution.
3. It is the high time when companies should engage in measuring, recording and analyzing their impact on the environment under the light of regulations through auditing and benchmarking the best practices under sustainable SCM.