Sustainable Supply Chain Management
Saturday 22nd of April was Earth Day and images such as this one were plastered all over Social Media by corporations desperate to show their Green credentials. In this article I’m looking at what Sustainable Supply Chain Management (SSCM) is, how it is a critical part of Supply Chain Design and integral to every modern business.
Earth Day, an international day of intentional environmental consciousness, begun in 1974, so, shockingly this year’s was the 54th such day. That means it has been over half a century since the awareness for living organisms, the environment and the inextricable links between pollution and public health were prominent enough to warrant a global day of action. Quite clearly we still have a long way to go – I’m going to focus on the role of Sustainable Supply Chains, how these can be developed and integrated and ultimately the responsibility we have for ethical practices that move us towards a healthier planet.
SSCM works to minimize environmental impact, maximize long-term social reach while ultimately remaining profitable. Beyond being an ethical responsibility, SSCM fits in with the wider principles of Supply Chain and the reduction of Waste, however Supply Chains aren’t ever sustainable by accident – it requires intentional planning and collaboration across the business to be enacted as a conscious strategy.
Below are just some of the areas within a Supply Chain that can have enormous environmental impact but also, with design, can be used to strengthen into a sustainable one:
Sourcing of Material: Are the materials sustainable or environmentally friendly and are the vendors measuring sustainability/acting in a sustainable fashion?
Service Design: Are products and packaging designed to be built sustainably and are they designed with a clear lifecycle?
Demand Planning: Are the right inputs (especially with goods with expiration dates) going into the business to ensure appropriate ordering and supply and therefore avoiding excess/waste?
Distribution & Transportation: What is the environmental impact of the modes of transport chosen and is the distribution geographically logical to minimize transportation?
Aftersales: Are there recycling and repair programs to keep products in circulation and use as long as possible?
Measuring Sustainability
If we were working with exclusively vertical Supply Chains, operating sustainably would be much easier as the full end-to-end chain falls under one umbrella, however as vertical chains become increasingly rarer and horizontal the norm there becomes a need to measure Sustainability to allow it to be practiced.
A quote that comes up repeatedly in SCM is “if it can’t be measured it can’t be improved”. While this is often used in reference to process, sustainability is no different and for any organization sincerely interested in SSCM, sustainability can and should be measured as a key performance indicator. Rather than simply having a Sustainability Scorecard which measures performance against internally set targets, it’s key to frame the measurement as part of the Triple Bottom Line.
We’re all familiar with the bottom line, especially from a Supply Chain side where our aim is to reduce impact, the triple bottom line removes focus from being purely financial and instead focuses on the 3 P’s: Profit, People, Planet.
Profit remains an integral measure for any business as without it the business will cease to exist or be able to operate. That measure, including the Supply Chain impact, has, for many companies, been the sole measure of success. People can refer to anyone that touches the business, whether that’s employees, customers, vendors or suppliers. Historically the shareholders have been the only focus, whereas with the Triple Bottom Line the wider stakeholders are key, be it in terms of fair employment, sustainable sourcing, diverse suppliers and appropriate feedback. The final segment, Planet, looks at environmental impact of trading. This could be measured by metrics such as greenhouse gas emissions, percentage of product recycled (or conversely landfilled), environmental regeneration (e.g. tree planting) even raw materials used in production.
Measuring each of these segments will provide a wider view of how sustainable a company is, although it also worth noting that as TBL reporting is self-generated the report is only as good as the data that is going in and coming out (e.g. not selectively highlighting areas of strength and ignoring/not including areas of opportunity).
SSCM by Design
As previously mentioned, Sustainable Supply Chains don’t happen by accident but are borne purely out of intention. Here are some of the actions that can be taken to develop the sustainability of an organization:
Measure Sustainability! As discussed above using the Triple Bottom Line as guide to create metrics that very clearly illustrate the performance of an organization / Supply Chain, with time adding YoY measurements to show clear directions and calls to action
When looking at new process be sure to include a Sustainability lens, for example when performing RFP’s having clear measurable sustainability-related criteria included
Third Party Accreditation - avoiding the pitfalls of only self-reported data, third party accreditation can not only provide prestige but best-practice guidelines. An example would be LEED certification for buildings.
Incentivizing best practice, whether it is with vendors (e.g. packaging requirements) or purchasing, or more crucially people. Without incentive the path of least resistance is usually followed, however Energy Star Rebates are a great example of how sustainability can be driven.
I’ve intentionally separated this last point as it is by far and away the most critical: Follow Supply Chain Principles!
House of Toyota
This graphic is a great high-level view of some Supply Chain basics. Within the House of Toyota, Sustainability can be applied through the principles whether it’s Heijunka (minimizing chance of overburden), 5S, or critically the Culture of Continuous Improvement (Kaizen).
Ultimately, to be customer focused and to maintain a Supply Chain that continues to eliminate Wasted Time and Activity is to be sustainable. Putting measurements against this is fundamental to SSCM.
I always refer to the necessity of being a customer-centric Supply Chain and that means staying current with demographics and what customers want. Research by Neilsen has shown that 48% of consumers in the US would consider changing buying habits based on environmental impact - this is a significant proportion and if a business wishes to fulfill all three P’s of the Triple Bottom Line Sustainable Supply Chains are essential.
SSCM Is Not A Choice, It’s An Inevitability
It’s tough reflecting on the fact that we’ve had over 50 Earth Days and since then our carbon emissions of have gone up enormously, plastic pollution is at such a critical point that we now have ‘Great Pacific Garbage Patch’ and we see nature receding to either intentional or unintentional human involvement. We all have a responsibility to protect our planet and ensure that the world we pass on to our children is at least not worse than the one we grew up in - to do this as Supply Chain personnel we have an ethical responsibility to ensure that we are not partaking in “Greenwashing” and once a year putting pictures of rainforests in our corporate bios, but instead using the influence we have to improve that Triple Bottom Line.
SSCM is fast becoming a necessity and I fully expect sustainability metrics to become more important over the next decade with independent accreditation essential for major companies, if not mandatory government intervention. This is not a bad thing, however as with all change, it is better to be prepared and building for that future as opposed to reacting and losing efficiency and momentum in the process.
In the meantime, one more stock image…
