Smart Warehousing Jun 24, 2022 3:54:32 PM 11 min read

The Importance of Building a Sustainable Supply Chain

Assuming greater social responsibility and environmental stewardship has become an important topic of conversation in the business world. Everyone from governing bodies and consumers, to investors and employees, has urged companies to adopt more sustainable practices.

Globally, 85% of consumers have shifted their buying behaviors, making “greener” purchases over the last five years. And in the United States, 42% of consumers are willing to pay more for sustainable products or services, according to the 2021 Global Sustainability Study conducted by Simon-Kucher & Partners. The need and desire for eco-friendly alternatives is growing stronger each year.

Supply chains have become a focal point for businesses across sectors, as they consume vast resources and produce significant waste. As a result, supply chain sustainability has risen to the forefront of corporate goals. Business leaders are now spearheading new initiatives to measure their environmental impact across the entire life cycle of their goods and services.

What Is Supply Chain Sustainability?

Supply chain sustainability refers to a business’s actions surrounding the environmental and human impact of their products. From sourcing raw materials to production, storage, and transportation, companies evaluate their practices as a product moves through each stage of the supply chain.

The goal is to reduce environmental damages caused by things like waste production, energy use, and water consumption — all to protect our ecosystem and build healthier communities. Companies are addressing these concerns alongside conventional challenges like driving efficiency and profitability.

 

How Can You Build a Sustainable Supply Chain?

Companies in the U.S. (and globally) are actively pursuing ways to decrease waste and carbon emissions while improving labor conditions. With a strong supply chain management strategy in place, leaders can monitor operations and track sustainability metrics to identify where their weaknesses lie. For instance, they may choose to focus efforts on recycling materials and products. Or maybe their first priority is to partner with companies and suppliers that are embracing socially responsible policies.

Subaru’s car-making plant in Indiana is America’s first zero-waste factory. Scientific American shares incredible insight into how the company is building a sustainable supply chain, from shipping parts in reusable containers to using a composter for cafeteria waste. And employees even take home the compost for gardening! Pretty innovative, right?

Another area businesses should explore is the use of analytics. Data can provide enhanced visibility into processes, which sets the stage for more sustainable decision-making across the company; for instance, strengthening inventory management practices to minimize error, correctly account for stock, and ensure products are shipped to customers from the closest warehouse facility to minimize travel.

 

Sustainability & Supply Chain Statistics

As more and more companies shift their behaviors to embrace supply chain sustainability, researchers are studying the subsequent impacts. Here are some noteworthy stats to begin the sustainability conversation:

  • Research from IBM reveals: “As consumers increasingly embrace social causes, they seek products and brands that align with their values. Nearly six in 10 consumers surveyed are willing to change their shopping habits to reduce environmental impact. Nearly eight in 10 respondents indicate sustainability is important for them. And for those who say it is very/extremely important, over 70 percent would pay a premium of 35 percent, on average, for brands that are sustainable and environmentally responsible.”
  • Social risk is an equally pressing facet of sustainability. Why? Because a company’s actions, like human rights violations or labor issues, can negatively affect surrounding communities. The U.S. Department of Labor released a report listing 156 types of goods from 77 countries produced by child labor or forced labor as of June 2021. To help businesses in the U.S. mitigate child labor risks in their supply chains, the DOL released an app called Comply Chain, which you can learn more about and download here.
  • A CDP survey discovered that 95% of CDP supply chain members believe companies that show environmental leadership make better partners. What’s more, they’re using metrics to make informed decisions and hold their business partners accountable for satisfying supply chain sustainability goals.

 

Benefits of Sustainability in Supply Chain

Incorporating sustainable practices into the supply chain is not only beneficial for businesses and their stakeholders but for society and the planet too. Scarcity of resources and intensifying weather conditions brought on by climate change, for instance, can jeopardize business continuity. Let’s look at four ways businesses benefit from sustainability.

Driving Supply Chain Operations: Sustainable practices can drive efficiency and decrease energy costs. Let’s take Smart Warehousing’s underground Kansas City caves as an example. The facility offers an eco-friendly omnichannel fulfillment solution for temperature-controlled goods. The caves are 60% more cost-effective because they allow us to conserve energy and naturally maintain a 50-degree environment year-round.

Boosting Brand Reputation: As the stats showed earlier, consumers are highly concerned with how products are manufactured and support brands that value sustainable practices. A sustainable supply chain can help your business foster brand equity and expand your consumer base. Your brand image and corporate culture also play an important role in hiring and retention initiatives. Millennials and Gen-Zers want a sense of purpose in their work, and are attracted to companies with strong values, like social responsibility, so sustainability is also a great investment in your talent pipeline.

Strengthening Investor Relations: Institutional investors always look at a company’s holistic picture. That includes the potential reputational risk that comes with running unsustainable operations. In recent years, media coverage has focused heavily on irresponsible supply chain practices. These news reports carry an immense amount of influence, examining businesses that have harmful working conditions, source electronics overseas, use toxic materials or procure defective parts, and partner with suppliers with significant pollution production.

The media and public perception of your brand can make or break your success. Over the years, this type of media coverage has had a direct impact on company sales and stock prices. And it’s not just current investors that you should take into consideration, it’s potential future ones as well. As a recent Gallup poll revealed, nearly half of U.S. investors surveyed said they were interested in sustainable investing funds.

Maintaining Compliance: Government regulations encompass a variety of factors, like disposal of electronics, labor laws, traceability of pharmaceuticals, carbon emission levels, and conflict minerals. In the coming years, these regulations will only become stricter as governments around the globe call for greater supply chain sustainability.

 

Sustainable Supply Chain Trends

 

Reshaping Systems

Innovation fuels sustainability initiatives within the supply chain. Two trends helping to propel forward momentum are data-driven supply chains and the circular economy approach.

Data-driven supply chains allow businesses to leverage cloud-based systems capable of producing detailed analytics utilizing devices like equipment sensors that are powered by the Internet of Things (IoT). These insights offer companies greater visibility into various facets of their operations, such as inventory management. Data is truly invaluable. Armed with the right metrics, companies can identify gaps and inefficiencies, implement new processes, and monitor how those strategies are bolstering sustainability efforts.

The second area, a circular economy, seeks to restructure current linear supply chain practices (think: take, make, and throw away). The goal is to eliminate waste, circulate resources, and regenerate nature.

The U.S. Environmental Protection Agency (EPA) defines a circular economy as “an economy that uses a systems-focused approach and involves industrial processes and economic activities that are restorative or regenerative by design, enable resources used in such processes and activities to maintain their highest value for as long as possible, and aim for the elimination of waste through the superior design of materials, products, and systems (including business models).”

Sustainable Transportation

Partnering with the right 3PL provider can help power more sustainable transportation efforts. For instance, they can apply the most efficient routes for co-loading and optimize inventory storage, so goods are housed closer to the end consumer. They also typically work with a wide range of carriers, so the most sustainable transportation options can be selected.

Green Packaging

The timely, safe arrival of goods to a customer is always a priority. But now those endeavors are evolving to include more eco-friendly packaging and disposal of materials. An experienced 3PL can assist your company with implementing greener packing solutions, ultimately decreasing packaging and disposal costs.

Optimize Warehouse Energy Use

By nature, warehousing operations require vast amounts of energy. Environmentally conscious 3PLs are regularly assessing their carbon footprint and evaluating how their operations impact the planet. From energy-efficient floor plans to eco-friendly energy sources, you can find a warehousing partner that seeks to optimize sustainability while keeping performance and efficiency high.

 

The Bottom Line

Building a sustainable supply chain is a smart business decision across the board, as it has the power to positively impact the planet, communities, and your profitability. Discover how Smart Warehousing can help your business create a more sustainable supply chain by contacting our team of experts today.