Supply chains are critical links that connect an organization’s inputs to its outputs. Traditional challenges have included lowering costs, ensuring
just-in-time delivery, and shrinking transportation times to allow better reaction to business challenges. However, the increasing environmental, social and economic costs of these networks and growing consumer pressure for
eco-friendly products has led many organizations to look at supply chain sustainability as a new measure of profitable logistics management. This shift is reflected by an understanding that sustainable supply chains mean profitable supply chains. Many companies are limited to measuring the
sustainability of their own business operations and are unable to extend this evaluation to their suppliers and customers. This makes determining their true environmental and social costs highly challenging. However much progress has been made in defining supply chain sustainability and benchmarking tools are now available that enable sustainability action plans to be developed and implemented, although progress remains more limited. A study conducted in 2017 researched the correlation between supply chain position (how close or far the firm is from the end user in the supply chain) and firm performance. The study findings concluded that suppliers located farther upstream in the supply chain (farther from the end user), had the most to gain financially from sustainable supply chain management.
Environmental impact The goods and services of the global economy produce many environmental impacts, ranging from the introduction of greenhouse gases that cause climate change, to biodiversity loss, freshwater depletion, excess biochemical flows, and introduction of novel pollutants. Initiatives to quantify these impacts across supply chain tiers through product accounting (e.g., European Product Environmental Footprints, or Environmental Product Declarations) or through corporate efforts (e.g., Greenhouse Gas Protocol for climate or Science Based Targets Network for land, water, ocean, and biodiversity). As companies are setting climate targets, suppliers’ operations can be responsible for a majority of company’s total emissions, depending on the industry and their position in the supply chain. Some of these impacts are doubly material in that both the company's actions influence the environment, and there are risks/opportunities that affect the company's performance. For example,
Climate change poses a new risk to supply chains and a need to increase their
resilience.These environmental impacts are evident across industries, for example, food and beverage companies are particularly vulnerable to the impacts of climate change as changing weather patterns can disrupt
agricultural production. Measuring
supply chain resilience on factors such as natural resource availability, infrastructure, financial resources, and social safety networks among others, can help them respond to challenges and create better supply chains in the process.
Social impact Besides sustainability and resilience, an ethical supply chain is imperative to ensure
corporate social responsibility and adhere to a
supplier code of conduct. The work environment for the workers should be congenial and must not violate the basic
human rights. For instance, companies like Nike and Apple, which outsource manufacturing of their products to other countries like China, have been under the scanner for workplace conditions and wages of their workers. Consumers increasingly demand transparency and traceability in supply chains, especially where disturbing social breakdowns occur, such as with
forced labour and
child labour for globally traded goods. Forced labor, understood as work that is performed involuntarily or under coercion, occurs in different industries, often upstream in the supply chain with limited visibility to buyers, customers, and end-users. For example, in the United States, the 2010
Dodd–Frank Wall Street Reform and Consumer Protection Act requires manufacturers to audit their
supply chains and report use of
conflict minerals to the Securities and Exchange Commission.
Governance impact Governance practices in global supply chains can pose risks to supply chain sustainability, alongside social and environmental factors. Governance factors include guidelines and procedures for countries and corporations. Buyers screen their supply chains for appropriate governance practices such as a company’s purpose, the role and makeup of boards of directors, shareholder rights and how corporate performance is measured.
Stakeholders The
purchasing power held by buyers, gives them significant influence over their
vendors or suppliers’ business practices. Companies in the role of buyers acquire goods or services through organizational functions such as purchasing, procurement, or sourcing, typically for use or consumption in their own organization. Suppliers or vendors typically sell their goods or services to the next link in the supply chain. Buyers might thus interface with only one tier of their suppliers, while their supply chain spans across complex tiers of suppliers upstream. Progress has been made in the
sustainable procurement space as companies help suppliers design and implement sustainability programs that directly support the companies’ own goals. Buyers are working to achieve sustainability goals by setting standards for their suppliers’ performance and treating sustainability performance similar to other business considerations such as cost, quality, and timeliness. One of the key requirements of successful sustainable supply chains is
collaboration. The practice of collaboration — such as sharing distribution to reduce waste by ensuring that half-empty vehicles do not get sent out and that deliveries to the same address are on the same truck — is not widespread because many companies fear a loss of commercial control by working with others. Investment in alternative modes of transportation — such as use of
canals and
airships — can play an important role in helping companies reduce the cost and environmental impact of their deliveries. == Drivers for supply chain sustainability ==