What is supply chain sustainability and why is it important?

More and more companies are focusing on sustainability in their supply chain. This is partly due to more legislation for supply chain sustainability and an increasing demand from customers that products are sustainably made.

What is a sustainable supply chain?

A sustainable supply chain is one that uses environmentally and socially sustainable practices at every stage to protect the people and environments across the whole chain. This means an organisation upholds environmental and social standards for their own operations and their suppliers’ operations.

Environmental standards include issues like environmental degradation, deforestation, greenhouse gas emissions, pollution and water security.

The social standards focus on areas like working conditions, forced labour, labour practices and health and safety.

There’s a misconception that the word “sustainability” solely means “environmentally sustainable” – that something isn’t harmful for the planet. Many businesses and people use this term without considering social sustainability, which is just as important. A product that is good for the environment but has negative consequences for workers or local communities isn’t truly sustainable.

Check out our case studies for examples of supply chain sustainability in action!

Sustainable supply chain vs. ethical, responsible and green supply chains

There are several similar terms that businesses use to describe the environmental and social standards within their supply chains. These terms are often used interchangeably but can have different meanings.

Green supply chain
This emphasises the environmental standards within a supply chain. These include issues like pollution, water usage, greenhouse gas emissions, deforestation and other impacts that operations across a supply chain may have on the planet. A green supply chain may not consider the ethical and social impacts of business activities.

Ethical supply chain
Some people use the term “ethical supply chain” interchangeably with terms like “sustainable” or “responsible supply chain”. This term suggests an emphasis on managing the social impacts and working conditions within a supply chain.

Responsible supply chain
This term usually refers to an approach to supply chain management that considers both social and environmental issues. Organisations actively source and create products and services in an ethical, environmentally and socially conscious way.

The importance of sustainability in supply chains

Consumer and investor demands
One reason for growing attention on supplier sustainability is that consumers are more aware of unethical practices that exist in supply chains — like child labour, forced labour and gender discrimination. As consumers become more informed, they may prefer to buy from companies that they know are managing the social and environmental impacts of their business decisions.

Investors are also looking to make more sustainable investments. They’re aware of the reputational, operational and financial risks of unsustainable practices, including when these are in companies’ supply chain. They may choose not to invest in these companies, or offer less favourable terms of investment.

Climate change and global disruption
Consumers are increasingly more educated on the negative environmental impacts of brands’ supply chains. Global businesses have resources and influence that individual people don’t – consumers expect businesses to use this power to drive sustainable innovation and operations.

Poor environmental practices have serious long-term impacts on ecosystems, but also have immediate impacts on people. Pollution and noise may have negative effects on the health of workers and the surrounding communities. Deforestation and environmental degradation can reduce the ability for communities to exist in their original locations, forcing people to migrate.

Building supply chain resilience
A more sustainable supply chain can also help improve supply chain resilience. For example, when workers face unsafe conditions, low wages or insecure employment, this may affect their availability and ability to work effectively. Businesses with a high turnover of workers risk losing valuable skills and experience that help to navigate disruptions.

Increasing legislation
Many countries have introduced laws for supply chain sustainability that require businesses to demonstrate and report on their supply chain due diligence.

The UK’s 2015 Modern Slavery Act established legal requirements for companies to identify, prevent and mitigate modern slavery in their operations and supply chains.
California’s Transparency in Supply Chains Act in 2010 requires large companies to annually disclose their efforts to address modern slavery in their supply chains.
The EU’s Conflict Minerals Regulation requires importers of tin, tantalum, tungsten and gold to report on their supply chain due diligence activities.

Improving supply chain sustainability with Sedex

Technology and data are essential for sustainable supply chain management and achieving your sustainability goals.

Sedex’s solutions enable businesses to gather detailed data and increase visibility in their supply chains, to limit and manage negative social and environmental impacts. Over 85,000 businesses use Sedex to map their supply chains, understand sustainable practices, and drive improvements.

Use Sedex’s Self-Assessment Questionnaire (SAQ) to gather data about activities and working conditions across your supplier sites.
Assess social and environmental risks across your supply chain globally with our risk assessment tool. Study inherent risks in relevant countries and sectors and build custom risk profiles for every worksite you have data on.
Store, share, analyse and report on supply chain sustainability with our data platform.
Get tailored support from Sedex Consulting. Our expert team can design a holistic supply chain management plan that focuses on sustainable sourcing.