What is supply chain sustainability and why is it important?
More and more companies are starting to shift focus to the sustainability of their supply chains. This is largely due to recent and growing legislation around supply chain sustainability and an increasing demand from customers that their products be sustainably produced.
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
The environmental standards include issues like environmental degradation, deforestation, greenhouse gas emissions, pollution, and water security.
The social standards include issues like working conditions, forced labour, fair labour practices, and health and safety.
There is a misconception that the word “sustainability” solely means “environmentally sustainable” – that something is good for our planet. Many businesses and people use this term without considering social sustainability.
Social sustainability is equally as important as environmental sustainability. A product that is good for the environment but has negative consequences for workers’ or local communities is not truly sustainable.
Sustainable supply chain vs. ethical, responsible, and green supply chains
There are several terms that are similar to sustainable supply chain that businesses often 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 resources used, greenhouse gas emissions, deforestation, and any other impacts a business’s operations and the operations of their suppliers could have on the planet. A green supply chain may not be considering the ethical and social impacts of business activities.
Ethical supply chain: Some people use the term “ethical supply chain” interchangeably with “sustainable” or “responsible supply chain” terms. This term suggests an emphasis on managing the social impacts and working conditions within the supply chain.
Responsible supply chain: This term usually refers to a holistic approach to supply chain management, where organisations actively source and procure products and services in an ethical, environmentally and socially conscious way.
Why is it important to have a sustainable supply chain?
Consumer and investor demands
One reason for growing attention on supply chain sustainability is that consumers are more aware of the unethical practices that exist in many supply chains – like child labour, forced labour, and gender discrimination. As consumers become more informed about these issues, they may choose to buy from companies that they can see are actively managing the social and environmental impacts of their supply chains.
Investors are also looking to make more socially and environmentally sustainable investments. They are aware of the reputational and financial risks of companies that have unsustainable practices within their supply chain and may choose not to invest in these companies.
Climate change and global disruption
Consumers are also much more educated on the negative environmental impacts of the supply chains they buy from .
Due to large-scale and global production, today’s organisations hold the power to significantly mitigate the effects of climate change in ways that individuals do not. The long-term effects of climate change are dire for both our planet and its people, and consumers want to support businesses that want to build a more sustainable world.
The impacts of bad environmental practices not only affect our world in the long term, but they have immediate impacts on workers and communities. Pollution and noise can have a negative effect 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, and therefore force migration.
Building supply chain resilience
Having a sustainable supply chain can also help with supply chain resilience in vulnerable times. When workers are suffering from the negative effects of environmental degradation, this in turn affects the availability, ability and resilience of the workforces that our supply chains depend on.
Many countries have introduced legislation for supply chain sustainability that require businesses to demonstrate and report on their supply chain due diligence. For example:
- The UK Modern Slavery Act was established in 2015 and sets legal requirements for companies to identify, prevent and mitigate modern slavery in their own operations and supply chains.
- California established the California Transparency in Supply Chains Act in 2010, which requires large retail sellers and manufacturers who do business in California to annually disclose their efforts to eradicate human trafficking and modern slavery from their supply chains.
- EU importers of tin, tantalum, and tungsten, and their ores and gold areas need to report on supply chain due diligence obligations because of the Conflict Minerals Regulation, which was established in 2021.
How Sedex can help
Technology and data are essential for sustainable supply chain management, and for achieving a business’s sustainability goals.
Sedex’s tools and services allow businesses to gather data and get greater visibility into their supply chain, as well as manage and mitigate the risks of negative social and environmental impacts within it.
- Our ethical data exchange platform allows you to access, store, share, analyse and report on supply chain information ethical data exchange platform for your business and supply chain, including:
- Use Sedex’s Self-Assessment Questionnaire (SAQ) to gather data about activities and working conditions across your supplier sites.
- Our risk assessment tool helps you assess social and environmental risks across your supply chain. Study inherent risks in relevant countries and sectors and build custom risk profiles for every work site that you have data for.
- Our expert consulting team can design a holistic supply chain management plan that focuses on socially and environmentally sustainable sourcing strategies.
Interested in sustainable supply chain management?