Sustainability in the Supply Chain: How to Make a Positive Impact

What's in this article:

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• Sustainability in the Supply Chain: How to Make a Positive Impact
• Why are sustainable supply chains important?
• 4 key challenges in achieving a sustainable supply chain
• 6 strategies for achieving a sustainable supply chain
• How Can Analytics Help Make the Supply Chain More Sustainable?
• Conclusion

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Sustainability has become a critical concern for modern businesses and their supply chains. With increasing awareness of the impact on the environment and society and consumers' shifting preferences to sustainable brands, companies globally are under pressure to make their operations more sustainable. Whether it is reducing plastic usage or adopting renewable energy, businesses are ready to adopt practices that minimize the negative impact of their operations on the environment while maximizing their positive impact.

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Earth Hour was celebrated recently and Earth Day will be observed soon. To bring attention to the effects of climate change, Earth Hour and Day are celebrated annually by encouraging people to switch off their lights for one hour. While honoring Earth, it's essential to consider the value of sustainability throughout the supply chains and the steps businesses may take to improve their environmental footprint. This blog post will delve further into that topic and discuss the main challenges. We will also examine the strategies and technologies companies may embrace to affect the environment positively.

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Why are sustainable supply chains important?

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The global supply chains are complex. They are a network of activities from sourcing, production, and transportation to the delivery of products and returns. All these activities that create an end-to-end supply chain can significantly impact the environment if not monitored closely. Their impact can range from greenhouse gas emissions, deforestation, water pollution, or worse, an effect on society. With all the push in recent years, companies have now become sensitive to the impact they create on the environment, and sustainability has become a critical issue for companies operating in the global market.

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Implementing sustainable practices in their supply chain can help companies not only reduce their carbon footprint and mitigate risks, it can also enhance their brand reputation and increase customer loyalty and stakeholder engagement.

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There has been a noticeable uptick in sustainability concerns among consumers. According to a survey by Businesswire, a third of consumers are prepared to pay a premium for eco-friendly and sustainable goods and services. They are more likely to back businesses that put environmental responsibility first. Therefore, companies that integrate sustainability into their supply chain stand out, improve their brand's reputation, and charge a premium for their offerings.

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It takes tremendous focus and effort to change the existing process for sustainability. And there are many challenges to achieving a sustainable supply chain. The following section will discuss companies' key challenges in achieving sustainable supply chain practices.

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4 key challenges in achieving a sustainable supply chain

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The advantages of sustainable supply chain strategies are clear, yet many businesses struggle to implement them, particularly when the systems have been in place and functioning for a long time.

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Here are some of the significant challenges that companies face in achieving sustainable supply chain practices:

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1. Lack of visibility: Many companies lack visibility into their supply chain beyond their immediate suppliers. Such limited visibility can make it challenging to identify areas for improvement and ensure sustainable practices for the end-to-end supply chain.
2. Complexity: The global supply chain is a complex network of activities involving multiple stakeholders and geographies. Hence, keeping control and ensuring the sustainable process is followed, upstream and downstream, needs special attention and dedication.
3. High Cost: Implementing sustainable practices in the supply chain can be expensive. Especially when it requires redesigning the existing process while maintaining profitability, setting up new processes, or investing in sustainable solutions like solar or EV can require high upfront costs.
4. Resistance to change: Implementing sustainable practices often requires changes in the way that companies operate, which can meet resistance from employees, suppliers, and customers.

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Thankfully, today's modern technology can play a significant role in addressing these challenges. For example, supply chain analytics can help companies gain visibility into their supply chain and identify areas for improvement. It can help companies track their sustainability performance targets and manage risks.

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But investing in technology without a strategy for a sustainable supply chain can become a futile and expensive attempt. The following section discusses companies' strategies for sustainable supply chain practices.

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6 strategies for achieving a sustainable supply chain

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Companies can adopt various strategies to make their supply chain more sustainable than where they are today. Here are some of the most effective strategies:

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1. Assess sustainability risks: Companies should conduct a sustainability risk assessment to identify their supply chain's potential environmental and social risks. This assessment should be done for the end-to-end supply chain, i.e., from supplier's supplier to customer's customer. Such a review can help companies identify and prioritize areas for improvement and become the starting point of the company's sustainability strategy.
2. Collaborate with suppliers: Companies should collaborate and educate their suppliers on the importance of sustainability in the business. They should work together to implement sustainable practices throughout the supply chain. This collaboration can include sharing best practices, setting shared sustainability targets, and providing training and support to suppliers' teams.
3. Optimize transportation and logistics: From this onward, steps become more operational. But don't misunderstand; these are still critical for shaping the strategy. Companies can reduce their environmental impact by optimizing their logistics operations. This can include reducing the distance between suppliers and customers, using more fuel-efficient vehicles or electric fleets, and reducing packaging waste by redesigning the packaging or choosing more environment-friendly options.
4. Invest in renewable energy: Companies can reduce their carbon footprint by using renewable energy. The difference between energy sources becomes evident when comparing the numbers. Traditional sources such as natural gas produce between 0.65 - 2.01 pounds of carbon dioxide equivalent per kilowatt-hour, while coal produces between 1.4 - 3.61 pounds. On the other hand, renewable energy sources are far cleaner and more sustainable. Alternate sources, like wind, solar, or hydro, are much cleaner. Wind contributes only 0.02 to 0.04 pounds of CO2E/kWh, solar 0.07 to 0.2, and hydropower between 0.1 and 0.5.
5. Monitor and measure sustainability performance: Companies should define key performance indicators (KPIs) to monitor and measure their sustainability performance regularly. This can include tracking greenhouse gas emissions, water consumption, waste generation, and social impact.
6. Collaborate with customers: Companies should collaborate with their customers to promote sustainability and encourage sustainable behavior. This can include providing information about the environmental impact of products and services, offering sustainable alternatives, and incentivizing sustainable behavior, such as returning packaging or the product at the end of its cycle.

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Achieving sustainable supply chain practices requires a comprehensive approach that involves collaboration with suppliers and customers, investing in renewable energy, optimizing transportation and logistics and monitoring sustainability performance. By adopting these strategies, companies can reduce their environmental footprint, enhance their reputation, and contribute to a more sustainable future.

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How Can Analytics Help Make the Supply Chain More Sustainable?

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Business intelligence (BI) and Analytics have been increasingly important in recent years as organizations strive to green their supply chains. Using data analytics, businesses may learn more about their supply chain processes, pinpoint problem areas, and make better decisions.

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1. Analytics' use in the supply chain provides crucial transparency for monitoring and improving sustainability results. Key sustainability measures, such as carbon emissions, water, paper, and plastic usage, and related waste generation, can help businesses assess their environmental impact and find ways to improve it. Companies can improve their environmental footprint and sustainability performance by focusing on these areas of opportunity.
2. By analyzing data on supplier performance, companies can identify suppliers committed to sustainability and prioritize them in their procurement decisions. This helps promote sustainability throughout the supply chain and reduces supply chain risk by ensuring suppliers align with the company's values and goals.
3. Additionally, analytics can help companies optimize their logistics operations, reducing transportation-related emissions and improving efficiency. Companies can identify opportunities to consolidate shipments, reduce transportation costs, and minimize their environmental impact by analyzing data on transportation routes, delivery times, and shipping volumes.

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Analytics can play a critical role in helping companies make their supply chains more sustainable. By providing valuable insights into sustainability performance and supporting targeted strategies for improvement, analytics can help companies reduce their environmental footprint, enhance their reputation, and gain a competitive advantage in the marketplace.

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Conclusion

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In conclusion, while there are challenges to implementing sustainable practices in the supply chain, the benefits are clear and hugely rewarding. Companies can reduce costs, enhance their reputation, and gain a competitive advantage with the proper focus and strategy.

By collaborating with suppliers and customers and adopting targeted strategies, companies can make their supply chains more sustainable and better positioned for success in the future. And with the help of BI and analytics, all this can be achieved faster, with higher accuracy and visibility that helps stay on the course.

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On this Earth Hour, let's reflect on how we can better promote sustainability throughout the supply chain. We all have a role in making the future more sustainable, whether as customers, suppliers, or corporate leaders. And Ikigai can help you meet your goal.

Ikigai is a no-code AI apps platform. Based on cutting-edge MIT research on AI and machine learning, Ikigai helps supply chain teams improve the speed and accuracy of their decisions in the VUCA world, thereby increasing the business's return on investment (ROI).

Ikigai combines data analytics, visualizations, and automation with its proprietary technologies, such as aiMatch and aiCasting time series forecasting, and translates them into more precise decision-making data. Let's connect for a quick chat.

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