Winning with Sustainable Supply Chains

Since their adoption in 2016, Sustainable Development Goals (SDGs) have become a beacon for companies and governments to map and evaluate their performance towards sustainability. Action on several SDGs is required for making supply chains sustainable. These include SDG 8 (decent work and economic growth), SDG 9 (Industry, Innovation and Infrastructure), SDG 12 (Responsible Production and Consumption), SDG 14 and 15 ((Life Below Water and Life on Land); and SDG 17 (Partnerships for the Goals). Given the range of SDGs covered, sustainability improvements in supply chains are crucial for the success of SDGs.

Utkarsh MajmudarConsiderable work had started on making supply chains sustainable. COVID-19 has thrown the spotlight back on supply chains and logistics. February 2020 saw a supply shock as supplies from China were disrupted. This was soon followed by a demand shock as most of the countries around the world went into a lockdown. This has exposed the vulnerabilities in production strategies and supply chain processes. The US, India and some other countries are looking at economic nationalism as a solution. Although Brexit had shown a glimpse of these what is to come, the pandemic has exposed the fault lines.

Most of the procurement and supply chain activities are centred around cost savings. This means obtaining supplies at the lowest cost possible. Post COVID-19 this is likely to change with risk of supply being factored into the cost.

Corporate supply chains have been opaque for a long time. This is now changing with greater focus coming on traceability. Coupled with companies becoming more transparent, supply chains are getting the right attention.

So, what is traceability? Traceability is the ability to verify the history and location of products and services in the supply chain. This involves building supply chains that are transparent and providing an easy way to assess where contamination is occurring. Traceability improves product sourcing, reduces costs and ensures a healthy output.

This is not new. For instance, companies have been tracking agricultural commodities and forest products for years. With growth in technology, newer tools and techniques such as sensors and data analytics, are enabling companies to more easily and affordably account for the environmental and social impacts of their materials and products. Thus traceability permeates right from farms, forests and mines to individual factories.

The growth of third-party verification is another factor. Professionals are now readily available to verify the provenance of products and raw materials. This makes it very difficult for companies to escape by feigning ignorance.

Worldwide, many food and beverage companies are partnering with their growers and other agricultural partners to push for sustainable business practices.

An uncertain present, roadmaps to action

The outcome of the Paris Accord (COP21) has extensive ramifications for both manufacturing and supply chains as India needs achieve its nationally determined emission cuts of 33-35% . This has been accentuated by the pandemic. Given the rather low key performance of Indian companies on the supply chain front there is an urgent need for action.

The long term objective would be to develop closed loop supply chains. Closed loop supply chains are designed to and managed to explicitly consider the reverse and forward supply chain activities over the entire life cycle of the product. This involves:

– Product returns management including reverse logistics

– Repair, remanufacture and recycle

– Remaking and reuse

Achieving closed loop systems is not exactly easy. It may take several years to achieve it and some industries may never really manage it .However, some immediate steps could include:

This requires that companies choose the most environmentally responsible suppliers. This also implies that existing suppliers be trained into becoming environmentally responsible.

Many companies engage their suppliers in the greening process. Companies can collaborate with their suppliers to come up with environmental guidelines and innovative approaches to combat environmental challenges.

Shocks come in many forms — climatic catastrophes, hydrologic catastrophes, meteorological events, and, geophysical events. To this biological crisis needs to be added. This will require companies to quickly rejig their supply chain and logistics so that right materials are available at the right time. This involves uncovering and addressing the hidden risks, identifying the vulnerabilities, diversifying the supply base, and holding intermediate or safety stocks.

To maintain their competitive edge and help achieve SDG goals, nationally and globally, companies will have to rethink their approach towards  supply chains.

Disclaimer: The views expressed in this article are those of the author and do not necessarily reflect the views of ET Edge Insights, its management, or its members

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