Consumers worldwide are expected to increase by 1.8 billion by 2025, representing a significant increase in opportunity and potential revenue to manufacturers and distributors. Additionally, the spending power of consumers is expected to increase even more than this as global incomes increase as well as the proportion households spend on consumables. In essence, the consumable industry is set to grow by approximately 5% each year for the next 20 years.
At the same time, it has also been shown that there is increasing pressure from consumers, global committees, shareholders and activists to ensure there is increasing control over the supply chain behind a consumable, such that each step has the least social and environmental impact possible. In this article, we explore the basis behind a sustainable supply chain and some ways in which you can begin implementing sustainability and reducing your company’s environmental impact.
Sustainability is no longer a choice, it’s an expectation
If a company was to scoff at sustainability in their supply chain, they would experience dramatic resistance in the retail world and a significant loss in revenue.
In 2015, 195 countries agreed to the Paris Agreement at the UN climate-change summit. This agreement aims to prevent global warming by 2 degrees Celsius through the reduction of greenhouse gases. This affects the consumer-packaged goods sector as they are significant contributors to global greenhouse gas emissions. If they are to still experience the approximate 5% annual growth we mentioned before, while supporting the Paris Agreement targets, they will have to reduce their emissions by as much as 92%. How is this possible?
The supply chain of a consumer company accounts for more than 80% of greenhouse gas emissions and therefore has a far greater environmental and social impact than the company’s own manufacturing operations. To this end, it is absolutely essential to earnestly and effectively seek to manage the risks of your whole supply chain to reach the goals we should be aiming for.
Map out your supply chain and identify areas for improvement
To reduce the environmental impact of your supply chain, you must first understand your entire supply chain and the areas which can be vastly improved. Each step has associated risks and by-products that can be harmful to both society and the environment and therefore, each step must be analysed in detail. Additionally, it can be helpful to have a metric by which you can compare current performance, otherwise how do you really ascertain how a company is tracking?
Organisations such as the WWF, the Global Reporting Initiative and TSC have developed a set of standards and risk-measures to be reached by each sector and product category. This creates a minimum benchmark to aim for as well as providing a clear road to improvement.
Align your company’s goals with the global agenda
Once you have identified areas for improvement within your own supply chain, it is then important to set goals for your own operations as well as those of your suppliers that are aligned with the global initiative to reduce greenhouse gases and negative outcomes on humanity. To do this, it is important to consult documents and research defined by scientific bodies such as the Intergovernmental Panel on Climate Change which is a UN entity. There is no point in reinventing the wheel but rather it is beneficial to consult the important work already done in this area which defines targets to reach to achieve admirable goals worldwide regarding the global impact on our planet. In conjunction to this, it is also important to listen to your customer-base as the social view on environmental sustainability changes and reaches a far more eco-conscious standpoint. Your customers will expect to see certain changes and measures adopted as they compare practices with other consumer companies rather than just comparing prices and making purchases based on convenience. Take these things on board as they will denote your long-term brand loyalty and subsequent profitability.
Assess your suppliers’ performance and encourage management of impact
The next step is to ascertain where your suppliers fit into your predetermined goals as aligned with global standards. Are they on the road to helping you reach these objectives or will they stand in the way? Across the world both in retail and government, it is becoming accepted to issue surveys and questionnaires to suppliers to ascertain their practices and subsequent environmental awareness and impact; find out from your suppliers where they stand on this issue. Once you have this knowledge, you can actively work with them to close the gaps between current practice and where you expect them to be to support your objectives.
If a supplier refuses to adapt processes for a greener supply chain, then it might be time to seek new suppliers who are aligned more closely with your own agenda. This involves a robust vetting method so that you only work with people who will inevitably support your supply chain objectives.
Establish a program to usher in sustainability improvement
Once you have ascertained where your suppliers sit on the sustainability spectrum and you have constructively communicated your expectations for your future relationship, it is important to establish a program to support continued improvement. This may involve onsite audits which assess behavioural norms and practices that questionnaires do not. It is then possible to attach incentives for constructive change to see clear gains made in sustainability.
Article by Melanie Chan in collaboration with our team of Unleashed Software inventory and business specialists. Melanie has been writing about inventory management for the past three years. When not writing about inventory management, you can find her eating her way through Auckland.