Supply chain sustainability: which inefficiencies may affect your business

Sustainability has become an essential aspect of modern businesses. As companies aim to reduce their carbon footprint and promote social responsibility, they must take a holistic approach to their operations. In this context, supply chain sustainability of businesses plays a major role in generating positive effects worldwide. While the traditional perspective on international trade suggests that countries simply export finished goods and services to foreign consumers, this only accounts for approximately 30% of global trade today.

In fact, the majority of international trade (around 70%) is now conducted through global value chains (GVCs), which involve the movement of services, raw materials, and components across borders, often multiple times, before being incorporated into final products that are distributed to consumers around the world.

Modern trade relationships are highly complex, involving intricate interactions between a wide range of domestic and international suppliers. 

In this increasingly globalized economy, companies must strategically make decisions about outsourcing, investment, and operations based on factors such as cost and quality, in order to remain competitive and to avoid fees and taxes such as the upcoming Carbon Border Adjustment Mechanism (CBAM).

Supply chain sustainability: definition

As global concerns about climate change, resource depletion, and social responsibility continue to grow, businesses are increasingly recognizing the importance of sustainable practices in their supply chains

Ensuring that products are produced and delivered in an environmentally and socially responsible manner has become a critical factor in maintaining brand reputation, reducing costs, and complying with regulations.

Supply chain sustainability refers to the environmental, social, and economic impact of a company’s entire supply chain, from sourcing raw materials to delivering finished products to customers. 

The subject has been treated by international institutions such as the UN Global compact with the creation of the Supply chain sustainability guide, which aims at guiding a sustainable development of the value chains and global supply chains.

By collaborating, purchasers and suppliers involved in global supply chains and networks can promote human rights, environmental protection, climate resilience, ethical business practices, inclusive economic growth and community development.

Supply chain sustainability critical factors

However, achieving supply chain sustainability is not an easy task and requires a concerted effort across multiple areas, including procurement, transportation, manufacturing, and disposal. 

In this context, identifying and addressing the critical factors that impact supply chain sustainability is essential for businesses looking to build a resilient and responsible supply chain that benefits both their bottom line and the planet.

Stakeholders management: Suppliers management

Supply chain sustainability depends on the actions of all parties involved, including suppliers. Therefore, it is crucial for businesses to have a comprehensive supplier management strategy. Poor supplier management can lead to unsustainable practices in the supply chain, such as the use of hazardous materials, unethical labor practices, and environmental pollution.

Transportation: Sustainable logistic

Transportation is one of the major elements of supply chain management and its efficiency has a profound impact on the overall economic performance.

However, it can also have a significant impact on the environment. 

Inefficient transportation practices, such as lack of transportation mode sustainable management and poor route planning, can lead to increased carbon emissions and higher costs which impacts economic and environmental performances of products.

The creation of a policy regarding supply chain and logistics operations is necessary in order to create a hierarchy of transport mode that can be applied by choosing less impacting modes such as train and sea transportation or implementing technology that optimizes route planning and reduces fuel consumption.

Packaging: Eco-design and material selection

Packaging plays a vital role in protecting products during transportation and storage. However, excessive and non-recyclable packaging can lead to significant waste, environmental harm and economic losses.

In order to mitigate this inefficiency, business can adopt sustainable packaging practices such as the selection of biodegradable materials, the creation of innovative packaging solutions that promote reuse and recycling, and the implementation of eco-design practices (e.g. packaging simplification and size reduction).

Supply chain Transparency: Traceability and Data transparency

Transparency is a crucial aspect of supply chain sustainability. 

Without transparency, it is challenging to identify and address sustainability issues in the supply chain of organizations and to track impacts performance.

The need of transparency is a transversal issue affecting all organizations worldwide which can be approached holistically by promoting information sharing about supply chain operations with stakeholders, including customers and suppliers. 

In this context, the adoption of technological solutions such as blockchain could promote transparency and traceability in the supply chain thus enhancing its credibility.

The innovation stimulus has led the creation of specialized companies which aims at mapping the supply chain of different sectors as in the case of The Hemp Blockchain, a SaaS solution that maps and traces the supply chain of hemp from the cultivation to the development of products. 

Waste management: Waste hierarchy and minimization

Waste management is a critical aspect of supply chain sustainability as the consequences of an inadequate waste management can lead to environmental impacts, economic and legal consequences for the organisations involved.

In order to address such an inefficiency, organizations should adopt waste reduction and management practices, such as a waste hierarchy encompassing recycling and composting operations.

Conclusions 

Supply chain sustainability is crucial for businesses to achieve long-term success. 

Inefficiencies in the supply chain can lead to increased costs, reputational damage, and regulatory sanctions. 

Therefore, companies must identify and address inefficiencies in their supply chain to ensure sustainability. 

By adopting sustainable practices in supplier management, transportation, packaging, transparency, and waste management, businesses can achieve a sustainable and responsible supply chain.

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