Sustainability in Supply Chains
Sustainability is not just a simple case of profits or environment, but a subtle issue of some people vs other people. Those looking for jobs and inexpensive goods are part of our society, and that part of our society is less interested in sustainability and more towards the price. The other part of our society is looking more towards the environment, future, and making it sustainable. So the question arises is how far can we go in sustainability and how can we integrate this in the current corporate scenario.
It has never been towards the environment but at the end of the day we have certain needs that we need to fulfill; we have things in life to accomplish, feed our kids, run our daily lives. It became clear that it wasn’t like these big evil corporations against which people want to set out and protest against, but it is people vs people. Companies inherently are producing goods that someone wants or something that they will use whether it is in business to a business scenario or business to consumer scenario and there is a demand for that, so it’s not them setting out the impact on the environment or social ecosystem negatively. Corporates are just fulfilling the demand and along the way, things got affected, but that was not the intention.
Impacts on the supply chain can be refined to government, society, natural resources, and customers. These factors are actively influencing how supply chains are designed and operate. Firm and supply chain behavior can be influenced by both “hard” (Government & Natural Resources) and “soft” (Society & Customers) factors. For instance, how can an event or exogenous factors impact freight flows? It can have an impact on sourcing patterns, flow destination, routing, flow volume, and value density. As far as consumers go, there is an increasing amount of attention and concern based on whether a product is ingested (food and pharmaceuticals), worn or in immediate proximity (clothes, cell phones), or the general environment (metals in electronic goods, carbon).
Let us look back to an example of disruption of the supply chain because of the use of palm oil. Different corporate responses are reviewed between Nestle, Unilever, P&G’s, and Dr. Bronner’s novel approaches. Based on their company orientation, pressure from NGOs, capacity to change, and long-term objectives, each company had a novel approach. Nestle spent a lot of their efforts on getting a top level of traceability to sources, this is particularly because of Greenpeace’s attacks and their naivety on where their material was coming from. P&G spent a lot of time researching their options and focused their efforts on supporting smallholders because of their portion of spend on smallholders. Unilever, with its orientation towards industry-wide change, worked heavily on unique organizations and collaborations that sought to elevate the practices in the palm oil supply chain. For the small Dr. Bronner’s, their entire company orientation was on sustainable supply chains, so they spent considerable time transforming their supply chain by vertically integrating with a subsidiary.
Now everyone is putting out conversations and talking between players and we see that so many companies and all the public cases of Unilever or Starbucks or P&G instead of being in the center of controversies where NGOs and other groups were criticizing them but now they are partnering with groups and people that were looking at them and raising their voice on their operations. There is shifting dialogue and hearing all the stakeholders and getting an informed perspective on how the companies are affecting the environment for decision-making and future strategies. When a company gets started to think about their stakeholders’ voices and then also looks at how this might impact their bottom line, making it strategic not only just putting into stakeholders accounts. Doing it in the right way becomes the economics of sales issues where many companies are joining into this issue of sustainability and talk about the circular economy or product life cycle or getting transparency or traceability. The more companies do it, more will adopt these practices and enable technologies that bring down the cost and will allow companies to lower the risk and achieve some goals towards growth.
A company needs to segment its response to these issues for strategy. They must segment potential responses and actions based on pressure and importance. Responses are on a continuum from “Do nothing” to “Focus all Activities”. When we think about cutting costs or reducing the risk or achieving growth, many of the companies focus on lean improvement or waste management and some business continuity or activity that are tied with acidic weather or climate change or retrofitting older buildings or plants are just checking the boxes. People vs people interaction is worth as we know that human behavior is the root cause issue and the solution to most of our problems these days. But if the shift in the businesses is the duty to incorporate sustainability, then how far can we go? And if we take a business as usual approach with no regulations and compliance from industry across trading partners and consumers, how will this impact our planet in the coming years?
We should have the right of responsibility for the world we share. Right things may include decarbonization and social justice. We don’t have to look far for why the changes needed. Look at the massive forest fire at the amazon, Indonesia or Australia, or recent blackouts in California. All of these pose a threat to humanity as well as in the reliability and the viability of the supply chains. And if you again ask “how far can we go?” then the answer will be - “as much as we can” because what’s the price of doing nothing.
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