Sustainability in Supply Chain? A guide to get started
Whether it is from personal willingness or from internal or external requirements, starting to explore Sustainability in Supply Chain may be challenging. This article aims at providing a few insights on how to get started through definitions setting followed by insights on how to actually start.
Whatever the trigger point, the journey on Sustainability will be great and will bring you a lot of learnings. Understanding the dynamics and the stakes will bring a new perspective and will challenge your certitudes. At one point, the different dimensions related to sustainability will become part of your decision making. Referring to Supply Chain, your beloved triangle: cost, quality, speed may change to a square shape with Sustainability as the fourth key dimension.
The article answers 5 key questions on how to start your sustainability journey within your Supply Chain:
- What is Sustainability?
- How does it apply across the Supply Chain?
- What are the key definitions that I should be aware of?
- How to start my Sustainability journey?
- What are the key mistakes to avoid?
1. What is Sustainability?
T o make it simple, sustainability considers long-term value creation. This means that the company not only focuses on profitability but also on the impacts it has and the perennity of its operations. Usually, the environmental and the societal/social impacts are considered as the key drivers in Sustainability while maintaining economic profitability.
With increasing sensibility from the public on those challenges, investors are bringing their focus on the so-called Environmental Social Governance (ESG) indicators. Meaning that founding will more and more be allocated considering the willingness to act on environmental challenges of a company. Starting a transformation journey of your Value Chain is thus beneficial for the society at large, long-term profitability, capital allocation while preserving the Planet for the future generations.
2. How does it apply across the Supply Chain?
In the context of supply chain, sustainability requires a holistic approach that considers everything from sourcing materials to delivering products to customers including the so called "End of Life".
It involves reducing waste, conserving resources, and promoting social responsibility. By incorporating sustainability into decision-making processes, businesses can create a more resilient and responsible supply chain especially over the long term. Interestingly, Sustainable thinking often also brings short term benefits by asking questions sometimes leading to change of paradigm.
Concretely, Supply Chainers are mainly interested by the following dimensions:
- Environmental impact of the Operations especially related to CO2, water and waste
- Social impact of the model including several Tiers of suppliers (depth may depend)
- Governance and "morality" of the operations
3. What are the key definitions that I should be aware of?
Emissions scope 1 | 2 | 3
When it comes to measuring Greenhouse Gas emissions in a company', there are three different scopes to consider: scope 1, scope 2, and scope 3.
Scope 1 emissions refer to direct emissions from a company's own operations, such as from manufacturing or "internal" transportation.
Scope 2 emissions are indirect emissions from a company's purchased electricity, heat, or steam.
Finally, scope 3 emissions are all other indirect emissions that occur as a result of a company's activities, such as emissions from suppliers or customers.
By understanding and measuring these different scopes of emissions, companies can better identify areas for improvement and work towards a more sustainable Supply Chain.
Environmental Social Governance (ESG)
A set of indicators that helps investors to allocate funding to companies. Those outline the actions and commitments of an organization to act.
Global Logistics Emissions Council (GLEC)
This council provides a framework for measuring and reporting logistics emissions, including those related to transportation, warehousing, and distribution. By using this framework, companies can better understand their emissions and work towards reducing their impact on the environment.
Greenhouse Gas (GhG)
These gases, including carbon dioxide, methane, and nitrous oxide. They trap heat in the Earth's atmosphere and contribute to global climate change. This is an important area of focus when referring to sustainability. Several options are available to report such emissions but the most used and recommend standards remains the one set by: https://ghgprotocol.org/
Intergovernmental Panel on Climate Change (IPCC)
The IPCC is an organization established by the United Nations to provide scientific information on climate change. Their reports are widely recognized as authoritative and have been instrumental in shaping global policy on climate change. It is of upmost importance for any conscious leader to read the Executive Summary of each new report to understand the global situation.
Life cycle assessment (LCA)
In the world of sustainability, LCA is a crucial tool to measure the environmental impact of something. It takes a holistic approach, considering the entire life cycle of a product/service from sourcing materials to disposal. By understanding the impact of each stage, companies can make informed decisions about how to reduce their environmental impacts and promote sustainability.
4. How to start my Sustainability journey?
"Only What Get Measured Gets Managed" Peter Drucker
Well the journey on sustainability start by educating yourself to understand the global mechanisms and what is expected either internally or externally. The expectations may be set by regulations but also shareholders or even society at large.
Once the basics are understood, the journey must start by measuring. Setup a dedicated team or develop on-the job accountabilities to measures your operations impact. Using the relevant methodology start to report and consolidated data. This will quickly provide a high-level understanding allowing to then set priority actions either on low hanging fruits or on key drivers.
A quick tip: integrate as early as possible the concept of circular economies and the reknown 5R (priorize from top to bottom):
5. What are the key mistakes to avoid?
Select a methodology that will be suitable for your operations over the long run to allow comparisons over time and avoid expensive future switches. Very quickly, the question of the depth of the analysis will arise. This is a particularly tough one since staying at high level leads to generic information sometime lacking details while going in-depth may be very time consuming or even impossible today.
It is also extremely important to understand all impacts of a potential decisions, often improving one metric or dimension leads to important effects on another one. There is no perfect solution, it is important to identify criterias and priorities that are relevant for the organization and take decisions accordingly often using a Life Cycle Assessment.
Last but not least, sustainability will bring very interesting and deep questions to the table. To have an impact, often a change of paradigm/approach/model will be required throughout the organization. All stakeholders will have an important role to play in transforming the model, as such onboard them early to ensure the success of tomorrow.
Continue to discover more about getting started in Sustainability by listening to our podcast episode.
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