The Challenges of Building a Sustainable Supply Chain

In this second of a blog series, our CSR Specialist, Viktoria Lamprinaki explores the best approach to building a sustainable supply chain, and the common challenges that businesses face along the way.

In recent years, sustainability has become more important in all aspects of business and supply chains.

Companies are developing and implementing strategies to incorporate sustainability into the products and services that they deliver to the marketplace. Today as part of our blog post series around sustainable supply chains we will discuss the different approaches a company might follow to incorporate sustainability in its supply chain.

Building a sustainable supply chain allows companies to maintain control and achieve competitive advantages through enhancing track and traceability from raw materials through to the customer.

How to approach sustainability in a supply chain

When creating a sustainability strategy a lot of internal and external factors come into play. There is no 'one-size-fits-all' approach that leads to a successful sustainability and the same goes for building a sustainable supply chain. However, there are some approaches that can help you stay on the right path and monitor your supply chain’s sustainability. Here’s what you can do:

• Align it with company culture, code of conduct, sustainability strategy and materiality. You should set the sustainable vision, mission, scope, goals and explicit strategic targets that effectively direct towards sustainability. Make sure that you offer to all of the above fair resource allocation, financial support and a shared information system.
• Comply with regulations and voluntary commitments (e.g., certification schemes). Managing your impact through goal-oriented and market-based mechanisms together with a proactive approach to compliance provide flexibility and efficiency. Furthermore, make sure your suppliers are also compliant and align with your code of conduct and sustainability strategy.
• Use international frameworks and standards such as UN Global Compact principles, principles of the International Labour Organization, SA8000 Standard, Global Reporting Initiative, World Business Council for Sustainability Development principles and others, as a guide. Various globally recognised organisations have published literature on supply chain sustainability and offer guidance on achieving your aims. Following these principles not only helps to structure your approach but also offers your strategy credibility.
• Collaborate with industry initiatives and associations, not-for-profit organizations, suppliers and customers. Collaborations and joint development of products & processes lead to the development of innovative technologies. Use environmental requirements in the process of selecting new suppliers as well as the continual evaluation of existing suppliers. Furthermore, aim to develop a closer relationship with suppliers by holding regular meetings for enhanced communication and trust-building.
• Communicate your efforts by using reporting mechanisms, such as sustainability reports, the Carbon Disclosure Project, Dow Jones Sustainability Indices, and industry databases. Reporting on your progress is related to the transparency of your organization, can enhance your reputation and credibility, and offer you a holistic view of your supply chain sustainability that will make it easier for you to identify the best practices and the areas for improvement.

Always keep in mind that while the above can be applicable to all sorts of companies, building a supply chain is directly related to your company’s DNA. Creating a strong and sustainable supply chain can ensure the continuity of your operations as long as it’s aligned with your company’s core values.

Challenges of a sustainable supply chain

Supply chains can be complex and long which can slow down their adaptability when it comes to sustainability related changes. Recent research from the University of Lund in Sweden identified costs, complexity, operationalisation, mind-set and cultural changes, and uncertainties as the major challenges most companies face when working on their supply chain sustainability.

1. Costs

• Increasing financial costs in reducing negative environmental impacts
• Quantifying sustainability costs of operations/processes/activities

2. Complexity

• Identification of sustainability aspects/effects of operations
• Measurement of sustainability effects of operations

3. Operationalization

• Interpretation of dimensions of sustainable development in operations
• Inertia against development of sustainable operations

4. Mind-set and cultural changes

• Change of mind-sets on international, national, and organizational levels
• Making customers, decision-makers and employees aware of dimensions of sustainability
• Change of customers’, decision-makers’ and employees’ behaviour

5. Uncertainties

• In the degree and nature of governmental regulations and policies
• In long-term development
• In consumers’ behaviour and demands
• In competitive advantages and strategies formulated by stakeholders

There are also challenges on the regulatory and organisational level that may lead to conflicts between several stakeholder groups. At the same time, the lack of effective implementation of the relevant legislation in some markets, has proven an obstacle to supply chain sustainability.

Economist Intelligence Unit and LLamasoft contacted a study in 2019 in which 38% of companies said that higher costs make it harder to adopt sustainable supply chains, also noting that compliance with regulation obliges the supply chain members to implement possibly costly adaptation processes. Difficulty in monitoring complex supply chains (29%) and organizational structure (24%) followed, while lack of customer interest (20%) and lack of expertise (18%) came next. Other  challenges that are limiting the effort put in by supply chain to improve sustainability are; inadequate return on asset, customers are not ready to pay higher price for the green products and the complexity in accessing sustainability throughout the life cycle of a product.

To meet the market demands value chains have become longer and more complex. This complexity is prone to risks and disruptions. In order to address these challenges a wide range of stakeholders need to give their input and work together to identify efficient and applicable solutions.

We are committed to conducting our business in a responsible & sustainable way. Acting with passion and integrity, our people work with customers, suppliers and other stakeholders to make a positive contribution to social responsibility and environmental sustainability in communities around the world.

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