In February, our CSR Specialist, Viktoria Lamprinaki wrote about the importance of building sustainable supply chains. Over the next month she will explore this topic in more detail, in a series of blog posts.
This week, Viktoria considers the key drivers for businesses to develop a more environmentally and socially conscious supply base.
According to the United Nations Global Compact (UNGC):
‘Supply chain sustainability is the management of environmental, social and economic impacts, and the encouragement of good governance practices throughout the life cycles of goods and services’
The graphic below shows some of the primary linkages between the UNGC’s Ten Principles and the contribution that these can make towards the achievement of the UN’s Sustainable development Goals (SDGs). By respecting and supporting universal principles, UN Global Compact business participants can play an important role in helping to realize the SDGs.
Stakeholders - especially consumers - are showing increasing concern regarding the environmental and social issues that are associated with the manufacturing processes and the use of products. These new developments are compelling organisations to identify and implement sustainable solutions not only in their own boundaries, but also across their supply chain networks. The globalization of market economies, shorter product life cycles, digitalisation, and multifaceted customer expectations, together with resource scarcity, stricter regulatory requirements, and a more long-term focus, have led to the creation of highly complex supply chains.
Organizations are incorporating environmental and social responsibility issues in the management of their supply chains, since they are now considered accountable not only for their own operations, but also for the operations of their supply chain participants. Adopting sustainability practices improves the performance of organisations and provides the opportunity to acquire a new set of competencies which can help them achieve competitive advantage. However, the adoption of sustainability practices are often influenced by various internal and external factors. In addition to several new regulations, that are related to different dimensions of sustainability, such as carbon discharges, greenhouse effects, carbon taxes, and anti-corruption, stakeholders are pressuring organisations and their supply chains to address their sustainability.
A supply chain has to be resilient and responsible. Being resilient means having the ability to understand and adapt to external challenges that may impact an organisation’s ability to maintain business continuity. Such factors may be the risks from the rise of the global temperature, weather impacts, cyber security, outbreaks of diseases, natural disasters such as droughts earthquakes and floods and others. Being responsible means to mitigate the economic, environmental and social risks and impacts that are part of an organisations operations. Organisations need to be aware of their impact on communities, the environment and across the value chain, and be able to adapt to the changing conditions. Sustainable procurement is increasingly being integrated in operational risk management practices.
But what are the main drivers for organisations to incorporate sustainability in their supply chain management?
Drivers for a sustainable supply chain
Risk management is found to be the predominant driver for organizations to integrate sustainability in the supply chain. Unintended environmental or social impacts can affect a company’s brand reputation. Companies are also becoming increasingly aware of the strategic benefits a sustainable supply chain may offer. Such benefits includes opportunities for cost reduction, enhanced efficiency and development of innovative products. There are also companies that are driven by the importance of doing the right thing and their leaders’ passion for sustainability.
According to EY’s ‘The state of sustainable supply chains’ report the top drivers for building a sustainable supply chain are:
- The licence to operate
- Efficiency and opportunities for innovation
- Compliance and regulatory risk
- Business continuity
License to operate
Incidents, disasters and scandals regarding various companies in past years, have taken centre stage in the global news. These have shaken things up, both at company and at industry levels. The need to avoid reputational damage is driving companies to change their way of doing business. Every year, based on data gather by ILO, approximately 337 million people are victims of non-fatal work accidents, while over 2.3 million people die from occupational injuries or work related diseases. Apart from managing regulatory and reputational risk companies integrate sustainability in their supply chain operations in order to respond to their stakeholders needs and maintain their license to operate. Consumers, customers, investors, local communities, employees are all stakeholder groups with power that forces companies to acknowledge their expectations and act accordingly. This power is currently pushing sustainability into the world economy.
Efficiency and opportunities for innovation
There has been a noticeable shift in the businesses’ approach to managing risk from reactive to proactive. Current trends show that a growing number of companies are identifying strategic opportunities in sustainability, which enhance corporate strategy, improve quality, add value or reduce costs. A sustainable supply chain can foster opportunities that lead to environmental and social, as well as financial benefits.
Compliance and regulatory risk
The potential that a company might be deemed to have violated a law or a regulation is a compliance risk, while the potential that a new law, regulation or interpretation might cause losses to a company is a regulatory risk. Legislation regarding sustainability requirements, coming from governments play a critical role in the market. These regulatory drivers set the minimum standards for markets, shape the stakeholders expectations and level the playing field for companies of different sectors to address various issues, such as pollution standards, health and safety standards, etc.
Business continuity
Managing disruptions of operations is for a number of companies an important driver of supply chain sustainability. Maintaining the security of the supply chain enables companies to deliver on time, at cost and to specification. Climate change has led to resource scarcity and multiple natural disasters that in turn have had an impact on the availability and the cost of various commodities. By managing their supply chain’s sustainability companies can manage and ensure the continuity of their operations.
ASL Global and sustainable supply chain management
Here in ASL Global we have been engaging with our supply chain, managing quality and sustainability since day one. An industry-leading in-house designed Total Quality Management (TQM) program defines our systematic and structured approach to compliance and quality management. All our suppliers and factories are subjected to our robust auditing that is based on ISO 9001 and SA8000 standards. Growing an environmentally friendly and socially responsible supply chain is part our CSR strategy launched in Autumn 2019. We are in the process of building relevant checklists that help with the categorization of our existing vendors and the on-boarding of new suppliers.
For ASL Global, incorporating sustainability in the supply chain is driven by our passion for sustainable development and for innovative solutions. We recognize the importance of engaging in environmental initiatives and of being a global citizen that responds to the challenges our planet is facing. At the same time we are determined to offer fresh ideas and solutions to our clients, as we view Innovation as a fundamental mind-set rather than a specific departmental responsibility.
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.
Discover more about our ONE WORLD initiative
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