There are many benefits of taking action to improve environmental impact. Generally, organisations associate the efforts with costs and burdensome of change.
It might make sense, therefore, to try to understand the value of sustainable actions which can have a positive turn on cost savings, price, market share and product differentiation.
When the conversation starts in within the supply chain concerning sustainability it also gives the customers more confidence in the supply chain and trust in business relationships.
Each business will look at sustainability from different perspective. The value generation will depend on the sector, customer expectations, organisational culture and reputation.
Managing risks
Risks in organisations can be managed proactively or reactively. Proactive risk management may include training and programmes for employees and suppliers or partnering with suppliers to mitigate risks. Reactive risk management generally involve responding to risks after events that have already happened or corrective actions after audits.
By ensuring that suppliers have robust regulatory compliance systems organisations can protect themselves from potential supply chain interruptions. Proactive supply chain management ensures businesses can protect their market share and control the costs. Sustainable procurement practices can also be adopted to reduce potential liability. More and more sustainability related regulations are being put in place, for example REACH, RoHs, Minimata Convention, Conflict Minerals and human rights in the supply chains.
Supply chain efficiencies
By implementing supply chain efficiencies companies can reduce business procurement costs and contribute to reducing negative environmental impact at the same time. Businesses are encouraged to take time to evaluate their supply chains as it would strengthen the understanding of its strengths, limitations and avoid price increase.
Strong H&S practices also lead to price reductions. Health promotion activities and accident reductions can bring financial benefits across the supply chains with increased productivity and keeping labour costs under control. Companies which rely on skilled employees would especially benefit from those actions.
Development of sustainable products
Cooperation with suppliers can also lead to product innovations. Customers continuously demand products created from sustainable materials, operational activities and working conditions. By partnering with suppliers who improve the sustainability allows stronger and increased market share, customer loyalty, lower price and access to new markets.
Development of sustainable business culture
Supply chain sustainability efforts allow employees to contribute to matters which they are personally passionate about. This efforts can improve the attractiveness of the organisations to new and potential employees as well as keeping talent within organisations.
Keeping sustainable business culture also allows the business to maintain good relationships with external stakeholders such as regulatory bodies, governments and investors. Those relationships can give businesses access to market trends, regulatory forces and other future impacts affecting the organisations.
Such culture can build positive perception of the business brand and better rates for business loans, more investments and financing.
Organisations operating within highly regulated industry would particularly benefit from the sustainable culture.
More and more companies built efforts to supply chain sustainability. Understanding of the business value and developing ways to measure can bring significant improvements and increase business value.
This is the reason why big organisations want to improve their supply chain sustainability performance. Because they create value, bring investments, efficiencies, productivity, cost savings, improve company reputation and finally, allow for increased market share and more profit cumulation.
Bibliography:
BSR, 2010, The Case for Business Leaders
BlackRock, 2021, Sustainable investing
EMD, 2016, Why all businesses should embrace sustainability
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