Sustainability and environmental, social, and governance (ESG) standards have been on most organizations’ radars for quite a while, yet these standards have not always been top of mind. Some organizations have viewed these efforts as being at odds with their bottom line. Today that is no longer the case.
Many of today’s buyers are partnering with organizations that are diligent about ESG standards, even if it means paying higher prices. Meanwhile, companies face compliance mandates posed by ever-increasing governmental sustainability regulations. In today’s economy, sustainability is not a luxury. In many cases, it is necessary for an organization’s success.
The business case for supply chain sustainability has grown over the past several years. According to findings from McKinsey, companies that excel in ESG see higher valuations and faster growth while costs fall as organizations zero in on reducing waste and streamlining operations.
Moving the sustainability needle, however, can be complicated. If you find the process daunting, you’re not alone. Some 90% of respondents to McKinsey’s survey have trouble determining the best course of action to make changes around ESG topics. In addition, nearly 70% of those surveyed said they weren’t quite sure what ESG targets to set.
There are, however, specific steps organizations can follow to start making their value chain more sustainable. First, start with a baseline of your current sustainability status, then figure out which key stakeholders will work together to draft a thorough sustainability plan. Once these details are established, you’ll be ready to take the following four steps:
- Map your supply chain and reduce your number of suppliers. Start by reaching out to your suppliers and determining their biggest sustainability challenges. Ask suppliers for detailed reports on their ESG impact, or use external data sources such as ESG rating companies. Next, work to reduce your overall number of suppliers so that sustainability is easier to track. New initiatives and pilot projects can help you determine which new approaches and supplier relationships will be the most successful. Then, scale those across your organization.
- Create a supplier code of conduct. Eliminate ambiguity with regards to supplier expectations with a clear sustainability code of conduct. Plenty of resources and tools exist to help you create a thorough supplier code of conduct that can address topics such as improving logistics and warehousing as well as sourcing packaging more sustainably. For instance, the United Nations Global Compact publication, Supply Chain Sustainability — A Practical Guide for Continuous Improvement, offers guidance on creating a successful supplier code of conduct.
- Develop training programs. Education and ongoing training are essential. Technology and procurement teams should be regularly trained on sustainable procurement principles and how to apply them. In addition, they’ll need to understand how to evaluate potential suppliers’ ESG credentials. General employee education—for example, making workers aware of carbon emissions that their company’s products produce—can also help to influence purchasing and business travel practices.
- Pursue sustainable sourcing and the circularity of products. Work with value-chain partners to decarbonize areas of the supply chain that are emissions-intensive and find low-carbon alternatives. Companies should collaborate across the value chain to adopt circular principles into operations. Digital solutions—such as those that provide real-time information on a product’s origin, composition, and end-of-life handling—can help foster transparency and promote further product circularity.
As you work through the above steps, set specific, achievable goals and targets, and then measure your sustainability improvements as you progress.
While building more sustainability into your value chain can at first seem intimidating, it’s a necessity in today’s world. Over time, companies that make sustainability and ESG a priority will realize reputational and financial benefits.
GEP helps companies seamlessly incorporate sustainability into their supply chain through a combination of strategy, software, and managed services. GEP’S end-to-end comprehensive, unified solutions harness technology to transform organizations for the better.
Start making your value chain more sustainable today with GEP.
