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What does a sustainable supply chain mean?
La Sustainable supply chain derives from the integration of the concepts of supply chain And say Sustainability Management. In practice, it is a matter of integrating the principles of responsibility and environmental sustainability into the entire supply chain.For large companies, this means making sure that all their suppliers and collaborators have undertaken a environmental sustainability path.
According to the parameters ESG, in fact, the choice of its suppliers is reflected on sustainability report of the entire production chain. Large companies that want to start the journey to Net Zero they therefore need a virtuous network of small and medium-sized enterprises engaged in the same path.
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Why focus on a green supply chain: 5 reasons
Large companies are increasingly oriented towards a sustainable supply chain at all levels. What are the motivations?
- Value chain emissions represent a large part of the emissions of Scope 3 of a company, and knowing them allows you to obtain an accurate and detailed data on your carbon footprint.
- Knowing the carbon footprint of suppliers and customers makes it possible to define a complete decarbonization strategy and to improve sustainability performance at 360°.
- A comprehensive analysis of Scope 1, 2 and 3 issues allows obtaining higher scores in ESG ratings.
- Various regulations such as CSRD (Corporate Sustainability Reporting Directive) provide for reporting obligations for certain types of companies.
- For a company committed to a sustainability path, not involving its suppliers can represent a big risk in terms of reputation and corporate image.
On this last point in particular, it is necessary to pay particular attention: over the years, in fact, there are several large companies that have faced each other media attacks because their suppliers were accused of having negative impacts on the climate and the environment.
Media campaigns of this type often lead to significant repercussions on the corporate image and sometimes even to a Decline in stock price.
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The sustainable supply chain from the point of view of SMEs
As Larry Fink, president of BlackRock (the largest global investment firm) writes in the annual Letter to CEOs*:
“Engineers and scientists are relentlessly studying how to decarbonize cement, steel and plastic; shipping, road transport and aviation; agriculture, energy and construction. I believe that the decarbonization of the global economy is about to create the greatest investment opportunity of our lives. Companies unable to adapt, regardless of the sector in which they operate, will be left behind.”
By now, almost all large companies are moving towards a path of reducing their environmental impact, also imposing requirements on their suppliers. These large corporations have as suppliers the SMES who, if they want to continue collaborating with them, must necessarily adapt.
Taking action early allows you to Don't be unprepared When the emission report becomes a basic requirement. Suppliers who are already preparing with a serious plan of action towards carbon neutrality they will then get a competitive advantage, because they will be more easily chosen as partners by large companies and multinationals.
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How to make the supply chain sustainable: 3 steps to get started
To implement a sustainable supply chain, there are some actions that companies can implement: let's see below what are the 3 steps to start from.
- Upstream and downstream supply chain mapping: through the visualization of the supply chain, companies are able to have an overview of the main processes, and identify impacts and risks associated with individual activities.
- Evaluation and selection of suppliers: it is possible to use self-assessment methods to evaluate suppliers, asking them if they have obtained certifications or if they adhere to sustainability initiatives. The final objective is to introduce selection logics, based precisely on performance in terms of sustainability.
- Prioritization of risks: by evaluating the magnitude of the risks deriving from the value chain, it can be determined on which activities or suppliers to act first. For example, a company with suppliers located in a country with limited labor rights laws will be more likely to have repercussions. However, if the same suppliers provide a service of minimal importance to the company, the impact could be small. The combination of these two variables makes it possible to define the risk and evaluate which supplier to give priority to.
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Involving the supply chain in the sustainability journey is difficult (without the right tools): let's see why
It is obvious that everything becomes more complex the moment you cross the boundaries of your company, where you have greater control.
To be able to ensure compliance with the principles of sustainability, also on the part of external companies (suppliers and customers), requires a Effort not indifferent.
A sustainable supply chain requires clearness And say visibility of the entire process. This is why the concept of traceability, which we often hear about in association with supply chain management.
It is necessary to know everything that happens along the entire value chain, to ensure that all sustainability principles are respected. In addition, monitoring the carbon footprint of your value chain is essential to calculate your Scope 3 emissions.
This implies the need to have access to an enormous amount of data, which, without the right tools, can be really complicated.
