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Sustainability, ESG, CSR… however you are referring to it, it’s a topic that grows hotter by the day.
One of the drivers behind this is the rise in demand for increased transparency and sustainability regarding manufacturing processes of consumer products by customers and legislators. Despite this, many companies fail to understand the environmental, economical and social aspects of their supply chains and as such, they also fail to conduct successful sustainability initiatives in this area. But where should one start if the topic of sustainability seems daunting? Below, we provide 5 quick tips on how to lay the foundation of your sustainability work.
1. Supply chain SWOT
A good first step is to map out your supply chain, starting with a simple flow chart showing how you get your goods from suppliers to customers. Make sure you detail where you are using third party suppliers/providers and where you own the process yourself. This can help indicate how to prioritise your initiatives, as it’s often easier to change your own processes, than those of your trusted partners.
Moreover, perform a stress test of your suppliers and your supply chain. Are your products produced locally or globally and what is the effect of that? Are you selling to other businesses or end consumers and how does that affect your logistics and 3PL setup? Have you mapped out all options in terms of transportation, raw materials, waste management and discharge? Use sustainability as your guiding principle and map out potential risks connected to your supply chain setup, including environmental, social and economical aspects.
2. Convey your requirements and goals
Your suppliers have to be highly involved if you are to achieve your sustainability goals. Invest in your suppliers and make sure you create strong partnerships, where you are both willing to invest for the sake of your joint operations and success. Some small steps can be to offer training to suppliers on sustainability best practices. Make sure to continuously reinforce your goals and allow for bonus structure for suppliers meeting and exceeding these requirements. Moreover, ensure you have signed agreements and code of conducts with your suppliers, where your terms and conditions are clearly laid out.
3. Measure supplier performance
Once you understand your suppliers and have set an appropriate compliance standard, you can use this to evaluate your suppliers' performances and identify the most pressing sustainability challenges they face. Define your KPI’s and use a supplier evaluation questionnaire to gain insights into their current performance and challenges.
Benchmark your suppliers and keep an extra eye out for those that go that extra mile and do more than they’re obliged to, as well as those that fail to meet even the basic requirements.
When possible, leverage technology. Supply chain and sustainability are complex topics that require technology and digitization to alleviate the workload and identify opportunities. SaaS tools can help manage purchase order processes, production milestones and supplier relationships. They can also allow you to map out your suppliers tiers to create transparency with your value chain, while enhancing efficiencies. Whether it’s making sure your suppliers are meeting your requirements, reducing emissions of production or freight, a digital tool analysing the data for your can have considerable effect over your sustainability goals.
4. Set an action plan for improvements
Once you have reviewed your KPI’s with your suppliers you can start to build a CAPA (correct and preventive action plan). This will facilitate determining what kinds of improvements are feasible to achieve in a certain amount of time. You will also most likely continue to do regular audits (potentially once a year) to verify that changes are actually happening. Also, this may mean that if a supplier keeps under delivering, that you may need to replace them with a new partner.
Make sure to continue to be transparent with your suppliers and also reiterate the company's requirements. Again, having some type of bonus or reward program for suppliers meeting your requirements is a great way to ensure motivation stays high.
5. Partner with other businesses within your field
Some goals and requirements are too big and require more than just pressure from one business to be accomplished. This is when it is a good idea to partner within your industry to drive change. Sharing standards, processes and practices as well as supplier evaluations can help drive the change throughout the industry and across geographical borders.
With this in mind, we hope you feel inspired to get going with your sustainability work. To dig deeper on this topic, check out these best practices and insights from Harvard Business Review.
