Ultimately, customers want assurance that controls are in place and that an organization’s suppliers and manufacturers work to minimize social, ethical and environmental issues.
Without a supply chain, businesses would come to a standstill. This network of organizations acts in like a spider’s web: agile enough to adjust to different situations, but also stable enough to withstand a sudden change in the environment. Each component of the supply chain forms a vital part of a wide-spread “web,” working together towards a common goal. For a business, that is the delivery of source materials from the supplier to the manufacturer, and eventually to the end-user.
Sustainability – including social and environmental responsibility – is becoming more important to this network, playing a crucial role in the requirements for manufacturing and supplying processes. The organization at the end of the supply chain is under intense scrutiny, to ensure that end products are compliant with customer values and regulations. This scrutiny extends through the supply chain and it is critical that sustainable processes are being applied from end-to-end, ensuring that standards are consistently met. Ultimately, customers want assurance that controls are in place and that an organization’s suppliers and manufacturers work to minimize social, ethical and environmental issues.
A multi-pronged approach to achieve sustainability
This assurance is only achieved if a company has confidence in the processes within the entire supply chain. This builds a certain trust with its partners and customers. Companies can take several steps to ensure their supply chain is as sustainable as possible. However, some aspects aren’t solely within the influence of an organization. There are several external factors – economic, political, social and environmental – that can act as threats to the complex structure of the supply chain and sustainability efforts. To combat this, a multi-pronged approach involving assessments, relationship management and auditing is needed.
Per Ädelroth, VP, Operations,
Axis Communications
Know the challenges and risks
To be able to develop a sustainable approach for a company’s supply chain, it’s key to know the factors that need to be taken into consideration and that can become a risk to a sustainable approach. Looking into the environmental aspect, there are things like ensuring appropriate energy and water consumption, proofing origin and quality of materials are on the list as well as avoiding the usage of hazardous materials.
Know your location and its characteristics for businesses
Factors like extreme weather events or geopolitical tensions in one country can quickly become a threat to the intactness of the whole supply chain. Two states that have formerly enjoyed a positive trading relationship may suddenly fall into economic conflict, with consequences that impact companies selling into those markets. This is why the geographic and geopolitical location is an important consideration for companies.
Sourcing suppliers closer to the point of manufacture and sale is useful in terms of reacting to disruptions. There is also an added environmental benefit of reducing the transport distances between organizations.
Furthermore, companies need to be aware that suppliers in different countries might adhere to different ethical and social practices, where sustainability regulations could be non-existent or not enforced. It’s these practices that need to be reviewed and adjusted to the values and philosophy of the business that partners with the suppliers. In Asia, for example, suppliers often report a significant amount of overtime – often due to the local laws. In many countries, having working weeks that exceed 60 hours isn’t illegal. Working these long hours has the potential of being detrimental to workers’ health and safety. While it might be ok based on the local law, it’s crucial for companies not to tolerate if workers' health is compromised by, for example, much overtime work at the supplier-companies. It’s important to set demands on quality when it comes to working hours and the health of the workers in general.
Organizations can also support suppliers through education around innovative applications of technology, which could play a key role here in smoothing processes and improving working conditions and reduce time needed for certain processes. There are a number of different solutions that eliminate task that are a risk to human health. For example, surveillance cameras could be used to monitor hazardous areas instead of a worker.
Developing relationships with suppliers
In some ways, building a supply chain follows the same rules as building a house: it’s essential to create a solid foundation, otherwise, it might be hard to guarantee that whatever is built upon it will last. Choosing the right suppliers is key, as they form the foundation of a supply chain that complies with the company’s philosophy and ethics.
Having these relationships supports visibility into suppliers’ own processes and applying codes of conduct guarantees commitment to standards. A guideline for what should be included in this code of conduct can be found in the
UN Global Compact on human rights, the environment, labor as well as anti-corruption. In detail this means, suppliers must have several measures in place to control their environmental impact and to keep it to a minimum – starting with energy and water consumption, over emissions to providing decent working conditions – including no child or forced labor. This conduct should be reviewed on a regular base to keep it up-to-date.
That said, to engage external suppliers in the organization’s sustainability journey it’s advisable to go beyond the compliance-based relationship. Codes of conduct are a good guideline but communicating with partners authentically is important. Through this, suggestions can be offered to help them improve their own sustainability practices. A healthy collaboration between suppliers and partners can help to engage both further in this mission.
In cases, where suppliers meet most but not all the sustainability requirements that are set by the company, training can make all the difference. That’s why it’s important for businesses to make education a central part of their business philosophy. Not only for partners but also for suppliers. Local training for suppliers can help to raise awareness for sustainability issues and provide suggestions on how to tackle them.
Regular audits
As a company with exacting standards that focuses on treating suppliers as part of its business, regular audits are one good way to ensure these standards are met. They can be tailored to the region but should focus on the key elements. This could include verifying appropriate controls to minimize energy and water consumption, handling of chemicals and hazardous waste as well as verifying occupational health and safety and labor rights.
The same goes for checking where materials come from and ensuring no conflict minerals were used in the manufacturing process. That includes tin, tantalum, tungsten and gold, mined from conflict areas in the world, where money from the sale may go to criminals, thereby perpetuating armed conflict. Performing these regular audits will help to identify and rectify issues effectively.
Maintaining sustainable supply chains today while keeping an eye on a green future
Ultimately, creating a sustainable supply chain on all its levels benefits everyone – it reduces the environmental impact of business and can make our earth a little greener, be that by improving the air quality due to shorter routes of transport or with better working conditions for the employees in various countries. The businesses themselves can improve their partnerships and optimize their investments regarding transport, process and materials. Technology can help in some cases by making processes easier or less hazardous or simply more efficient.
However, sustainability is not just a trend. It’s the future and it can transform an entire system. But the mission of becoming sustainable demands everyone’s participation. Which is why in the process of making your business and your supply chain more sustainable it’s crucial not to look at the supply chain as a siloed factor. It's helpful if the teams work closely with departments for development and research together to understand the future product roadmap. This collaboration will lead to a work-relation that benefits both sides and creates meaningful progress - for company and suppliers.