In the wake of unprecedented globalization and changing consumer preferences, the global supply chain industry has come to witness stringent laws and regulations protecting the environment. There is also increased pressure from the end consumer for businesses to make environment-conscious decisions, which trickles down to their supply chains too. Sustainable supply chains have become imperative to reduce costs and increase efficiency, internal & external customer satisfaction, and market shares & sales, resulting in more effective risk management. In this month’s cover story, we take a look at the reality of what makes supply chains sustainable.
Sustainability is among the key buzzwords of the supply chain industry today, and a truly deserving one. Though rapid industrialization and globalization have improved how humans work and live, it has also had a devastating impact on the health of our planet. One may find ample literature to substantiate how far we’ve pushed Earth beyond the boundaries that have kept our planet stable for millennia.
The increasing rates of pollution and environmental calamities caused by industrial production have urged several stakeholders, including regulatory authorities, manufacturers, and customers to reconsider economic business models and to question the implications of business practices on society and the environment. Over recent years, because society has evolved in developed countries, more stringent laws to protect the environment have been implemented, laws that mandate binding environmental legislation.
EVOLUTION OF SUSTAINABILITY
The modern sustainability movement began with growing awareness of environmental issues during the 1970s -1980s. This period saw the emergence of environmental regulations and corporate environmental responsibility. By the 1990s sustainability expanded beyond just environmental concerns to include social and economic aspects. The concept of the ‘triple bottom line’ emerged, emphasizing the need to consider people, planet, and profit in business decision-making. In the next couple of decades, by the 2010s, supply chains were introduced to concepts like sustainable sourcing, circular economy, transparency, and traceability. It was during this time that governments and international bodies began implementing regulations and standards related to supply chain sustainability. During the next decade i.e. the 2020s, the COVID-19 pandemic highlighted the importance of supply chain resilience and sustainability, while the growth of e-commerce placed a spotlight on the environmental impact of last-mile delivery.
The evolution of sustainability in supply chains has been a significant and ongoing process, driven by a combination of societal, environmental, regulatory, and economic factors. In fact, in today’s competitive business landscape, sustainability is more than just a buzzword. It’s a strategic imperative.
Let’s take a look at what a few industry experts think about the evolving definition of sustainability:
“I think earlier it was more around ‘using less’ or ‘using alternatives’ to reduce cost, which then evolved to ‘using better alternatives’ that helped in a benefit for the environment in addition to lowering cost, to today where I believe supply chains must be truly sustainable from a Triple Bottom Line perspective – and the key difference is that supply chains today expected to deliver on all these 3Ps and not ‘either/or’ over a period of time,” says Varun Chopra, Executive Chairman, GEAR India.
“Sustainability in supply chains is becoming increasingly important to consumers and investors. Customers are becoming more aware of the environmental and social impact of their purchases and are demanding sustainable products and services. Investors, on the other hand, are recognizing the importance of sustainable business practices in long-term value creation and are increasingly focusing on sustainability performance as a key metric for investment decisions.” says Shonik Goyal, President, and Head of Supply Chain, Sheela Foam Ltd (Sleepwell).
“The term has been the talk of the town for the last 10-15 years. Sustainability across the value chain has become the most important subject, many organizations are adopting green and sustainable supply chain practices & even monitoring the carbon footprint. Not only are organizations moving towards sustainable supply chains but also trying to become carbon neutral,” says Mayur Chhabra, Head – Supply Chain, JK Cement.
“The definition of sustainability in supply chains has evolved significantly in recent years, driven by a stronger commitment to social responsibility among other factors. Companies are now actively collecting data to inform strategies for environmental, economic, and social sustainability, investing in alternative energy solutions, and prioritizing supplier accountability,” says Ingo Kloepper, Global Managing Director, WeFreight.
“The definition of sustainability in supply chains has evolved from a narrow focus on environmental concerns to a broader, more holistic approach that encompasses environmental, social, and economic dimensions. This evolution is driven by a combination of regulatory changes, technological advancements, stakeholder pressures, and a growing awareness of the interconnectedness of sustainability issues,” says Vinay Purohit, Strategy Lead (E-commerce), Mondelēz.
Owing to its complex and inter-twined nature, a supply chain is bound to face several challenges while implementing any change, big or small, including sustainability challenges. These sustainability challenges not only impact supply chains from the perspective of production but also delivery.
Prarthana Borah, Director – India, CDP shares that in the last few years, extreme weather events have increased tremendously making it difficult to predict the risks to the supply chain both in production and in delivery. “Climate change could be one of the biggest challenges for the supply chain along with other environmental issues. The growing discourse on decarbonization and defining ways to reduce emissions is the other sustainability challenge for the supply chain.”
Reducing emissions upstream and downstream requires a strategy for generating data, the capacity for assessment, and appropriate technology. Sustainable supply chains require efforts to assess the environmental and human impact of a product’s journey across the value chain, along with factoring in energy usage, water consumption, and waste production.
“Like with any business, everything starts with the consumer. These days, consumers are more aware of the importance of sustainability and thus may favour companies and organizations that include sustainable practices. And with increasing pressure, supply-chain businesses that market these ESGs successfully are bound to have a competitive advantage,” adds Christian Roeleoffs, CEO and Co-Founder, of Container xChange.
Pallavi Chaudhuri, Director – Procurement Services, Perfetti van Melle: “Initiatives driven by regulatory requirements are critical to business continuity. Certain sustainability initiatives would drive costs down, while there would drive them up. Reducing waste and packaging material consumption by optimizing weight and thickness would reduce costs, whereas, shifting from plastic to paper as a packaging material could increase them. Also, there is an increased pressure from trading partners to deliver along sustainability measures, viz, retail firms are asking FMCG companies to be audited against ESG parameters to be able to continue the business.”
Ankur Kumar, Logistics Expert & Consultant: “The challenges in the implementation of sustainable supply chain practices faced by Indian companies are huge. There is a lack of technical know-how, and companies face the prohibitive cost of sustainability solutions as they have few resources to spare. There is a lack of awareness on the KPIs to quantify the profitability and data management challenges for reporting and audit of sustainability initiatives.”
Vineet Agarwal, Managing Director, TCI: “The time is opportune for the country to implement sustainable supply chain practices. TCI has been heeding this clarion call by investing in green logistics and reducing our carbon footprint for over a decade. We are investing in emerging industry trends of Logistics 4.0, to deliver operational excellence by coupling it with a strong digital & ESG-based framework.”
This is an abridged version of the cover story published in the October edition of the Logistics Insider Magazine. To read the complete version, click here.