As the reality, and human responsibility, of climate change are now generally accepted, companies around the world are seeing the advantage of moving to a sustainable model supply chain management. Some companies do so in an honest attempt to mitigate environmental damage and others merely to protect against harm to their reputations, but either way changes are being made, and sustainable supply chain management is becoming both more common and more economically viable.
What are the challenges for supply chain managers?
The challenge of a supply chain manager is maintaining all the links in a global supply chain despite the constant threat of local disruptions at any point on the chain, anywhere in the world. In 2011, Thailand was hit by devastating flooding, causing 800 lives and some £42,000,000,000 pounds to be lost. As a result of the damage to industry and infrastructure in that one country, the world’s largest hard drive manufacturers (Dell, Hitachi and HP) all depended heavily on suppliers in Thailand for components and materials, and could not meet demand. Hard drive prices rose all over the world, peaking in December 2011 and affecting the Christmas buying season for electronics manufacturers all around the world.
Many were quick to blame the flooding on climate change, bringing sustainability questions into what had already been a difficult disaster mitigation problem.
On a different level, Apple recently took a huge PR hit due to the practices of one of its primary suppliers. A series of high profile suicides at the Chinese factory and the resultant media attention to the questionable working conditions at the factory and hundreds like it hurt Apple’s reputation and cost it a large but uncertain amount of money. This is a sustainability issue as well, though not an environmental one.
So, as our supply chains now wind around the world, linking suppliers in hundreds of different countries, legal systems, and degrees of transparency, how can we make them simultaneously resilient to disaster, environmentally friendly, socially acceptable, and profitable?
Experts are divided, of course, but they have identified several key factors that companies seeking to implement sustainable supply chain command should consider.
Supply Chain Sustainability: Looking Beyond the Quarterly Report
Far beyond, in fact. A 20 year plan may be the smallest scale at which meaningful change and profitability can be found.
Now, the simple fact is that most small and medium sized companies cannot look beyond the next 80 quarterly reports, no matter how worthy the goal or how great the potential profits. This means that the ‘heavy lifting’ of meaningful sustainable supply chain management reform must be carried out by the largest and most well-established of companies, those who can make, and stick to, a 20 year plan.
Smaller organisations will have to keep their eyes on these larger organisations and note how they manipulate their supply chains and media stances on social and environmental sustainability issues. After they blaze the trail, sustainable practices will become more economically viable due to the presence of these large firms activity. Smaller organisations will then be able to enact more sustainable supply chain solutions with less fear of unprofitability.
The real ethical questions have to be asked by medium-sized companies, who could make 10- and 20-year plans, but have to balance the risks of long term sustainability versus short term profitability, and take a gamble on one or the other.
The unfortunate truth is that interest in sustainability in this could-go-either-way middle ground is waning. 54% of such CEOs reported supply chain sustainability to be ‘very important’ to their plans in 2010, but merely 45% did so in 2014. If you, as a supply chain manager, have to make the case for implementing a sustainable strategy, how would you go about it?
The Common Sense Justification
You need to make sure that the real decision makers understand what sustainability is and what it can do for the company. Too many executives and directors consider sustainability issues to be separate from the core of the business. They don’t instinctively see that efficient processes, development of truly reliable suppliers and eliminating waste, the core of real sustainability, are even sustainability issues. As long as the see sustainability as a kind of white-wash or marketing spin laid over the core business, they won’t do anything meaningful with it. Get them to see that sustainable methods are, and always have been, a part of the core business.
Don’t try to sell sustainability to the directors as a moral imperative, or even as an appeal to good press. Show them that it is really a way to make sure the business makes decisions that are as good for the bottom line in 10, 15, and 20 years as they are now. Let them see that the alternative is merely being short-sighted. Make it about resource efficiency, and making sure there still is a business in 20 years.
Environmental benefits are real, working parts of your business, but many businesses fail to model them correctly, and have not assigned the proper pound-value to them. This makes standard economic planning short sighted because it fails to predict how quickly a mishandled resource can lose its value. The availability of fuel, material, land and even suitable water should be modelled as ‘eco-system services’. Once the decision makers see how spending more to sustain a resource today can improve its long-term efficiency, they can make good decisions about how much to spend, and how much to preserve.
Sustainable supply chain management is also about protecting the company from reputational damage. Disruption can be made a lot less likely just by committing to the idea that the company will not consciously enter into a deal that could damage its reputation, and committing to taking steps to seek out more transparent, predictable suppliers.
The Near Future
Demand for transparent, sustainable supply is still small, but growing steadily. As more and more companies place a premium on sustainable suppliers, more suppliers will see the profitability of using sustainable methods themselves. The global markets are ready to cater to this movement, as soon as supply chain managers are willing to spend money on it.