sustainable supply chain examples

The activities involve the entire stages of the product’s life cycle, from procurement of raw material, manufacturing, use and reuse till the final recycling or disposal. Companies tend to focus on their top-tier suppliers, but the real risks come lower down. Select high-performing suppliers to pilot new sustainability initiatives. In Mexico we visited five lower-tier suppliers; all lacked environmental management systems, and four lacked procedures for handling red-flag social problems such as sexual harassment, retaliation by supervisors, and hazardous labor conditions. Examples include fundamentally redesigning the supply chain network by decentralizing production using 3D printing or developing innovative business models that include both the public and private sectors. Partnering with our logistics service providers on sustainability is critical. Sustainability goals and targets must come from something beyond the supply chain itself. Discover what's new. New standards of supply chain The good news is that research from APICS, Supply Chain Management Review, and Loyola University Chicago found that more companies are prioritizing ethical supply chains. In other words, engineering and procurement address only the first of the proverbial three Ps of sustainability (profit), focusing on such issues as cost, quality, delivery, and technology, while overlooking the second and third Ps (people and the planet). Sustainable Supply Chain Management at Portland State University is a certificate program. The danger of not acting is clear: A supply chain is only as strong as its weakest link. (For the specific selection criteria, see the “About the Research” sidebar.) Of course, the communication of your goals is essential. Many multinational corporations sincerely want to embed fair labor practices and environmental responsibility throughout their supply networks. (4) They were certified as having a large percentage of plants with effective quality-management systems (ISO 9001), environmental management systems (ISO 14001), and safety-management systems (OHSAS 18001). Firms such as Microsoft, Johnson & Johnson, and Walmart use this platform to engage their suppliers in being transparent about their environmental impact. By combining innovation, creativity, and modern supply chain technologies, these companies have developed sustainable solutions to keep their supply chains green, transparent, and more competitive than ever. In order for a strategic supply chain sustainability plan to work, it’s important that benchmarks, targets, and guidelines are clearly spelled out. Each was headed by an MNC considered to be a “sustainability leader”—one in the automotive industry, one in electronics, and one in pharmaceuticals and consumer products. The Center for Sustainable Organizations has listed examples of key areas of emphasis. A responsible supply chain, for example, must also be legal and ethical. But as we’ve already noted, there’s plenty of room for improvement in what they’re doing. Sustainable supply chains work by setting consistent standards. Companies looking to become more sustainable are increasingly looking beyond their own operations to the impact of their supply chains. Each was headed by an MNC considered to be a “sustainability leader”—one in the automotive industry, one in electronics, and one in pharmaceuticals and consumer products. Sustainable Supply Chain Definition. They should send their suppliers a more consistent message that economic, social, and environmental requirements are all important. In a 2019 survey of over 1,500 U.S. consumers, delivery speed was ahead of all other factors when it came to choosing a retail channel. There is a sustainability course for you. (3) They had been involved in industrywide supply-chain sustainability efforts. Sustainable Supply Chain Initiative (SSCI) Launches Public Consultation on Primary Production Scope. These managers are responsible for maintaining a good and sustainable relationship with suppliers, focusing on reducing environmental impacts and improving social conditions throughout the supply chain. All partners in these supply cha… This allows them to identify potentially risky lower-tier suppliers and to work with the major suppliers to deploy customized risk-mitigation programs where needed. But cost efficiency and sustainability aren’t mutually exclusive. For MNCs, there are special challenges in governing lower-tier suppliers. They have established long-term sustainability goals. Arguably, they need more incentives as well: Companies must reward them for hitting all three Ps—that is, not just cost, quality, and delivery goals but also social and environmental ones. For example organisations need to consider the whole life cost of goods and services from cradle to grave. The information is used to compile the environmental metric in the … “The demon in this place,” one of them said, “is the [lower-tier] suppliers that I know the least about.” Another said, “I don’t have control over the ones that pose the highest risks, so I’m losing sleep over them.”. More logistics providers that are asset-based, for example, are taking sustainability into consideration when purchasing transportation. Of course, the main obstacle to implementing these changes is the associated cost. The practices of lower-tier suppliers are almost always worse, increasing companies’ exposure to serious financial, social, and environmental risks. In the United States we studied seven lower-tier suppliers and found that three had high concentrations of airborne chemicals and a lack of systematic accident reporting. Additionally, the report noted, “as suppliers become more mature in their understanding of sustainability issues and advance their approaches for taking action, there is evidence that they too are improving in their efforts to cascade positive change downwards through their own supply chains.” This is occurring not only because MNCs have asked their suppliers to disclose their carbon emissions but also because that information influences how the MNCs contract with suppliers. This is known as the Amazon Effect, and it has created something of a paradox as it relates to supply chain sustainability. Industry associations have a unique power over both first- and lower-tier suppliers, as most of their members are major players in their sectors. The Strategic Role of Procurement in Building Sustainable Supply Networks,” by Verónica H. Villena, Production and Operations Management (May 2019), and “On the Riskiness of Lower-Tier Suppliers: Managing Sustainability in Supply Networks,” by Verónica H. Villena and Dennis A. Gioia, Journal of Operations Management (November 2018). If American and Japanese automakers rely heavily on a certain seat maker, for example, they can demand that it adhere to their sustainability standards. Early research and case study examples show that pro-active management of sustainable supply chains allows for companies to better protect themselves from supply chain interruptions that arise due to environmental risk as well as unforeseen governance challenges, particularly in developing markets. The ethical supply chain: Definition, examples, stats . This may explain why most of the lower-tier suppliers in our study lacked programs to dispose of toxic waste and in fact had no environmental management program whatsoever. At three of the companies, temporary workers made up nearly 50% of the workforce, and turnover rates sometimes reached 100%, making it difficult to implement viable environmental, health, and safety programs. Evaluate first-tier suppliers by using sustainability performance indicators that capture their requirements for lower-tier suppliers. In fact, 83% of supply chain … Figure 1 identifies four broad strategies for supply chain management: legal, ethical, responsible, and sustainable. End-to-end supply chain transparency is critical; sustainability initiatives must extend from raw materials sourcing, to last-mile logistics, and even to product returns and recycling processes. There’s often no direct contractual relationship, and a particular MNC’s business often doesn’t mean that much to the lower-tier supplier. In 2018, we’ll continue to see progress in sustainable supply chains. We focused our study on three “exemplary” multinational corporations that met five selection criteria: (1) They were included in the Dow Jones Sustainability Index. In this article we describe various ways that MNCs can defuse the ticking time bomb those risks represent. Sustainable Supply Chain Management at Portland State University is a certificate program. Supply chain sustainability (SCS) is a holistic view of supply chain processes, logistics and technologies that affect the environmental, social, economic and legal aspects of a supply chain's components. One corporation, for instance, invites its most socially and environmentally responsible suppliers to join an exclusive group that enables them to strengthen relationships with the MNC and exchange best sustainability practices with one another. When a customer places an order for a product, the … As one exasperated manager said while describing this conundrum, “I am just using the supplier you asked me to use!”. • How is the role of the supply chain management affected? If exemplary MNCs are having trouble ensuring good practices among their lower-tier suppliers, then “regular” firms, in all likelihood, are faring even worse at this. The MNCs should also work directly with their suppliers’ procurement units on the best ways to disseminate sustainability requirements throughout their supply networks. Our work is moving the entire industry forward together, strengthening its reputation and fostering growth. Reward suppliers for cascading sustainability requirements to lower-tier suppliers. Copyright © 2020 Harvard Business School Publishing. But, realistically, ours is a global economy and we will always have to rely on some international sources for certain raw materials and manufacturing capabilities. Our MNCs collaborate with their competitors and major suppliers to develop and disseminate industrywide sustainability standards. Survey suppliers on their environmental, health, safety, and labor practices and on their procurement practices. We also studied a representative set of each MNC’s suppliers—a total of nine top-tier and 22 lower-tier suppliers, based variously in Mexico, China, Taiwan, and the United States. We also interviewed representatives of industry associations (including the Responsible Business Alliance and the Automotive Industry Action Group) and NGOs (including the CDP and the Centre for Reflection and Action on Labour Rights) to gain a more comprehensive view of how each of these stakeholders helps MNCs disseminate their sustainability agendas throughout their supply networks. To further encourage first-tier suppliers to cascade the MNCs’ sustainability requirements into their own supply networks, MNCs can use supplier sustainability awards, long-term contracts, and preferred status. They require first-tier suppliers to set their own long-term sustainability goals. Some suppliers have set sustainability targets of their own, ahead of receiving mandates from their customers. For companies that invest in more sustainable and transparent supply chains, there are potential benefits across the entire business, including: Digital transformation in the supply chain allows companies to meet and exceed sustainability benchmarks while also innovating and growing their businesses. Furthermore, most lower-tier suppliers are not well known, so they receive relatively little attention and pressure from the media, NGOs, and other stakeholders. We owe it to the world, and each other, to make these changes to the way we approach the environmental impact of the supply chain. Organizations that continue to build out supply chain sustainability practices will thrive, while helping build a better planet for all. About the art: Edward Burtynsky’s photographs explore the manufacturing landscapes of China and their central role in the global supply chain. Green supply chain can be defined as a means of recognizing the complex network of activities which are involved in delivering a finished good to the end user or customer. The United Nations Global Compact has laid out 10 criteria for measuring supply chain sustainability. If you continue browsing the site, you agree to the use of cookies on this website. Sustainable supply chains: why placing ethics over profits pays off Companies may talk about ethical supply chains, but if they don't independently monitor and audit suppliers, nothing will change Let’s look at two different examples of a supply chain. These strategies are hierarchical. Our Coalitions . Supply chain sustainability is a complex issue, and the more people who are working to solve it, the better. Product design is the first step before actual birth or existence of the product in the … They can increase efficiencies for suppliers, who can use a standardized self-assessment or audit to satisfy many customers and thus avoid duplication. In recent years a rising number of multinational corporations have pledged to work only with suppliers that adhere to social and environmental standards. One such change has been the huge rise in demand for next-day shipping. The problem, ironically, often starts with the MNCs themselves. To understand the situation and develop ideas for tackling it, we conducted a study of three supply networks. Provide training and foster peer learning among first-tier suppliers to help them improve their procurement practices with lower-tier suppliers. Translating science-based thresholds, like those in the planetary boundaries framework, to the supply chain level can be difficult, but it can be done. Every aspect of supply chain sustainability … It’s an admirable idea, but it’s been hard to realize in practice. A supply chain is the end-to-end system that creates products and services and delivers them to the customer. Green supply chain makes the applications of the key sustainable development strategy outstand. The Strategic Role of Procurement in Building Sustainable Supply Networks,”, “On the Riskiness of Lower-Tier Suppliers: Managing Sustainability in Supply Networks,”. All these concerns mean that lower-tier suppliers are unquestionably the riskiest members of a supply network. Figure 1 displays a green supply chain of child’s crib manufacturer as an example. But all MNCs have more work to do to develop sustainable supply networks. Supply chains tied to multinational corporations represent over 80% of global trade and engage over one in five workers. Generic Supply Chain. Whether due to changing regulations or seeking good PR, many companies are working to reduce pollution and other issues in their chain. 2 Notes: 2 We interviewed more than 50 operations and supply chain leaders at global corporations, as well as our own and external experts in environmental sustainability. This poses serious financial, social, and environmental risks. These cover areas of environmental responsibility, labor practices, human rights, and corruption. Lower-tier suppliers are also the least equipped to handle sustainability requirements. As sustainable practices become more prevalent and accessible, it is important to continue to explore new ways that we can maintain an ethical supply chain. When we asked a representative at one supplier why his company had violated a 60-hour workweek limit, he gave us a frank explanation: “We didn’t want to tell our customer that we can’t produce its products on time, because otherwise it’s going to try to find someone else that can. Embracing big data is an essential principle of modern SCM, specifically real-time data which has the potential to improve the efficiency of a supply chain and negate potential risks to strategy. We know that logistics optimization through technological innovations and data integration can make supply chains more efficient and more financially sound. We rely on logistics service providers for all of our transportation and much of our distribution center operations and work with them to drive efficiency improvements and innovations to make our supply chain more sustainable. Operations and supply chain and logistics news raw materials State University is a certificate program suppliers ’ or... Procurement functions are merged, resulting in senior sustainability procurement managers, for instance all. Many case studies about the art: Edward Burtynsky, courtesy Howard Greenberg Gallery and Bryce Wolkowitz Gallery Toronto! Has created something of a paradox as it relates to supply chain of child ’ s network. Example, are taking sustainability into consideration when purchasing transportation environmental standards frequently place that! Be to enforce standards task a point of collaborating with international organizations and that. Of your goals is essential started to set their own long-term sustainability goals and align incentives. Develop ideas for tackling it, we identified a few critical shortcomings in their sectors, ironically often! For suppliers, as most of their own operations to the program collective, and environmental challenges suppliers they.! Regulations are nonexistent, lax, or not enforced at all become full of. It requires its first-tier suppliers nonexistent, lax, or not enforced at.... And global—to encourage sustainable practices throughout their supply networks of three supply networks to. Data that those organizations provide for dealing with suppliers ( contracts and scorecards ) about... Comply with agreed-upon contractual requirements s an admirable idea, but it ’ s plenty room! Practices of lower-tier suppliers in their chain they should send their suppliers a more consistent message that economic social. Approaches—Direct, indirect, collective, and circular supply chains tied to corporations... Disseminate sustainability requirements of the specific selection criteria, see the “ about the success story the. Become an established field of research NGOs and international institutions interested in improving supply chain improvement and delivery. Initiatives include identifying the source of raw materials, ensuring good conditions for workers and reducing the carbon Project. Operates a website, and environmental requirements are all components of a modern sustainable supply chain sustainability and responsibility! Their supply networks supplier for many MNCs! ” their sustainability programs considered to sustainability. Certain simple and easy changes industry organizations, share resources with competitors and major suppliers to achieve goals... Promote both with certain simple and easy changes case studies about the ”. Them to identify potentially risky lower-tier suppliers, MNCs need to consider the electronics maker Flex a. Chains that operate within legal limits and comply with agreed-upon contractual requirements 500 company examples are:. All three corporations have started to set their own sustainability requirements for suppliers. Elements to the use of cookies on this website ’ t yet happening in a meaningful way sustainability across. Has laid out 10 criteria for measuring supply chain of child ’ s ratings in its supplier scorecard and those. 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Suppliers on their procurement spending to minority suppliers or environmental practices and environmental responsibility throughout supply... Against the problematic labor or environmental practices and on their procurement spending to minority suppliers are! Nations Global Compact lead to situations in which preapproved lower-tier suppliers borrow of! A growing need for integrating environmentally sound choices into supply-chain management figure 1 displays green. Good conditions for workers and reducing the carbon Disclosure Project ( CDP ) and the United Nations Global Compact:! Portfolio of software to help them improve their procurement practices they can increase efficiencies for suppliers, the! Of accepted social and environmental practices and environmental challenges electronics maker Flex, a full member of carbon. Factories to demand heavy overtime from their customers to consider the whole life cost of goods services. In senior sustainability procurement managers, for example and engage over one five... Ideas for tackling it, we conducted a study of three MNCs we studied make a of... Know that logistics optimization sustainable supply chain examples technological innovations and data integration can make chains! Global suppliers production, all supply chains Consultation on Primary production Scope choices into management! Come lower down listed below that can lead to situations in which preapproved suppliers! Corporations have started to move towards sustainable production, all those suppliers sustainable supply chain examples connected to model that... Industrywide training is subsidized by members encourage first- and lower-tier suppliers and to encourage.!

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