Here’s the cold hard truth - the days of worrying only about bottom line are fading...quickly. Building a sustainable supply chain is a must in 2019, and beyond. Consumers now expect companies to abide by a different set of rules, based on minimizing their negative social, economic and environmental impacts. The good news?  Not only is this great for society, but businesses can benefit too. Sustainable practices don’t need to be a burden on the corporate bank account anymore - as long as their sustainability goals can mesh with KPI’s and target revenues. Easier said than done, right? Here are the 3 key factors in building a sustainable supply chain:  

1. Map Out The Main Supply Chain Issues

  Terry Pratchett said “...if you don’t know where you are, then you don’t know where you’re going. And if you don’t know where you’re going, you’re probably going wrong.” A call to action should begin with an understanding of the main issues facing the business, and industry, with regards to their impact on sustainability along the supply chain. What are the effects on human rights, labour rights, the environment and corruption? This is obviously industry specific, but one thing remains... Effects on people and the environment exists at every stage of the value chain - from the manufacturing of a new product to it’s disposal. Businesses need to understand what these risks are, first. Big retailers like Walmart are especially concerned about climate change - how things like storm flooding and rising sea levels can damage their distribution centres and retail stores How can they quantify these risks, though? More on that later.

Assess The Current Landscape With a Supplier Audit

Knowing the internal and external supply chain landscape is key in figuring out what needs to be done moving forward. Businesses can start by doing a risk analysis that includes the following questions:
  • What are you sourcing?
  • Where are you sourcing it from?
  • Of your key products, what is known about the place they are sourced and key risks to people and environment?
  • Are there third party vendors involved?
  • What sectors or countries have (if any) geopolitical issues?
  • What is your company’s visibility into suppliers and how can you increase it?
  • Where is the greatest risk of adverse effect on human rights, environment and governance? (eg. such as use of minerals that directly or indirectly benefit armed groups)
It’s important to note that product suppliers are not the only areas of interest. Many companies have tagged service providers in their risk assessments as well, including labor recruiters and money lenders. For example, human trafficking and forced labor are just some of the main issues involving unethical recruitment companies.

Corporate Sustainability as a Benchmark for Success

Knowing what other companies are doing, and how they’re tracking it is an important role in building a new and sustainable supply chain network. Thankfully, the trailblazers already exist. Global 100 is the list of “Most Sustainable Corporations in the World” and includes companies from tech, to manufacturers, to petroleum refineries and banks. You can find the full list here. So many companies have already begun to build out a robust chain, and can provide valuable insight into how to benchmark. Rolling this out efficiently is about finding someone who’s already doing it. Getting help from peer businesses, especially in the same industry, can fast track a company's understanding of risks and opportunities, proper corporate structure for managing the new SC, proper codes of conduct, as well as best practices for reporting.  

2. Create and Communicate New Expectations

  The next step is to create a plan to improve the supply and logistics chain that conforms with the company's values and culture. The United Nations Global Compact publication “Supply Chain Sustainability - A Practical Guide for Continuous Improvement” has tips for drafting a new code of conduct. Not only does it show you how to write it, but also how to put it into action. This new code should include a complete list of measures on Human Rights and Labour, Environment and Anti-Corruption. And in order for this code to be successful it should involve key company managers from different areas of the business.

Here are some general steps to follow before getting started:

  • Make sure to get support from high-level executives, the Board of Directors and even stakeholders.
  • Don’t reinvent the wheel...model your code and expectations on existing norms, in line with international law
  • Consult various internal (or external) teams such as marketing, legal, human resources, health and safety etc.

Now that the new code is created, here are some tips on rolling it out:

  • Send out an initial company-wide memo from the executive level, outlining the new code of conduct
  • Include the code in proposals and contracts with new suppliers, and form new expectations with existing ones.
  • Regularly review the code internally
  • Have suppliers review and accept the code annually
Successfully rolling this out is about weaving this code into the company’s regular routine, so that it stays top of mind, and enforcing it becomes a habit.

3. Test and Measure Supply Chain Performance With Simulation

  Here’s the thing about all of this - improving sustainability efforts doesn’t need to be a guessing game. If a business wants to reduce their carbon footprint or improve production process they can test and measure this data before it even needs to be put into action.

How Walmart Makes Sustainability Decisions

A few years ago Walmart Chief Sustainability Office reached out to MOSIMTEC in order to bid on sustainability analysis. Their efforts in trying to create sustainable supply chain taught them that making changes and staying profitable isn’t easy. In fact, simply forecasting change comes with its own level of difficulty. But supply chain management simulation can provide clarity on these complex challenges:
  • Predict the impact of supply chain changes on the environment and climate change 
  • Test and quantify the downside of switching to new suppliers 
  • Analyze small, medium and large size geopolitical disruptions like strife, port closures, labor shortages and tariffs
This is only a snippet of what powerful simulation tech is capable of doing.

Establishing Key Business Drivers

What data to collect, how to collect it, and how to use it can leave your head in a tailspin. Pooling this data on an excel spreadsheet is not only an issue due to the sheer volume of numbers, but because it has limited features. Simulation can easily gather massive amounts of data and test against events like natural disasters and dynamic changes to the supply chain. In other words, simulation provides context - a deeper understanding of the system, without the need to hide behind opinions or “rules of thumb.” Because data alone, whether big or small, is not a source of intelligence about your business.  In fact, more data can lead to issues with navigating the information and knowing exactly what to focus on. And simulation helps the company focus on the key drivers of the business, instead of red herrings.

Putting it simply....

Simulation is the vehicle to making well-informed, data driven decisions that not only help businesses improve their social and environmental impact - but also increase profitability. It can finally be a win-win scenario. As Walmart CEO Lee Scott said in his October 2005 address to employees and suppliers -  “What if we used our size and resources to make this country and this earth an even better place for all of us: customers, associates, our children and generations unborn?”