Guest Author: Daniel Schwartz
Today, maintaining a sustainable supply chain is no longer solely the domain of the large corporate. Not only are there opportunities for small suppliers in bigger chains, but it’s never been easier for small and medium sized businesses to meet sustainable supply chain criteria. By focusing on what matters to you and your organisation, executives of nimble and responsive organisations (typical characteristics of smaller businesses) are in a unique position to be able to choose strategies and partners that uphold social justice, promote environmentally friendly practices and still maintain profitability. However, to really achieve this goal requires thinking deeply and honestly about what parts of your business, and your supply chain, can change. It requires a commitment to incorporating sustainability into your company’s vision, mission, strategy and tactics, and making sure that your employees and partners are on board.
Transforming your business into a truly sustainable one requires finding the root cause(s) of your company’s environmental and social impact. Delving into your business processes, carefully investigating the performance of your suppliers (and maybe even their suppliers) can reap great rewards. Yes, there’s a bit of a process to undertake but, by taking your time and planning it properly, a thorough investigation will reveal not only how you can be more sustainable but where there might be hidden pockets of profit to release too.
The changes that you can implement range from the rather affordable and remarkably simple (adding infrared sensors in your offices for automatically turning lights on and off, and switching to energy efficient light bulbs) to the more complex (completing a full life-cycle assessment of your supply chain). In between, there are a number of intermediate options that can save you money while reducing the impact of your business on the environment and society. Remember, small changes can make a big difference, so don’t shy away from simple solution for fear of not doing enough.
Let’s take a look at some intermediate options that can save money and reduce environmental impact of an organization. Re-evaluating your distribution network with an eye towards reducing emissions can do just that. Making changes to minimise the total number of trips and the total distance travelled per shipment will save your company money and decrease emissions. Admittedly this can be a challenge for SMEs, but it can be done, especially for those willing to think outside the box. One possible solution might be to partner with other SMEs with similar distribution networks or suppliers to leverage your combined capacity. Take the Hardware and Building Traders buying group for example; they may be ostensibly focused on lower prices and higher volumes but a likely bonus of their program is a reduction in the carbon footprint of the overall supply chain.
Similarly, re-evaluating your suppliers, with a focus on risk management (including reputation management) and government incentives, can save you money. For example, off-shoring might lead to a cheaper price per unit, but with rising fuel costs and a trend towards “slow-steaming” (running cargo ships much slower than possible), it could mean increased transportation costs and longer lead-times. Not to mention the possibility of increased carbon footprint due to the manufacture of larger vessels to maintain throughput or diversion of frieght to other transport methods. Furthermore, off-shoring can lead to decreased communication with your supplier (due to time zones, distance and language barriers) which can increase risk. On the flip-side, looking into local suppliers might lead to a more stable supply chain and make you eligible for government incentives (be they for environmental performance or for promoting local economic development). Thoroughly evaluating your supplier network can reveal the potential for you to increase profits and decrease environmental impact.
Another way to get a grip on sustainability is to set environmental and social sustainability key performance indicators for your employees and suppliers. If you first create a baseline to measure against and set up a process to collect relevant data to see how you are doing, you can reward your employees and suppliers for improving environmental and social performance, in the same way you reward them for improving financial performance. Which KPIs you choose will depend on your business and your goals and capacity to measure them. For a more in-depth look at how to go about it, have a look at Supply Chain Quarterly’s 2008 article, which provides a number of steps to help achieve your sustainability goals. Alternatively, you could make use of the supply chain assessment tool in this publication from Iowa State University; whether as a full scorecard or just a checklist of areas to consider.
There is no single, “right solution” out there that can help you make your business more sustainable. But as the Hindu teaching goes, “There are hundreds of paths up the mountain, all leading in the same direction, so it doesn’t matter which path you take. The only one wasting time is the one who runs around and around the mountain, telling everyone that his or her path is wrong.”
If you are interested in finding out more about balancing profitability and sustainability, it’s worth checking out some of the bigger players like Patagonia and Unilever, or to get a feel for what can be done on a smaller scale how about All Good Organics or Redback boots . Perhaps their journey up the sustainability mountain can help you with yours.
Daniel is a student of sustainable supply chain management. He draws on his background in economics and international development to contribute to the improvement of supply chain networks and processes, for creation of wealth, health and better standards of living.