Sustainability is a key factor in creating resilient, efficient and ethically responsible supply chains. Given that 60% of UK carbon emissions originate from supply chains, ensuring sustainability can provide your business with a competitive edge, while also protecting against potential risks.
But how do you know if your supply chain is sustainable? In this guide, we’ll look into the elements and methods for assessment, along with the benefits, challenges and future outlook of supply chains and sustainability.
What Is A Sustainable Supply Chain?
A sustainable supply chain integrates ethical, environmental and social considerations into its operations, from sourcing materials to delivering the final product. This involves reducing carbon footprints, ensuring fair labour practices and optimising resource use to benefit both the company and society.
According to the United Nations Global Compact, supply chain sustainability focuses on areas such as environmental responsibility, labour practices, human rights and anti-corruption efforts. Implementing these practices can improve brand reputation and increase long-term profitability, making sustainability a smart business decision and a force for positive societal impact.
Why Supply Chain Sustainability Matters
Sustainability in supply chains is vital for several reasons:
- Environmental Impact: Supply chains contribute significantly to carbon emissions and resource depletion. Reducing these impacts is crucial in fighting climate change.
- Ethical Responsibility: Ensuring fair wages and safe working conditions helps improve global labour practices, particularly in developing countries.
- Consumer Demand: Modern consumers are increasingly looking for ethically sourced and environmentally friendly products, and companies that fail to deliver could lose business.
The Three Pillars Of A Sustainable Supply Chain
Sustainability in supply chains is commonly assessed across three core pillars: financial, environmental and social. Balancing these areas ensures that sustainability efforts are comprehensive and beneficial for all stakeholders.
1. Financial Sustainability
A financially sustainable supply chain ensures long-term profitability while providing fair income to all stakeholders. Companies can reduce costs through improved efficiency, waste reduction and better resource management. For example, digitising operations can optimise workflows, reduce waste and lower energy consumption.
Research shows that 54% of companies express concern about the sustainability performance of their supply chains. Cost savings from sustainable practices can result in a more resilient supply chain that is less vulnerable to disruptions like raw material shortages or price hikes.
2. Environmental Sustainability
Environmental sustainability focuses on reducing harmful impacts on the environment, such as carbon emissions, deforestation and waste. A sustainable supply chain minimises its carbon footprint by opting for eco-friendly materials, reducing energy consumption and optimising logistics to cut emissions.
With 60% of carbon emissions coming from supply chains, businesses must prioritise this element. Strategies such as using renewable energy, implementing circular economy models and reducing packaging waste are essential components of an environmentally sustainable supply chain.
3. Social Sustainability
Social sustainability addresses working conditions, human rights and fair labour practices within the supply chain. Ethical sourcing ensures that workers are paid fair wages, operate in safe environments and are not subject to exploitative practices such as child or forced labour.
Consumers are becoming more aware of social issues in today’s market, with 55% willing to pay more for ethically sourced products. Companies that invest in social sustainability build consumer trust and loyalty, which can lead to long-term brand growth.
Supporting local suppliers and contractors is another key aspect of social sustainability. Sourcing locally not only reduces the environmental impact of transportation but also strengthens communities by creating jobs and supporting regional economies. By prioritising local businesses, companies can build more resilient supply chains while demonstrating a commitment to ethical and sustainable procurement.
Related Reading: Ensuring Social Sustainability: Key Questions For Your Supply Chain
Common Challenges In Achieving Supply Chain Sustainability
While many businesses are aware of the importance of sustainable supply chains, achieving sustainability is not without its challenges. These obstacles can range from cost and complexity to a lack of transparency, stakeholder engagement, and inconsistency across clients, which creates inefficiencies for the supply chain.
Cost And Complexity
Implementing sustainable practices can be expensive and logistically challenging, especially for smaller businesses. Costs associated with sourcing eco-friendly materials, transitioning to renewable energy and ensuring compliance with ethical standards can add up quickly. For example, switching to electric vehicles for logistics can significantly reduce carbon emissions, but the initial cost can be too great for many firms.
Lack Of Knowledge And Visibility
Many companies struggle to fully understand their supply chains, making it difficult to assess sustainability and validate claims. A lack of transparency can hinder efforts to trace the origin of raw materials, assess labour practices, or identify weak links in sustainability initiatives.
For example, a project may claim to pay the real Living Wage, but without clear visibility into subcontractors and labour providers, it’s difficult to verify whether workers are actually receiving it. Without robust monitoring and oversight, sustainability commitments risk becoming hollow claims rather than measurable actions.
Related Reading: Strategies For Mitigating The Biggest Supply Chain Challenges Of 2024
How To Measure Supply Chain Sustainability
Measuring sustainability is essential for making informed decisions and improvements. Companies must track key metrics and engage in continuous assessment to gauge their sustainability progress.
1. Social Impact Audits
Conducting regular social impact audits helps companies assess labour practices and working conditions throughout the supply chain. These audits ensure that suppliers comply with international standards, such as fair wages, safe working conditions and the prohibition of forced labour.
Regular auditing can also highlight areas for improvement, such as the need for better worker protections or the adoption of more transparent reporting processes.
2. Sustainability Certifications
Achieving third-party certifications like Fair Trade, ISO 14001, B Corporation status or participating in comprehensive sustainability assessments like CHAS Social Sustainability can significantly boost credibility. These certifications provide external validation, signalling your commitment to ethical and sustainable practices and instilling consumer confidence.
Specifically, Veriforce CHAS’s Social Sustainability offering enables companies to assess and benchmark their ESG maturity across 15 key areas, focusing on social and environmental impact. This independently verified assessment offers both clients and contractors a roadmap for improvement, helping them to meet evolving ESG requirements and appeal to customers seeking sustainable business partners.
3. Technology And Data
Leveraging technology, such as supply chain management software, can increase transparency and provide real-time data on sustainability metrics. With the rise of these tools, companies can better monitor the social and environmental impacts of their operations, making it easier to identify and address issues as they arise.
Embracing Sustainability In Supply Chains
Achieving sustainability in your supply chain doesn’t have to be overwhelming—what matters most is taking the first step. Start small and focus your efforts where they will have the greatest impact.
1. Prioritise Key Areas For Improvement
Rather than trying to assess every aspect of your supply chain at once, begin by identifying the suppliers or areas that have the largest impact on your operations. For example, suppliers with a significant workforce delivering into your business can have a major social impact that you can influence.
Tools like the CHAS Social Sustainability maturity assessment can help by providing a structured model for assessing and benchmarking supply chain partners across 15 critical ESG areas. By focusing on key areas first, you can drive meaningful change while laying the foundation for long-term sustainability improvements.
2. Set Sustainability Benchmarks
Define clear goals for reducing waste and emissions and improving labour practices. Many companies align their targets with the United Nations Sustainable Development Goals (SDGs), ensuring that they meet internationally recognised standards. CHAS’s Social Sustainability suite supports this by offering a maturity model that tracks ESG progress across a five-point scale—from “Not Started” to “Influencer.” This scale allows companies to clearly communicate their progress and establish a credible benchmark for continuous improvement.
3. Collaborate With Suppliers
Engage your suppliers in your sustainability efforts and make sustainability a key factor in awarding work. Suppliers that invest in sustainable practices should be recognised and rewarded with more opportunities. Collaboration and transparency can help align the entire supply chain with your sustainability goals. For example, sharing best practices or offering incentives can encourage suppliers to adopt more environmentally and socially responsible approaches, ultimately driving industry-wide improvements.
4. Invest In Green Technologies
Energy-efficient manufacturing processes, renewable energy sources and electric transportation options can significantly reduce your supply chain’s environmental impact. By investing in green technologies, companies can not only meet sustainability goals but also reduce operational costs in the long run.
5. Engage Stakeholders
Sustainability is a collaborative effort. Engaging stakeholders, including employees, customers, investors and suppliers, helps ensure alignment and cooperation in achieving sustainability goals. Transparent communication about sustainability practices and achievements can also build stronger relationships and increase buy-in from all parties involved.
The Future Of Supply Chain Sustainability
Sustainability in supply chains is becoming a competitive necessity. Consumers are increasingly concerned about where their products come from, and governments are ramping up regulations to combat climate change. With consumers willing to pay more for sustainable products and the rise of regulations focusing on carbon neutrality, businesses can no longer afford to neglect this area.
Related Reading: The Growing Importance Of Sustainability In Construction Supply Chains
Navigate the complexities of compliance and sustainability within your supply chain with Veriforce CHAS. We’ll connect you with trusted contractors who share your commitment to efficiency, environmental stewardship and effective risk management. Get in touch today to find out how we can help.
