Companies are aware that to future proof their business, they need to ‘green’ their supply chain as well as increase the transparency and cooperation with suppliers. However their focus is highly dependant upon where they are in their journey, their industry sector, their leadership focus and the maturity of their supply chain. This insight into sustainable supply chain, was the subject of a national study in 2014.
‘The Sustainability and Supply Chain Divide: insights into the gaps, challenges and opportunities for Australian companies’ was undertaken by Tania Crosbie to shed light on how ‘green’ supply chains are in Australia. This research was funded by the NSW Office of Environment and Heritage and used a randomly selected set of companies across a broad spectrum of industries. The in-depth interviews with sustainability managers and procurement/supply chain managers clearly highlighted that often sustainability was low on their priority list for many.
The research concluded that all sustainability specialists and CEOs remain optimistic about their organisations’ future and continue to see sustainability gaining further acceptance across their business’ operations. All agree that energy efficiency, staff engagement and training, reducing waste, water and emissions are still driving organisations, sustainability strategy and programs.
The supply chain was worried about the pressures that complying with sustainability requirements mean to their business; the additional costs and the potential to be locked out of contracts due to their size and/or ability to comply. Most smaller companies agree that they do not have the time or ‘head space’ to see the opportunities at the moment. “We are so focused on delivering or winning our next job, that thinking about opportunities is the last thing we are able to do. Perhaps if we were able to spend time talking to our customers about this, we may be more positive in our approach’’ said one smaller supplier.
There were a number of opportunities identified by respondents, with many implementing these practices and/or looking at ways of continually improving their performance. These opportunities were both internal and external in nature.
Future internal supply chain opportunities:
- Improving internal processes such as identifying, mapping and measuring internal processes
- around supply chain management, establishing relationships with internal influencers of the supply chain and identifying supply chain impacts and performance, while at the same time integrating sustainability across internal business, will be a key area of focus.
- Automating data collection – given reporting and data collection is time consuming, complex and arduous, automating data collection and reporting will play a big role. There are opportunities to look at consistent data collection across industries to ease the burden on suppliers to provide their clients with bespoke data and reporting.
- Up skilling and training of staff and suppliers to undertake sustainable practices and development will enable organisations to move decisions from being bottom-line or price focussed to include the positive social and environmental impacts.
- Focusing on packaging and waste within the organisation. Unless all staff performance KPIs are linked to outcomes such as reducing packaging, increasing recycled content, return policies and innovative distribution solutions, then sustainability managers see very little motivation for staff to drive change.
- Embedding sustainability principles into procurement and supplier decision making within their organisations to include sustainability principles in vendor selection and sourcing procedures and then embed these principles in practice.
- Maintaining social licence to operation and sustainable product development – very few organisations reported that they were challenging their ‘core’ business to look to a more sustainable option. One sustainability manager in resources did express this was an issue for them and their supply chain in the future. “How do we reconcile the conflict between being a sustainable business versus producing an unsustainable product? Our social licence to operate in the future is coming to a head.” Sustainable product development is an opportunity for companies. They need to develop ways to ensure that any new products are developed sustainably and that the footprint is calculated and communicated before production, rather than reviewing practices after it is in market.
Future external supply chain opportunities:
- Improving supplier relationships and communication is essential in order to drive greater transparency and validation, product life cycle and innovation throughout the supply chain. Cooperation across the entire supply chain as well as and communication of information, contracts and measurement, while instilling confidence and generating common values, will become more important in the future.
- Collaborating as one industry to address the future challenges. Previous business models promote individualism and competition whereby sustainability promotes community ideals and collaboration. Many said that this would be a major challenge for organisations and, in fact, some regulations work against industry collaboration. “We would like to work with our competitors to green the supply chain but the ACCC may see that as collusion. We just need to make sure we have transparency and shared ideals,” said one sustainability supply chain manager.
- Focusing on packaging and waste – most respondents recognised that their supply chain had already started to address the packaging issues with many companies interviewed being members of the Australian Packaging Covenant. However they felt that more could and needed to be done and felt that more innovative thinking was needed around packaging. “Our suppliers have reduced the amount of plastic and use recycled cardboard, but they are still thinking traditionally about the connection between the product and the packaging. We need them to think outside the square and not be reactive”, said a respondent.
- Ongoing and better external engagement – including engaging with the board, shareholders and stakeholders to ensure they support the vision for the future; with government to ensure it delivers supportive legislation, support and regulation; with customers to improve overall product stewardship; and of course, with the supply chain. Organisations need to make public statements about where they see their future in terms of sustainability and thereby ensuring that their stakeholders support and monitor.
- Establishing relationships with relevant NGOs so that organisations can get a deeper and broader knowledge about environmental and social sustainability issues, also adding credibility to their brand. These relationships will help with access to information that would be timely and costly to do so internally.
- Dealing with climate change issues such as food production, water scarcity, extreme weather events, population displacement, carbon and more. “We have started to build in severe weather events into our annual planning now”, said one sustainability manager. “This is a real issue for us. It adds to our insurance costs, capacity to deliver products on time and severely stretches our resources in times of flood or bushfire. Community liaison activities are as much a core business as supply products,” said one sustainability manager.
- Preserving local and indigenous suppliers was recognised as an emerging priority and opportunity for companies. Having strong communities supported by business was gaining traction in organisations and respondents saw this as a real area for further development.
Most respondents agreed on one thing: that the future of their businesses relies on sustainability becoming core business strategy and behaviour for them, their suppliers and their customers. Time spent preparing now means they will be better able to deal with all the factors associated with climate change and the challenges the future world throws at them. And it was important to work through the sustainability business case to see the opportunities.