Photo by Alexander Abero on Unsplash
We’re stepping into the next stage in consumer-business relationships. As consumer awareness of environmentally friendly practices increases, companies need to enact significant changes towards building the ethical and sustainable supply chain of the future. One that ensures sustainable sourcing, manufacturing and product distribution.
But wait, why do we care? 😅
Why is the introduction of more ethical and sustainable supply chains a good practice for any business? Because it enhances regulatory compliance, improves business branding and reputation, reduces waste and overhead, and leads to responsible environmental sourcing.
And just to give you an idea…
A McKinsey report on sustainability shows the direct impact that supply chain operations have on the environment as they try to compete with a growing consumer base. More than 90 per cent of the damage caused to the environment by consumer packaged goods (CPG) producers — including 80 per cent of greenhouse gas emissions — comes from the supply chain.
So how come we don’t have sustainable supply chains? 🤔
Unfortunately, fewer than 20 per cent of supply chain managers say they have the necessary visibility into sustainability practices in the supply chain to cut greenhouse gas emissions by more than 90 per cent by 2050 in order to meet climate change agreements.
To accomplish the goal of an ethical and sustainable supply chain, as well as the ability to track and trace shipments to any location, companies will need the right technology. So let’s dig into what a sustainable supply chain is and how to achieve it in 6 steps.
What is an ethical and sustainable supply chain?
The supply chain has taken on a more forward-facing role that’s a competitive differentiator and part of the corporate business model.
So what is an ethical and sustainable supply chain? It’s more of a practice than a definition.
Supporting an ethical and sustainable supply chain means that companies will incorporate social and human rights and environmental considerations into how they do business across the world
Naturally, technology has a major role to play in developing ethical and sustainable supply chains. It enables organizations to ensure transparency of information about all suppliers, through systems that capture and manage information across the supply chain.
Six steps to successfully build ethical and sustainable supply chains
1. Identify Trustworthy Suppliers
Before embarking on an ethical supply chain strategy, organizations must first locate trading partners who share the same ethical practices. It’s imperative that companies are able to trust the partners they work with, to ensure ethical working practices across the end-to-end supply chain.
2. Secure Trading-Partner Relationships
Once a supplier has been selected, it’s important to secure the supplier’s interaction with your organization. It can be done using an identity and access management platform for assigning a digital identity to trading partners across the business ecosystem. Smart contracts are a good way to do that.
3. Digitize Your Contracts and Supply Chain
Upon securing the desired trading partners, companies must then connect them electronically to business operations, in order to establish a digital supply chain.
Ideally, this would take place in an automated and digitally integrated environment, which allows the supply chain platform to scale in line with changing consumer demands and fluctuating market conditions. Embracing a digital supply chain also helps to prevent the falsification of manual, paper-based supply-chain documents.
4. Monitor Shipment Provenance
Leveraging the internet of things (IoT), organizations can improve supply-chain visibility by tracking both the movement and condition of shipments. While IoT on its own can bring a slew of benefits to organizations, combining it with other advanced technologies such as blockchain can take it a step further. With blockchain, organizations can ensure greater traceability by capturing the source and retaining the provenance of goods as they flow through the supply chain.
While blockchain stands to transform ethical sourcing practices, organizations are still at the early stages of learning about the technology and how it can impact the way they do business. It will be a few years before blockchain finds its way into every business process.
5. Manage Supplier Communities
Effective collaboration with trading partners helps to drive greater adoption and adherence to ethical sourcing practices. Companies should ensure they have up-to-date contact details for each participant in the supply chain. Collaboration platforms can help to encourage this. After all, it’s difficult to collaborate with suppliers if key contact details such as e-mail addresses or phone numbers are missing.
6. Gather Ethical Insights
Through the use of advanced AI dashboards, organizations will be able to consistently monitor the ethical performance of trading partners. They’ll use the information to make strategic business decisions such as renewing supply contracts with high-performing suppliers or terminating those with underperformers.
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