While enjoying the low cost of production in many parts of the world, companies that operate in today’s global marketplace are faced with the unique challenge of integrating themselves in familiar markets while relying heavily on suppliers and contractors on the ground to oversee important aspects of the business; including supply chain management. Unfortunately, many of the countries that offer advantageous supply costs are the same that experience severe weather conditions, fluctuating economic trends, or government policies that allow for the exploitation of workers. These factors can lead to a break in the flow of supply and interrupt the production of costly products.

Working hand-in-hand with suppliers

In an effort to address the instability of global supply chains, Ceres, an advocate for sustainable leadership, has recently launched a Supplier Self-Assessment Questionnaire called Building the Foundation for Sustainable Supply Chains. The Supplier Self-Assessment Questionnaire, or the SAQ, has been introduced by Ceres as “part of a broader strategy to raise the bar of supply chain sustainability performance across the global economy” says Amy Augustine, Director of the Ceres Corporate Program.

Emphasizing the importance of working hand-in-hand with suppliers on the ground in order to monitor their performance on environmental, social and governance metrics, Augustine points to an analysis of 600 major U.S companies conducted by Ceres that revealed more than 70% take minimal, if any, steps to engage their suppliers on these issues: “…most [companies] focus on either environmental or social impacts. Effective supply chain management requires attention to both, including issues such as climate change, water scarcity, human rights, governance and stakeholder engagement.”

Building a business case for a sustainable supply chain

While Ceres may be one of the first to introduce a supplier self-assessment, the issue of sustainable supply chains has been long discussed on global platforms. In 2010, the UN Global Compact was formed in order to provide a strategic policy initiative for businesses driven to implement effective human rights, environment, labour and anti-corruption practices. Available online, the group has put together a business case for adopting sustainable practices in supply chain management, and beyond. The advantages of adopting policies that are in line with the four areas of concern, according to UN Global Compact, include:

  • Risks are better anticipated and managed (risk is spread out across different players)
  • Reduced operational risks such as disruption to supply, increased cost and lack of access to key raw materials
  • “Informal” or “social” license to operate within communities, legal systems and governments that otherwise might be antagonistic
  • Reduced costs and enhanced efficiency and productivity
  • Improved working conditions can reduce turnover and improve quality and reliability
  • Environmental responsibility improves efficiency and profitability
  • Corporate brand and values, and customer and consumer confidence and loyalty are protected and enhanced
  • Process and product innovation. Empowered suppliers uncover opportunities for developing sustainable products and services
  • Examples from leading companies show that good supply chain management can increase shareholder value

The benefits of adopting sustainable supply chain practices may be both costly and daunting, but like any step in a “greener” direction, the long-term advantages are meant to outweigh the initial investments.

According to Peter Senge, founder of the Society for Organizational Learning and a faculty member at the MIT Sloan School of Management, addressing supply chain issues is about more than simple policy change, it’s about buildings relationships that enable the manufacturer and the producer to work together. In an interview featured in the Harvard Business Review, Senge says: “If I’m a big manufacturer or retailer, I pressure my upstream suppliers to get their costs down. There’s very little trust and very little ability to innovate together. That must change, and it is starting to.”

Environmental assessment in supply chain management

While the SAQ takes into account multiple factors affecting the stability of the supply chain, the Environmental Leader, an online source for environment and energy news, reveals some of the questions being targeted at suppliers in order to evaluate their environmental readiness and including:

  • Does the facility monitor and track energy consumption and conduct on-site energy audits?
  • What are the total annual GHG emissions in the most recent year measured?
  • Does the facility treat wastewater prior to off-site discharge?
  • Does the facility maintain records of off-site transfer, treatment and disposal of waste?
  • Does the facility incorporate packaging reduction, reuse and recycling in its purchasing practices?

Are you a company looking to improve the sustainability of your supply chain? Have you used the Ceres SAQ? Let us know what you think in the comments section below!

image credit: Charlottine’s Pics