Environmental Pressure on Supply Chain & How to Mitigate It

Environmental Pressure on Supply Chain & How to Mitigate It

Amidst the growing issue of global warming, businesses are encouraged to be more sustainable in their production and operations. Especially in supply chain sectors where goods are produced and delivery services are conducted, sustainability should be the number one concern. Additionally, an environmental supply chain management is key to a sustainable business strategy as it covers the management of all significant impacts from your company’s supply chain throughout the life-cycle of products or services. And if supply chain does not mitigate its negative impacts such as inefficient resource use, loss of biodiversity, a risk to worker’s health and safety that might occur, not only the environment but also your business will be seen as incompetent in the society. Thusly, it can decrease your revenue and clients might stop doing business with you.

On the other hand, good management in the supply chain can add numerous advantages and possibilities for both the environment and business. For example, a sustainable supply chain can improve business and public image, reduce risk of legal non-compliance, attract environmentally-aware customers, improve productivity and efficiencies, improve quality, reduce the number of defaults, improve environmental management, as well as provide more sustainable products.

See also: How Supply Chain Can Mitigate Macrotrend Risks

Germany’s Federal Ministry for the Environment, Nature Conversation, Building and Nuclear Safety cited that a sustainable supply chain management can minimise and avoid the risk of upstream processes. It can result in more efficient business processes and strengthen your business capacity for innovation. Thusly, it is important to have a sustainable supply chain management.

So, how to ensure that your supply chain management is sustainable?

The best way to ensure the development of sustainable products is by looking at a product’s environmental impact and by taking action where environmental pressures appear the greatest. These are more steps mentioned by the Federal Ministry for the Environment:

  1.     Map your supply chain

The mapping process will help your supply chain gain an overview of its essential upstream processes that create value. In this process, you should gather information within your company and prepare for further materiality analysis.

  1.     Identify significant environmental and social impacts

This process is not concerned with a precise quantitative determination, rather with a rough assessment of sustainability aspects and effects. Sustainability aspects are determined for a respective activity in your supply chain. The more information you gather, the better impacts you will gain for both the environment and your company.  

  1.     Assess and priorities the related risks

Your analysis and determination of sustainability aspects and impacts should assess and prioritise the risks of negative effects on the environment and people, as well as risks that might arise within a company such as liability or lower reputation.

  1.     Determine sustainability topics and action areas

Focusing on specific sustainability topics and action areas is important. It can help your company operate effectively, especially if you have limited human and financial resources.

  1.     Analyse gaps and derive measures

Based on your results of the materiality analysis, you should record an objective/s, measures, and processes to be used or adapted. Once it is done, the aim here is to determine methods that can be used to optimise your supply chain from a sustainability perspective.

  1.     Adapt your internal structures and processes

It is necessary to provide the financial, human, and technical resources required to lay an internal foundation for a sustainable supply chain. Therefore, new and existing business processes should be set up or adjusted based on your materiality analysis and inventory.

  1.     Formulate supplier requirements

This process requires you to develop a code of conduct to communicate requirements of direct suppliers and to ask for a self- assessment of your suppliers’ implementation capabilities.

  1.     Evaluate the sustainability performance and build competencies

You can conduct this step by checking your supplier’s self-assessments of by directly auditing them. To ensure that your supplier meets your company’s expectations in the long run, it is important to develop suppliers’ capabilities, for instance by providing regular training on sustainability issues.

  1.     Finally, conduct a reporting

You should disclose information on your sustainability supply chain management activities as part of your reporting. This step will build transparency between your company and suppliers in the supply chain.  

Read also: Supply Chain 101: How to Choose Between Air and Ocean Freight

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