Rising environmental and social impacts are causing governments and NGOs to pressure consumer companies to implement sustainable strategies internally but also across their supply chains. The following article will explain the importance of Supply Chain Stewardship in order to respond to these rising issues.
Supply Chain Stewardships are:
Software and managed services that enable firms to collect, aggregate, monitor and report EH&S and sustainability metrics from their suppliers to fulfil compliance requirements, augment EH&S and sustainability performance and voluntary disclosures, and allow the application of sustainability, responsibility, and ethical sourcing criteria to supplier selection.
As the global economy expands and millions more join the consuming class, increased stresses on social and ecological services are occurring and in turn induce risks to operational activities of companies, ecosystems and society. In response to the situation, governments, NGOs, research institutions and the private sector are now focusing on the impacts caused by a company’s activities (direct / scope 1) but also impacts that occur from their suppliers (scope 2 and 3).
2 different types of risks emerge that companies can address.
- The first is linked to the sustainability impacts of providing goods and services. Whereby a consumer company’s overall impacts occurs mostly throughout its supply chain and particularly in scope 2 and 3, in other words not from their own operations. It is estimated that 80% of greenhouse gases emissions and 90% of impacts on air, land, water, biodiversity and geological resources are caused before it reaches the consumer company’s operations. However recognising, monitoring and analysing all impacts from multiple stakeholders is a major task. Adding to this are the complexities for a consumer company to engage scope 2 and 3 suppliers as they need to dedicate a lot of time and construct specific frameworks or initiatives for specific supply chains. Supply Chain Stewardships provide solutions to these problems. Such solutions can be executed with an online platform, a dedicated team and systematic processes that engage, register, guide, audit, analyse and synthesise all supplier policies and actions towards a sustainable future.
- The second risk is that social and environmental impacts actually hinder both the good functioning of supply chains and their good image as these impacts will be held responsible to the consumer companies for conducting bad or underdeveloped procurement and sustainability policies. GrainCorp a large Australian agricultural business reported that a drought cut its deliveries by 23% which lead to a 64% loss in profits. Unilever estimates that it does not capitalise on 300 million euros per annum due to increasing water scarcity that results into higher food prices.
In order to prevent risks to supply chains, understanding the impacts of goods and services through the multiple production steps is essential. As previously mentioned, each sector will have its specific issues meaning each sector will conduct sector specific or orientated programs that reflect internationally recognised standards and goals. To mention a few recommended steps, identifying critical issues across a supply chain, linking to international standards and best practices and provide a comprehensive mechanism for all stakeholders to work towards to the same goals.
Currently procurement departments among others are starting to see the benefits that emerge from implementing such sustainable measures. The market as a whole is acknowledging the direct, the indirect and long term beneficial effects where increasing efforts and collaboration with all stakeholders may bring less disruptions to market place, enhance performance whilst combating climate change. CDP and WWF published a joint report stating that if the U.S consumer staple and consumer discretionary sectors implemented strong CO₂ reduction schemes that represents their fair share of reduction targets established by the IPCC and reached them, they would save $15 billion and $38 billion respectively.
All the aforementioned points bring to conclusion that Supply Chain Stewardships are a rising solution to many issues that emerge from supply chains. Some research and consulting firms now project that the Global Market for Supply Chain Stewardships may almost double from $369m to $648m from 2016 to 2021.
-Global Supply Chain Stewardship Spend Will Nearly Double in the Next Five Years. (2016). Available at: http://www.verdantix.com/blog/global-supply-chain-stewardship-spend-will-nearly-double-in-the-next-five-years.
-Bové, A. and Swartz, S. (2016). Starting at the source: Sustainability in supply chains. [online] McKinsey & Company. Available at: https://www.mckinsey.com/business-functions/sustainability-and-resource-productivity/our-insights/starting-at-the-source-sustainability-in-supply-chains.
-Thorlakson, T et al. (2018). Companies’ contribution to sustainability through global supply chains. Proceedings of the National Academy of Sciences, 115(9), pp.2072-2077.