Sustainable Supply Chains
Challenge – impact of supply chains on society and environment
Design and management of supply chains have material impact on business performance, society and environment. Linking the sustainability strategy with a sustainable product philosophy and implementing it in complex supply chains, however, is a challenge for many organizations. It is about translating the principles from the sustainability strategy respectively product design into concrete work packages and actions for the value network. It is thereby important to design this network in an utmost flexible way, and to take a holistic perspective from the (end) customer all along to the (pre-) supplier and back, for sustainably integrating the overall system.
Solution – designing and managing sustainable supply chains
Managing sustainable supply chains comprises the different elements of the operating model, such as processes, governance and organization, stakeholder, performance indicators and technical infrastructure. Anchoring sustainability in the value network can be combined with the identification and realization of further optimization potentials, such as cost reduction, process optimization, digitalization and improvements in supplier and risk management. Overarching project and change management is required in order to effectively drive and control the different measures and actions.
Approach – steps for implementing sustainable supply chains
SustainNet Consulting supports companies in managing sustainable supply chains. Depending on the company and project requirements, the following steps are usually performed.
Supply Chain Analysis
The mapping and visualization of the value network is aimed at getting an overview about the broader supply chain. This includes the intracompany stages of the supply chain, as well as the up- and downstream stages. It is basically about assessing the positive and negative impacts along the entire value chain, from resource extraction to recycling. Available information about the supply chain stages and the related activities is gathered and prepared as basis for the following materiality analysis. This step forms the starting point for determining sustainability impacts and risks. The activities in the value network and the resulting sustainability impacts can be seen as causal chain.
Fields of Action & Measures
This step is aimed at capturing the sustainability impacts caused by business operations, assessing and prioritizing the sustainability risks as well as identifying material fields of action. The fields of action defined in context of the sustainability strategy can thereby be taken as basis, for conducting a detailed materiality analysis along the different stages of the value chain. It is examined cross-functionally and cross-company, which sustainability issues occur in which stage of the value chain and in which process. This is followed by an evaluation and prioritization of the sustainability risks, whereby the company viewpoint as well as the environmental and social perspective are being considered and brought together. Thereafter, a gap analysis should be conducted and concrete improvement measures should be defined. In procurement, for example, these measures can comprise the simplification and result-oriented description of specifications, the selection, awarding and assessment of suppliers based on sustainability criteria, as well as the implementation of supplier audits for inspecting the compliance with sustainability standards. The action plans should thereby be provided with SMART (Specific Measurable Achievable Reasonable Time Bound) goals and parameters, in order to measure progress and performance of the subsequent implementation.
Design & Implementation
This step is about amending the business structures and processes based on the results of the materiality and value chain analysis. The objective is to permanently integrate sustainability in the operating model. To continuously measure the degree of goal achievement, key performance indicators (KPIs) should be established. In order to holistically implement sustainable value creation, the company’s own perception of sustainability should be taken into the supply chain. This means that suppliers and network partners should be sensitized for sustainability, informed about the company’s sustainability goals and encouraged to work collaboratively and innovatively on sustainable solutions.
Monitoring & Reporting
This step is aimed at continuously controlling the sustainability activities based on the defined performance indicators and target systems. It is also aimed at disclosing information about the sustainable supply chain management, for example in context of the company’s sustainability reporting.