The pressure is mounting for sustainable supply chains
Advances in technology have layered on massive competition across industries and, today, the game of commerce is won or lost in the supply chain.
Following a decade that’s seen Netflix oust Blockbuster, Uber transform transportation, Revolut redefine banking, and Amazon evolve to become a logistics firm, doing things ‘how they’ve always been done’ is not an option.
With more choice than ever at the fingertips of customers— consumers and businesses alike— the only option for sellers has been to sweat to satisfy demand, ensuring logistical processes— from click-to-door, or production to operation— are as streamlined and cost-efficient as possible, even if that sees profits continuing to taper.
Of course, the combined pressure and demand breeds innovation, and supply chain vendors have emerged providing integration and transparency between partners, while data analytics and sensors now shine a light on specific points in the chain requiring optimization– even blockchain is being put to use to reduce wastage, securely track goods, and eliminate fraud.
But, even for a small number of organizations that believe they have their supply chain sewn up, there is a new challenge emerging; sustainability.
Demand for sustainable supply-chains
As consumers and businesses become more conscious of the impact of carbon footprints on the environment, organizations face new pressure to demonstrate that they are striving towards sustainability in the supply chain— or risk alienating a growing portion of their existing and future customer-base.
Ironically, the efforts made to optimize supply chains, such as distributing once consolidated resources in order to satisfy faster deliveries, have led to a rise in CO2 emissions attributed to the logistics sector. According to logistics firm sustainability reports, Axios found UPS’s ground and air deliveries resulted in 13.8 million metric tons of CO2 emissions in 2017 as it raced to deliver a total of 5.1 billion packages. FedEx exceeded 15 million tons in the same year.
That’s just two of hundreds of logistics firms— and it doesn’t include Amazon. Consider emissions by the logistics industry in total, and it’s safe to say that it’s behind a considerable chunk of the 6 billion tonnes of CO2 produced in the US each year.
“In 2019, we saw sustainability play a bigger role in supply chain operations,” Marcus Harvey, Sales Director EMEA at Targus, told TechHQ.
“We saw resellers and enterprises alike demanding eco-friendly operations from their supply chain. High sustainability standards are being rolled out across the board as businesses and their environmental policies ripple down the supply chain.
“[…] consumers now expect companies to deliver on sustainability to help save the planet. In fact, we expect that in the near future, brands that are not consciously making efforts to heighten their eco-friendly practices will increasingly find themselves losing market share and consumer support.”
Beware of ‘greenwashing’
There is mounting pressure from customers for companies to show they’re ‘going green’ when it comes to supply chains, and embracing this approach can be a competitive brand differentiator. The clothing brand Patagonia, for example, constantly explores ways to reduce its carbon footprint, but is open to discussing how it can do better. On a larger scale, Johnson & Johnson has its own Environment, Health, Safety, & Sustainability department, focused on ensuring internal adherence to sustainable practices.
This Black Friday, more than 300 clothing brands are taking part in the Make Friday Green Again initiative, calling on shoppers not to buy anything on the landmark retail day, instead urging them to look at how they can recycle, sell or repair items in their existing wardrobe to help combat the environmental impact of “overproduction” in the industry.
With no formal regulations to encourage practices towards sustainability, however, the onus is on companies themselves to drive green initiatives. But when misguided, these efforts can lead to “greenwashing”.
“Greenwashing is when companies rejig funds and claim they are feeding into green schemes when actually it’s just smoke and mirrors. This is becoming easier and easier to achieve given the lack of solid government legislation to hold companies to account,” said Harvey.
But when green policies backfire, they can result in more damage to reputation than inaction may have had in the first place.
As far back as 2009, for example, European McDonalds changed the color of their logos from yellow and red to yellow and green in an effort “to clarify [their] responsibility for the preservation of natural resources.” More recently, in 2018, Starbucks drew ire with the launch of a strawless lid that contained more plastic by weight than the straws it was facing pressure to ban.
“The main backlash we see in terms of eco matters is when companies have their unsustainable practices exposed – Volkswagen for the shocking levels of carbon emissions from their vehicles and Levi’s for the sheer volume of water that goes into the creation of a pair of jeans,” Harvey said.
The green premium
Companies will face “different supply chain mountains” depending on their size, industry and existing models, Harvey said. Being a smaller firm will mean it’s easier to keep a short supply chain in check, while larger corporations will find it difficult to “keep it green” at all levels.
Unsurprisingly, sustainability initiatives at any level are likely to carry additional expenses. Using recycled materials, for example, will cost more, but it may be possible to offset the investment, as growing customer demand for eco-friendly products that reduce carbon footprints may allow nascent adopters of green initiatives to charge a premium price.
“Demand drives supply so laying the foundation for eco-products that feature high levels of recycled materials is the way forward,” explained Harvey.
With the need clamping on to prove sustainability from source to shelf, organizations face further pressure in already squeezed supply chains. While the first movers here will carry an advantage, Harvey expects those smaller companies with more simple structures will reap the rewards of their efforts early on.
“The greenest supply chains are usually the shortest – boutique designers, local manufacturers, and small start-up companies.
“The real challenge is for big conglomerates to get their green ducks in order and create sustainable supply chains – these types of companies have so many different moving parts to scrutinize that overhauling their supply chain and making it green will be years in the making.”
But for those organizations concerned about the scale of the undertaking, it’s worth remembering that demonstrating efforts towards the end goal— and respect for customers’ ideals— can be just as important as pace; “The onus is on the organization to drive this change and transparency is key here – customers appreciate and expect companies who are honest about their sustainability journey,” said Harvey.
“Sustainability is no longer just a USP— it’s now part of the table stakes.”