Analyst Insight: Rising expectations of sustainability are requiring supply chain leaders to refocus their efforts less on employee behavior, and more on higher-impact initiatives. By zooming out to examine aspects such reverse logistics, last-mile delivery, and Scope 3 emissions, and by benchmarking current performance against best-practice leaders, organizations can realize exponential — rather than incremental — gains in environmental sustainability measures. 

Organizations face mounting pressure from multiple sources to ensure the sustainability of not just their operations and supply chains, but also those of their domestic and overseas supply chain partners.

In APQC research, supply chain leaders ranked sustainability among their top concerns for 2023 and beyond. The climate crisis, consumer perceptions and an increasingly constrictive regulatory environment are collectively driving organizations to reimagine operations and supply chains, both to protect natural resources and ensure compliance. In many jurisdictions, sustainable practices have gone from optional to mandatory, with noncompliance resulting in fines, penalties and negative publicity. 

Organizations in the consumer products industry outperform peers in other industries in adopting practices that strengthen supply chain sustainability, especially with respect to supplier relationship management. These practices include:

• Building sustainability requirements directly into supplier registration; 
• Making sustainability a factor in awarding contracts; 
• Collaborating with strategic suppliers to increase sustainability across the supply chain;
• Crafting interventions that target Scope 3 emissions; 
• Setting — and requiring first-tier suppliers to set — long-term sustainability goals;
• Including lower-tier suppliers in the overall sustainability strategy, and
• Assigning a point person to extend the sustainability strategy to first- and lower-tier suppliers. 

On average, consumer products companies were 13% more likely than other firms in APQC research to include lower-tier suppliers in their sustainability strategies. They were also 13% more likely to have designated someone to oversee supplier sustainability efforts. Implementing these practices has been shown to move the needle on sustainability.

Although important, efforts to curtail employee behavior and travel linked with high greenhouse gas (GHG) emissions are less impactful than reducing Scope 3 emissions. While many organizations continue to overlook this important opportunity, others have successfully recalibrated sustainability efforts around their supply chains, especially amid heightened concern over employee retention.

By targeting transportation, reverse logistics and last-mile delivery, for example, companies can bring about significant sustainability wins. Effective measurement and reporting of GHG is often a prerequisite, however. Organizations across industries will continue working to improve GHG tracking and reporting in 2024 and beyond.

Comparative information showing key performance gaps not only sparks new ideas for increasing sustainability, but also helps funnel limited resources to high-impact activities.

Benchmarking is the systematic process of searching for best practices, innovative ideas and more productive or sustainable methods through comparing chosen variables (such as fuel usage) against other business units internally or externally. In APQC research involving 888 supply chain professionals that regularly practice benchmarking, more than 80% said it was useful to “accelerate breakthroughs or innovations.” The most common uses of benchmarking in supply chain were determining the potential size of the benefits from tackling an opportunity, and establishing and measuring against performance targets.  

Outlook: In 2024, supply chain sustainability will continue as a prominent focus across industries, as companies double down on their commitments to the environment, seek to improve public perception, and achieve regulatory compliance. Green packaging and efforts aimed at operations will continue, but initiatives that seek to lower Scope 3 emissions, in many cases through effective benchmarking programs, will become more common and increasingly recognized as high-impact solutions. 

Resource Link:

www.apqc.org