In recent years there has been increasing pressure on companies to demonstrate social responsibility and environmental consciousness. The need for sustainable operations seems to become more urgent every year for companies within global supply chains.
Supply chain sustainability has become a goal for many international companies. Firms have begun to manage the environmental, economic and social impacts of their goods and services. In some cases, Suppliers see sustainability as a way of improving their reputations in the eyes of Buyers because they know sales could fall if they don't take eco-friendliness seriously.
Reasons to Adopt Eco-Friendly Supply Chain Practices
Many larger corporations can attest to how 'greening' a supply chain leads to many advantages. Companies such as Walmart, IKEA, Samsung and Google are pushing for greener supply chains. Many believe that eco-friendly practices in supply chains offer several benefits beyond reducing the impact of climate change.
As a consequence, small- and medium-sized enterprises (SMEs) have received considerable support from their larger counterparts.
- Walmart launched a digital tool to help thousands of Chinese suppliers improve their factories' energy efficiency.
- Unilever's free online tool helps farmers adapt to more sustainable and cost-saving practices.
- A Carbon Disclosure Project (CDP) report (2018) found corporate reduction initiatives saved Suppliers $12.4 billion (USD) in 2016.
Supplier Benefits of Going Green
- Reduced costs and increased productivity
Sustainable practices help to conserve resources and improve efficiency and productivity. Reducing a carbon footprint can be as simple as recycling paper or turning off idle lights and machines. Emerging technologies and machine-learning tools can help companies save energy and be more productive at the same time. These technologies and tools can automate processes in facilities, free up workers to focus on other tasks and save costs in the long run.
- Less waste production and better environmental impact
Increasing efficiency in transport and machinery helps companies to make a fast financial return. For example, freight carriers have switched to electricity or natural gas to power their engines, thus reducing environmental impact and operating costs while complying with new fuel efficiency standards.
- Broader client and market access
Suppliers that embrace sustainability can drive market innovation. Achieving recognised accreditation (such as ISO 14001) also shows that a Supplier is serious about sustainability and this opens the door to a broader range of clients.
- Strengthening the supply chain
Creating a diverse network of similar partners within supply chains helps to keep goods flowing. Environmental, social and economic disruption can be devastating. For example, the Thailand typhoon in 2011 halted auto parts supplies and this brought the industry to a halt. The disaster highlighted just how few alternative Suppliers there were in this supply chain and all Buyers were affected. Therefore, it's important to have backup plans in case of business disruption. Backup plans can keep supply chains running.
Suppliers that demonstrate sustainable practices protect their reputations and brand values. Many Buyers are less inclined to partner with Suppliers that are known for poor environmental or working standards. For example, Ralph Lauren now traces the source of its wood-based fabrics to avoid using any materials associated with rainforest destruction or human rights violations.
A National Marketing Institute survey shows that many US consumers consider a firm's environmental footprint when deciding which one to buy from.
 United Nations Global Compact 'Apply sustainable practices throughout the supply chain' website
 McKinsey & Co. Report: Starting at the source - Sustainability in supply chains (Nov. 2016)
 Carbon Disclosure Project Report 2018: Closing the Gap - Scaling up sustainable supply change practices
 Environment + Energy Leader Magazine: 6 Benefits of Becoming a Sustainable Business (Mar. 2016)
 Environment + Energy Leader Magazine: Sustainable Supply Chains: Ralph Lauren Is Latest Corporation to Commit to Sourcing Materials from Responsible Suppliers (Jan. 2017)
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About the Authors
This article is authored by the Stenn research team and is part of our educational series.
Stenn is the largest and fastest-growing online platform for financing small and medium-sized businesses engaged in international trade. It is based in London, provides financing services in 74 countries and is backed by financial giants like HSBC, Barclays, Natixis and many others.
Stenn provides liquid cash to SMEs within the global financial system. On stenn.com you can apply online for financing and trade credit protection from $10 000 to $10 million (USD). Only two documents are required. No collateral is needed and funds are transferred within 48 hours of approval.
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