How to Improve Sustainability in Your Supply Chain
Improving the sustainability of your supply chain has a bigger impact on the environment than you might think.
In the past few years, public awareness of sustainability has risen dramatically. Individuals have scrutinized their vehicle emissions, recycling practices, and their carbon footprint overall. Though individual contributions to sustainability are crucial to reducing pollution and climate change, manufacturing, transportation and industrial waste are responsible for a much larger percentage of emissions. Supply chains contribute a disproportionate amount of pollution and waste, but luckily, improving the sustainability of your supply chain has a resounding impact on the environment.
The environmental impact of supply chains
According to McKinsey, the consumer sector of the global economy is projected to rise 5% every year, meaning a 75% increase in global consumers since 2010. More than 90% of the damage caused to the environment by consumer packaged goods companies comes from the supply chain, including 80% of greenhouse gas emissions.
“The typical consumer company’s supply chain creates far greater social and environmental costs than its own operations, accounting for more than 80 percent of greenhouse-gas emissions and more than 90 percent of the impact on air, land, water, biodiversity, and geological resources. Consumer companies can thus reduce those costs significantly by focusing on their supply chains.” – McKinsey
Though supply chains are effective and efficient systems for manufacturing, storing, shipping and distributing products to consumers, they produce what economists call negative externalities. As the world becomes more transparent and environmental data becomes more readily available to today’s socially-conscious consumers, reducing pollution and emissions, while driving up efficiency and sustainability should be a high priority for your organisation.
Packaging’s role in supply chain waste
Within your organisation’s supply chain, your packaging plays a larger in waste generation than you might think. According to the Environmental Protection Agency (EPA) and EuroStat:
- In 2016, paper and cardboard accounted for 35.4 million tons of waste in the European Union. In contrast, plastic and glass made up 16.3 million tons of waste.
- Packaging made up nearly one-third of municipal solid waste (MSW) in the U.S. at 70.7 million tons.
- Of any single product category, corrugated boxes contribute the most to American MSW in 2015 at 31.3 million tons generated (roughly 11.9% of total waste generation)
The importance of corporate social responsibility
Today’s consumers are increasingly interested in environmental brands and social responsibility. The 2015 Nielsen Global Corporate Sustainability Report found that 73% of millennials (consumers born between 1980 and 1986) are willing to pay more on purpose-driven brands, and 81% of these consumers want organisations to be transparent with their corporate social responsibility efforts. Transparency with environmental data provides the following benefits to today’s organisations:
- Resonates with a new generation of eco-conscious consumers
- Communicates operational efficiency and performance
- Enhances brand value
- Decreases environmental impact and brand damage
- Establishes your organisation as a sustainability leader in your industry
Define sustainability metrics, benchmarks and KPIs
Before you can take action to improve the sustainability of your supply chain, you need to define the metrics and goals that are important to your organisation and your end users. To get a holistic picture of your organisation’s sustainability, you need to perform an audit on your operations. Fortunately, several organisations offer frameworks for measurement and instruments that help organisations identify the sustainability issues within your supply chain.
Businesses that provide sustainability measurement tools include:
- The Sustainability Consortium: This organisation developed a set of KPIs with a reporting system that identifies sustainability priorities for dozens of consumer-product categories. TSC developed the KPIs for sustainability metrics through a review of scientific research and consultation with more than 100 stakeholder organisations.
- World Wildlife Fund (WWF): WWF provides more than 50 KPIs the environmental risks involved in the supply chains for a wide range of commodities, along with the weighted severity of those risks.
- The Sustainability Accounting Standards Board: The SASB developed standards to help organisations across several sectors to provide material information about corporate sustainability performance throughout the value chain.
Establish a supplier code of sustainable conduct
One of the best ways to make sustainable changes to your supply chain is to establish a supplier code of sustainable conduct. Supplier codes of conduct are standardized, but they should be modified to develop and communicate sustainability expectations with vendors, partners and suppliers.
There are a variety of options and resources available for organisations looking to set up a supplier code. The United Nations Global Compact’s "Supply Chain Sustainability — A Practical Guide for Continuous Improvement" provides a framework for establishing and implementing a successful supplier code of conduct. Additionally, the Global Environmental Management Initiative (GEMI) shows companies opportunities to improve supply chain sustainability, with a catalogue of case studies that show companies who have implemented these opportunities.
Improve supply chain visibility, transparency
Unfortunately, very few companies have a detailed overview of their entire supply chains, which are now more complicated than ever. Taking the time and effort to audit your complete supply chain may seem daunting at first, but taking a deep dive into the sustainability of your supply chain is incredibly valuable. A supply chain assessment can double as an effective business strategy tool, as this analysis may uncover substantial business risks. Identifying areas that make a larger environmental impact can help your organisation reduce overall emissions.
As mentioned before, transparency is increasingly important to today’s consumers, so creating a database of sustainability performance numbers may align your organisation with a larger base of customers. For supply transparency metrics, there are plenty of notable resources available for businesses. The Higg Index is a set of tools from the Sustainable Apparel Coalition developed to give organisations an accurate measurement of their sustainability performance. This score provides insights to inform operational improvements that can improve the sustainability of supply chains on a large scale.
Drive incremental performance improvement
After your organisation audits your entire supply chain, be prepared to take action. Communicate the findings internally, and express your expectations to suppliers to develop future operational policies and practices. You may need to make adjustments to your list of suppliers and third-party partners in the event they cannot meet your expectations, or they are not aligned with your organisation’s sustainability goals.
Improving the sustainability of your supply chain requires a nuanced understanding of a complex system, and will not happen overnight. We recommend making smaller, incremental changes with clear timeframes and realistic goals to make this undertaking more actionable. Within your supply chain, packaging is one area where companies can look to drive significant improvements to sustainability. As one of the biggest contributors to waste and operational inefficiency, changing your packaging processes, practices and materials could be the best way to improve your supply chain’s sustainability.
Developing a sustainable packaging program
To make the first step towards sustainability in your supply chain, packaging is an ideal place to start. We work with international organisations with complex supply chains to improve sustainability and earn cost savings. For more information on how we can cut costs for your organisation, schedule a packaging audit with Billerud today.
Download our eBook, “Designing a Sustainable Packaging Program,” to learn why sustainability in packaging matters, how it ultimately translates to greater revenue and how you can deploy and measure a sustainable packaging strategy for your business.
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