There has been a tremendous amount of strain on supply chains across different industries all over the world during this COVID-19 period. Many companies looked to their business continuity strategies and plans to maintain stability in operations. The safety of employees took primary consideration in order to maintain operational stability. In continuing operations, supply chains were asked to source as quickly as possible, with low cost and just in time. In this haste, I am asking the following questions:
· Were thorough supplier checks completed?
· Were suppliers, suppliers’ vetted?
· Were compliance standards followed?
· Were there any considerations to source from sustainable raw material suppliers and manufacturers?
As we move slowly into a post-COVID world, supply chain leaders are starting to do an assessment of what they did, and why they did it. Some will also do an assessment of the behaviors and mindsets that persisted at the time so as not to repeat the mistakes.
So why does this matter?
This matters because old mindsets, practices, and behaviors will have a long-term impact on the organization's reputation if ethical sourcing, transparency, and accountability are not managed with strong doses of sustainability practices.
The one area that I have seen visibility and change starting to take place, is in sustainability in supply chains. Sustainability in your supply chain could mean different things for different people in a variety of different industries. A recent survey study (July 2020) of over 1000 respondents by the MIT Center for Transportation & Logistics (MIT CTL) and the Council of Supply Chain Management Professionals (CSCMP) show that the pressure to adopt supply chain sustainability practices is increasing across a variety of platforms.
Figure 1 below shows that supply chain practitioners are receiving intense pressure from the Government, Executives, and Consumers to act on sustainability.
Figure 1: Supply Chain Sustainability Pressure
In addition, Supply Chain Environmental Social and Governance (ESG) goals are gaining momentum as organizations are more concerned about their image and reputation.
Figure 2 below talks to some of the ESG supply chain goals that were cited in the MIT study. One can see a combination of environmental and social goals that are shaping the sustainability agenda.
Figure 2: ESG Supply Chain Goals
Supply Chain is the heart of any organization and is relevant especially if you are a B2B and/or B2C.
Sustainability and sustainability practices should start early in any product lifecycle as it sets the foundation of any supply chain.
Figure 3 below is an example of your typical supply chain with your raw material suppliers, processors and manufacturers, packaging, and logistics providers until they reach your wholesaler or retailer who then delivers this to the consumer. In a typical supply chain, reuse and/or recycling usually takes place at the end of the product life-cycle.
Figure 3: Your Ordinary Supply Chain
What I am proposing is that Sustainability in your Supply Chain starts at the very beginning of your product life-cycle. I call this a "Purpose Based Supply Chain"
Figure 4 below is an example of a Purpose Based Supply Chain. We have moved into a world where purpose and value in your organization matter. It is not only shareholders that are asking for it, but stakeholders in your organization, communities you serve, and your influential eco-system partners. Your supply chain is no different, in that all partners from your raw material suppliers to the end consumers are seeing contribution to people, planet, and profitability as value and purpose. Your supply chain purpose will have begun at the C-Suite, but the real value starts when you develop your own supply chain purpose with other functions in the organization. Gone are the days when a silo approach worked, it now requires a new type of supply chain professional that will innovate, collaborate, and integrate all at once.
True supply chain purpose is practiced when your own supply chain vision and goals, once developed, have fundamental Environmental and Social Values (ESV).
Figure 4: Purpose Based Supply Chain
A conscious sustainability-based approach is rooting in your supply chain, adding value to your existing compliance, legal, and regulatory phases of reporting.
This is what I have termed Beyond Compliance with an emphasis and focus on Environmental and Social Values (ESV).
I am proposing that ESV should be considered at every level of the supply chain cycle starting at the raw material/supplier stage and then carried through to the very end where we are seeing a completely new type of circularity in our supply chains. In essence, a much leaner and less wasteful supply chain. On the environmental side, key elements of energy, greenhouses gases, water, and waste need to be assessed, monitored, and reported. On the social side, diversity, inclusion and equality need to be assessed, monitored, and reported.
We will see an ESV multiplier effect that will assist in building a robust supply chain with a purposeful contribution to people, planet, and profitability. In addition, transparency will have materialized because of strong visibility and traceability. This, in my view, leads to accountability to your shareholders and stakeholders.
Is this what you see happening in your own supply chains? Are you making the change?
I invite you to share your comments, thoughts, and ideas with me at nitesh@2podventures.com.
In my next blog, I will be discussing the various stages of building ESV in your supply chain and different ways in which to amplify ESV in your supply chain.