What makes a Supply Chain Sustainable?

Simply put, a sustainable supply chain is able to balance the use of natural, human and productive capital without indebting future generations.

Since the industrial revolution there has been a huge imbalance as companies have generally sought to maximise productive capital with little regard for natural and human capital.  

Born from logistics strategies in times of human battle and refined through the decades since the Industrial revolution, traditional supply chain management has always been about balancing cost and service to the customer.  Cost is a general term for lowering purchase cost, cost-to-serve and eliminating waste to maximise profits.  It also refers to improving return on Investment on Asset ownership.  Service, on the other hand, is all about delighting the end consumer or customer and providing a competitive advantage through an exceptional experience and delivery of a superior product.

Since the turn of the century, increasing numbers of consumers and investors are advocating that a company’s purpose can no longer just be about profit, but rather should be about profitably solving the problems which society and the environment face today; and not being the cause of them. The urgency for people and planet are too great to be ignored, and business growth needs to be tempered to consume a within the limits of the finite supply of resources which our planet can provide.  Sustainability as such has become a license to operate rather than a competitive advantage or a “nice to have”. 

As companies strive to embrace social and environmental costs, the traditional outputs of supply chain management must now change.  It is the integration of social and environmental costs into supply chain management, that is the essence of what makes a supply chain sustainable.  

Integrating sustainability targets into the supply chain is a huge undertaking that doesn’t happen overnight.  Far from it, it is a journey across several decades, which should be started sooner rather than later given the enormity of the task.  The journey requires three things: a shift in mindset, a tangible roadmap and collaboration based on trust.

The mindset shift, is being able to see the business opportunity in doing the right thing by people and planet, rather than just seeing additional costs and added complexity.  It is also about accepting the fact that current practises of resource utilisation and rising populations are not sustainable and that we only have one planet.  Creating a sustainable business vision that contributes to a wider purpose than just profit, can hugely influence the pace of change inside organisations towards a more sustainable supply chain.

Secondly, in building a tangible roadmap to realise the sustainable business vision, it is essential to understand where we are now, and what good looks like, so that we know when we reach our vision.  In addition to this, there is also a time factor to consider, as experts say we only have a limited number of years to reverse climate change or loss of biodiversity, before it is too late.  

Coupled with a lot of ambitious target setting recently by prominent brands, the quest to understand these parameters has led to a fury of supply chain mapping, an array of indexes and target development (net zero initiatives, SBTi-FI, SBTi-C, RMI, ICC, AOA, Carbone 4 / Net Zero Initiative, Fashion Charter, and others such as Fashion Revolution’s annual Transparency Index, or the Higg Index etc.), leading to a confusion over “which targets” to follow and a lot of greenwashing by brands just wanting to brush over the details, because the complexity and opaqueness of current global supply chain is incredibly challenging to comprehend.  In addition, there are an array of platforms and third-party service providers to choose from who can help implement, track and monitor supply chain impact globally, not to mention where sustainability accountability should sit inside the organisation, notably the C-Suite.

Thirdly it is important to point out, that those brands least focused on sustainability have a long way to go in terms of building collaboration and trust with their suppliers and gaining transparency. Decades of transactional lowest cost-based procurement (for example e-auctions) has resulted in low levels of trust and exploitation of people in the supply chain, not to mention a lesser regard for the environment.  Moving away from this type of transactional buying towards collaboration with suppliers is key, because you cannot implement transformational change alone, plus brands need to take responsibility for the people and the environment in their extended supply chains.

To progress a sustainability vision and implement a roadmap, best suited to a given Company it is useful to gain independent external input, maybe even from another Industry, to set the wheels in motion by coordinating efforts with the C-Suite and across the supply chain operations. A combination of end-to-end experience in Supply chain management and sound business acumen, that not only combines the traditional cost/ service drivers of supply chain management, but that can also bring deep understanding of the global goals and priorities for 2030 and beyond.  Combining experience in both productive, human and natural capital ensures the ability to see things differently and provide pertinent guidance, whilst keeping things pragmatic and tangible.  This will help ensure engagement, momentum and balance between all three elements when creating and implementing a sustainable supply chain road map.

What to measure?

For productive capital, it is advisable to use the traditional key performance indicators in supply chain management on costs, assets and service (which have been formalised and well documented over the years) on the one hand. 

For human and natural capital on the other, we advise turning to the 17 UN sustainable development goals (SDGs). These goals, adopted by 193 countries across the globe in September 2015, were informed and set by a diverse group of experts from around the world. Specifically, to keep things simple, pragmatic and tangible it is advisable for business to measure the 10 benchmarks determined by the UN Global compact in 2020 as the most pertinent goals businesses must meet this to ensure the world meets the 17 Sustainable Development Goals by 2030.  

How to make your supply chain sustainable?

Through our 4-step circular supply chain management cycle, we help smaller Fashion brands determine their sustainable supply chain vision, develop the right productive, human and natural capital targets for their business and select the right service providers to help collect, map and measure global supply chain performance.  We then help them build a roadmap outlining actions for change over the next decade.  

In view of economic downturn caused by the pandemic in the Fashion Industry, there is a need for a supply chain transformation to reduce discounting, inventory levels and improve agility. The traditional model of long lead time procurement ahead of the season, is not longer viable, since Fashions trends today are no longer set by Brands, but rather by influencers and the consumers themselves. The need for change here, is an opportunity to also better address sustainability issues upstream in the fashion supply chain.

Given the nature of global supply chains, currently, following a period of offshoring post 1970, a lot of activities are outsourced or purchased and therefore controlled by external partners, vendors and third parties.  This makes transparency of the supply chain impact harder, than say for vertically integrated supply chain controlled by one company.  Greater transparency in globally outsourced supply chains, requires a different approach to supplier selection, i.e. not based on lowest cost transactions, as well as deeper supplier relationship management, continuous improvement and to the extent possible investment in platforms to provide supply chain visibility e.g. blockchain technology or other digitally enabled traceability platforms.

In view of the need for faster response and the complexity of current global supply chains, we help Fashion brands redesign their supply chains to be more agile, less complex and more transparent, by focusing on total supply chain cost (rather than unit cost), and other supplier selection criteria such as ability to innovate, automate, influence social practises in their supply chains and alignment of fundamental business values.

Having established a vision and roadmap to make supply chain transformation possible and with the means to measure progress, we help companies select, engage, partner and work with the right vendors through sustainable procurement, to give them access to the right technology, automation, quality of product, agility and a supply base that upholds the same ethical and environmental standards as the brand.  Suppliers who not only share their vision, ambition and fundamental values, but who are willing to measure and improve through closer collaboration.

From here we help deepen relationships, through partnership and collaboration by developing an annual continuous improvement process based on 3 principles: waste reduction, ensuring social equality and eliminating harm to the environment. Given how fragmented global supply chains have become, concentrating focus and effort on building strong supplier relationships is key to making supply chains sustainable.  Strong relationships are built over time and require a mindset shift favouring win/win rather than win/lose transactions.  As trust, transparency, reciprocity and synergy build up over time, great partnerships and collaboration become the catalysts of the sustainability movement.

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