A sustainable supply chain management system is becoming increasingly important for businesses worldwide. Companies are recognizing that managing and improving environmental, social, and economic performance throughout their supply chains can lead to several benefits such as conserving resources, optimizing processes, uncovering product innovations, reducing costs, promoting corporate values, and responding to the growing demands of stakeholders who are demanding cleaner and more responsible supply chains.
Here, we will discuss the practical steps to build and maintain a sustainable supply chain management system for your organization.
Establish Your Overall Objectives
The first step is to set out your overall objectives for your program and lay out how you’ll want to manage your supply chain system. You need to establish the overall vision and expectations on your supply chain management program and begin assigning responsibilities for its operations to different people within the organization. You need to determine the scope of the program, start developing policies, or even benchmarking yourself against your peer companies in similar sectors.
Communicate Expectations to Suppliers
In the second step, focus on communicating expectations to suppliers and setting out their obligations. You might adopt or develop your code of conduct, aligning it with international standards and regulations. Consider cascading these requirements not only to your suppliers but to your supplier suppliers and engage them in a meaningful discussion about supply chain sustainability and its importance to your business and theirs.
Understand Your Supply Chain Footprint and Identify Risks
The aim is to better understand your supply chain footprint and start identifying risks so that you can prioritize which suppliers to include in your program and which not. Develop a detailed supply chain risk map, which maps products and traces the flow of materials and information, and carry out some due diligence and information gathering on human rights, labor, environmental, and corruption risks at every step of the production chain.
Engage with Your Key Suppliers
Once this is completed, engage with your key suppliers to ensure a shared understanding of your objectives. Establish proper oversight controls, develop scorecards that integrate typical procurement considerations of price and quality with sustainability-related issues. Ensure that sustainability obligations are written into the legal contracts and establish any incentives or penalties for suppliers for any breaches to the code of conduct or their underperformance.
Actively Engage in Due Diligence Activities
It’s not enough to rely on these verbal or contractual commitments; you need to actively engage in due diligence activities to assess the environmental, social, and governance performance of your suppliers to ensure compliance with your company’s expectations. This may involve self-assessments, on-site audits, supply chain management certifications, and a review of operational-level grievance mechanisms.
Monitor Ongoing Performance
In addition to conducting assessments of suppliers, it’s important to monitor ongoing performance and effectiveness of the sustainable supply chain management system as a whole. You need to ensure that you’re monitoring the performance overall, so you can build ongoing capacity within the supply chain to address any emerging issues.
Finally, our management system ends at a decision point on whether to end or renew the contract with the supplier. The aim is to ensure that ESG considerations are taken into account when evaluating whether to expand, reduce, or end the supplier relationship, allowing you to step back and assess the supplier relationship based on quality data and effective engagement with your suppliers on issues that are important to your company’s sustainability performance.
In conclusion, building a chain management system is an essential step towards creating a more sustainable and responsible business. By implementing sustainable practices throughout the supply chain, companies can conserve resources, optimize processes, reduce costs, increase productivity, and promote corporate values. The steps outlined in this article, from setting objectives to monitoring ongoing performance, can provide a roadmap for companies looking to create an effective and responsible supply chain management system.
It is also important to note that while the steps are set out in a sequential or stepped approach, they are not always applied in a linear fashion. Each organization has its own context, and the steps outlined in this article should be adapted to suit the specific needs of the organization.
In today’s world, stakeholders, including consumers, employees, and investors, are increasingly demanding cleaner and more responsible supply chains. By building a sustainable supply chain management system, companies can not only meet these demands but also gain a competitive advantage in the marketplace.