They can increase efficiencies for suppliers, who can use a standardized self-assessment or audit to satisfy many customers and thus avoid duplication. Provide training and foster peer learning among first-tier suppliers to help them improve their procurement practices with lower-tier suppliers. Sustainable supply chain management should focus on improving recycling numbers, using more recycled materials, and reducing the amount of packaging used overall rather than eliminating all … The Center for Sustainable Organizations has listed examples of key areas of emphasis. Remember, all those suppliers were connected to model firms that were working proactively to encourage sustainability. Of course, the main obstacle to implementing these changes is the associated cost. (Risk here is assessed along labor, health and safety, environmental, and ethical dimensions.). The RBA, for example, requires its full members to conduct approved audits annually for at least 25% of their own high-risk facilities and 25% of their high-risk suppliers’ facilities. The United Nations Global Compact has laid out 10 criteria for measuring supply chain sustainability. Photos © Edward Burtynsky, courtesy Howard Greenberg Gallery and Bryce Wolkowitz Gallery, New York / Nicholas Metivier Gallery, Toronto. Every aspect of supply chain sustainability … A second problem is lack of sustainability training and incentives for procurement officers. Despite this importance, there is currently no comprehensive, empirically grounded understanding of how companies address sustainability in their supply chains. Awareness is key. They have established long-term sustainability goals. Examples include fundamentally redesigning the supply chain network by decentralizing production using 3D printing or developing innovative business models that include both the public and private sectors. The following are illustrative examples of a supply chain. We also studied a representative set of each MNC’s suppliers—a total of nine top-tier and 22 lower-tier suppliers, based variously in Mexico, China, Ta… Generic Supply Chain. If you continue browsing the site, you agree to the use of cookies on this website. Each was headed by an MNC considered to be a “sustainability leader”—one in the automotive industry, one in electronics, and one in pharmaceuticals and consumer products. One such change has been the huge rise in demand for next-day shipping. Currently, SSCM plays a crucial role in mature markets as well as in emerging economies (Esfahbodi et al. Starbucks is a leading brand that claims to be sustainable; Let’s see if Starbucks could be considered a case study for the success of sustainability in supply chains Alternatively, MNCs could engage the top executives at their first-tier suppliers and explain the importance of building a sustainable supply network, with the goal of motivating them to catalyze the dissemination of sustainability requirements to lower-tier suppliers. Such practices, also called sustainable plans, are the ones that improve not only supply chain economic performance, but also their environmental and social performances. Encourage first- and lower-tier suppliers to take advantage of sustainability training programs offered by industry organizations. For example organisations need to consider the whole life cost of goods and services from cradle to grave. Sustainability Measures: As major companies and countries around the globe move towards sustainable production, all supply chains become impacted. Via industry organizations, share resources with competitors and major suppliers to achieve sustainability goals. For the procurement professionals we interviewed, cost savings were unquestionably the top priority, followed by quality improvement and on-time delivery. Recognize suppliers that excel in programs sponsored by NGOs and international institutions. They require first-tier suppliers to set their own long-term sustainability goals. Green supply chain can be defined as a means of recognizing the complex network of activities which are involved in delivering a finished good to the end user or customer. By combining innovation, creativity, and modern supply chain technologies, these companies have developed sustainable solutions to keep their supply chains green, transparent, and more competitive than ever. They include lower-tier suppliers in the overall sustainability strategy. A supply chain is the end-to-end system that creates products and services and delivers them to the customer. But our customer didn’t give us enough notice to hire enough skilled people to do the job.”, First-tier suppliers, for their part, rarely concern themselves with their own suppliers’ sustainability practices. The first-tier suppliers we interviewed noted that the MNC periodically checks to see if the target is being met and creates opportunities to help them network with minority lower-tier suppliers. The foam manufacturer has little incentive to conform to the automakers’ sustainability requirements, because the automakers account for only a small fraction of its total business. For many businesses, it took the arrival of COVID-19 to deliver the sharp jolt of realization as to just how outdated and vulnerable their supply chain operations were. And typically they don’t know much about the sustainability requirements imposed by MNCs—but even if they do, they have no incentive to comply. These initiatives can also draw in more suppliers, because suppliers that have many customers with the same sustainability requirements tend to be more willing to participate. Definition of Sustainable Supply Chain Management (SSCM): SSCM may be perceived as the proper management of related environmental, social, and economic impacts in constructing and maintaining effective and efficient global supply chains. Different functional units of an MNC (engineering, procurement, sustainability) may pursue different agendas in interacting with first- and lower-tier suppliers—with results that do systemic damage to the corporation’s overall sustainability effort and undermine its credibility. Although the tension in the exchange of resources between developing and developed countries lies at the heart of current sustainability activities, what these companies are actually doing to manage their supply chain has not yet been explored in depth in the literature. They tend to act only when MNCs intervene. The aim is to create a cascade of sustainable practices that flows smoothly throughout the supply chain, or, as we prefer to call it, the supply network. SSCM encourages governance practices at all levels of lifecycles of goods and services that … Work with major first-tier suppliers to map the firm’s supply network. “Sustainability in the Supply Chain” is based on a holistic approach that comprises the steps “Prevent – Detect – Respond” and concentrates on minimizing risks. Several of these suppliers have started to set their own sustainability requirements for the suppliers they use. “We don’t comply with this requirement ourselves,” the representative told us, “so how could we ask our own suppliers to do so?”. Embracing environmentally sustainable … In this example, the e-commerce company operates a website, and that website sells various products. Twenty years ago, the word sustainability was almost completely synonymous with eco-friendliness. The first-tier suppliers are then in a tough spot. And so on. Discover what's new. There is a growing need for integrating environmentally sound choices into supply-chain management. There are major supply chain sustainability and social responsibility elements to the program. Additionally, the three MNCs work with their major suppliers to map the connections and interdependencies in their supply networks, including those at the lower-tier level. One of the corporations we studied has created an award to recognize the suppliers that have improved the most in terms of CDP Supply Chain Program performance. Many of the 22 lower-tier suppliers in our study are small or medium-size private firms that provide little information to the public—characteristics that, in effect, make them almost invisible. More logistics providers that are asset-based, for example, are taking sustainability into consideration when … The hoped-for cascade effect was seldom occurring. Partnering with our logistics service providers on sustainability is critical. Supply Chain Examples. Some specific strategies within each type of approach are listed below. Yet, in many other surveys, such as this recent report, Nielsen indicates that customers are willing to pay more for products that ensure green logistics practices and transparent supply chains. Companies looking to become more sustainable are increasingly looking beyond their own operations to the impact of their supply chains. All rights reserved. Of course, the main obstacle to implementing these changes is the associated cost. The three MNCs have also created preferred-supplier programs aimed at fostering peer learning about sustainability. Such predicaments are not uncommon. Harvard Business Publishing is an affiliate of Harvard Business School. Audit suppliers regarding sustainability standards. Through understanding ways to mitigate ethical supply chain problems, this gives hope to many companies to move towards a greener manufacturing process. Our Coalitions . Another MNC includes the program’s ratings in its supplier scorecard and monitors those ratings annually. When we asked a representative at one supplier why his company had violated a 60-hour workweek limit, he gave us a frank explanation: “We didn’t want to tell our customer that we can’t produce its products on time, because otherwise it’s going to try to find someone else that can. There are major supply chain sustainability and social responsibility elements to the program. Start there. And to encourage widespread dissemination of best practices, they need more direct contact with the procurement people at their first-tier suppliers. In a 2019 survey of over 1,500 U.S. consumers, delivery speed was ahead of all other factors when it came to choosing a retail channel. We should add that although companies at every level of the supply network need to provide more training and incentives for their procurement officers, supplier firms are likely to do so only if MNCs lead the way. 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