by Thomas Williams, group head of sustainable business strategy at Markerstudy
From a sustainability perspective, financial services is not traditionally regarded as a sector in which the supply chain is particularly impactful. However, many of the decisions financial organisations take, and the way they decide to do business, will have a significant influence, not least the types of companies they use and, in turn, those companies’ supply chains.
This lack of understanding of the importance and mechanics of a sustainable supply chain programme explains why sustainability managers often encounter challenges and misconceptions when seeking to establish such programmes.
Stakeholder buy-in and sustainability maturity
One of the main challenges to overcome in the early stages of establishing a sustainable supply chain is to ensure the right stakeholders from both the business and the supplier are involved and empowered to make business decisions that are focused on sustainability.
If they fail to establish that initial contact and secure the necessary buy-in from supply chain partners and procurement specialists, sustainability teams risk wasting time and energy in the early stages of sustainable supply chain programmes.
Another common issue is that not all suppliers will have achieved the same level of maturity in terms of sustainability. Some will publish sustainability reports, some will engage in carbon reporting and others will do neither, and this isn’t necessarily influenced by company size or industry sector.
Certain organisations will have already begun regular reporting following requests from their customers or other stakeholders, or because they’ve decided to take a proactive approach to sustainability. Others will trigger specific mandatory requirements due to their size or company type.
It is the job of a sustainability team to communicate goals and expectations, but take a practical approach to adding minimum requirements of supply to the terms of business.
Data capture
The varying levels of maturity typically displayed by supply chain partners make it hard to establish a consistent level of data across the supply chain. Markerstudy’s supply chain ranges from small family firms to large multinational manufacturers providing materials with a high environmental impact. Organisations need to be flexible regarding what they are initially willing to accept, but then work with suppliers to make improvements and put different initiatives in place.
Sustainability costs
Along with the challenges involved in creating a sustainable supply chain, there are familiar misconceptions that can also hamper progress.
The most obvious is the belief that sustainability equals higher costs, when that’s not necessarily the case. While there could be upfront costs, the long-term financial benefits are delivered through reduced resource consumption, innovative process optimisation and a more engaged workforce.
During Covid, many companies’ supply chains were heavily reliant on China. After the huge disruption caused by offshoring, there’s an appetite to now seek to nearshore and bring a lot of that supply chain closer to their base operations. Not only does this mitigate against supply issues reoccurring, it also allows those organisations to profit from an engaged supply base on matters of sustainability.
Large vs small companies and the tick-box mindset
A second misunderstanding is that only large companies blessed with huge resources can meaningfully adopt sustainable initiatives. In fact, smaller, more agile firms can reap the rewards of instilling a sense of ownership and looking at business decisions through a sustainability lens.
Smaller businesses can avoid a lot of the reporting and regulation that can be linked to resource strain, allowing them to voluntarily submit to the most relevant standards and closely track their progress.
The final mistaken belief is the tick-box mindset that organisations can be tempted to adopt once they’re satisfied that they’re complying with all necessary requirements: sustainability has been taken care of indefinitely.
On the contrary, sustainability is a journey, not a destination. Organisations will always be working on sustainability, as it’s not a one-off task. It’s a continuous process, and quite often looking at business challenges through a sustainability lens can offer long-term, value-added solutions.
Sustainable supply chains create long-term value
Being alive to the challenges and misconceptions commonly encountered in the sustainable supply chain space will help to equip sustainability teams with the necessary knowledge and tools to overcome and correct them.
Organisations that demonstrate why and how they’d like their suppliers to work with them create closer connections, and greater innovation and value, which in turn lead to combined growth.
