Supply chain · 23 February 2016

What does the sustainable supply chain look like in 2016?

Conversations around ethical practice in the supply chain will continue for small business this year

In his latest column for Business Advice, chief strategist at GT Nexus and supply chain guru Kurt Cavano tackles the complex issue of sustainability for small business.

In 2016, firms will need to consider supply chain transparency and ethical best practice more than ever in an increasingly globalised business environment.

In the years following the Rana Plaza Factory disaster in 2013 pressure has mounted for businesses – particularly from millennial consumers – to provide greater insight into the working conditions of manufacturing facilities in emerging markets.

There are now even larger conversations around environmental impact opening up, whilst sustainability continues to be a hot topic. At the recent COP 21 climate conference in Paris, clothing companies, called out as one of the most hazardous industries for environmental impact, were asked to reconsider their high carbon footprints.

In 2016, conversations around ethical practices in the supply chain are likely to continue and businesses will need to consider how they can provide consumers with the visibility they are calling for, whilst reducing their environmental impact.

The move towards sustainability

Ethical sourcing and sustainability, business have realised, is not just the ideal of a few ethically minded campaigners but a driver of real long-term growth and profitability. Understanding the importance, some companies have made sustainability a core ambition and a powerful differentiator. These companies are leading by example.

Analysing the life cycle of jeans, Levi Strauss & Co found that 3,800 litres of water were used and 33.4 kg of Co2 were produced in the process of making a pair of jeans. In response, it optimised trucking routes to significantly reduce carbon emissions, implemented a manufacturing process that uses only recycled water, and developed a product line that reduced the water used in finishing by up to 96 per cent.

Levi’s has also offered financial incentives for suppliers to comply with its environmental, health, safety, and labour standards in their terms of engagement. Patagonia, meanwhile, has an ongoing “footprint chronicles” on the firm’s website that allows customers to see exactly where products are made.

Moreover, following last year’s COP 21 summit, retailers like Ikea and Marks & Spencer vowed to reduce carbon impact, coinciding with a mandate that businesses need to seriously evaluate how operations are impacting climate change. China, meanwhile, was sanctioned for the high level of pollution the country created in manufacturing.

Although there is an undeniable movement towards focusing on sourcing, ethical practices, and sustainability with consumers leading the charge – not everyone is joining in. There are still far too many stories of businesses allowing appalling working conditions, or allowing illegal materials to enter supply chains. These practices need to be eradicated. As more businesses realise the financial and reputational implications of failing to do so, we will see supply chains become increasingly:

(1) Sustainable and ethical: Firms that make sound environmental decisions and uphold ethical standards – providing sustainable supplier initiatives that help meet environmental, health and safety, and labour standards – will be held in the highest regard.

(2) Transparent: Having foresight and being certain of what is going on in a supply chain is ultimately crucial. In today’s world of complex supply chains, companies have to respond swiftly to sudden changes and unforeseen disruptions and transparency is critical in battling these challenges.

(3) Secure: Having a secure supply chain is essential to mitigate against potential disasters. In some industries this can be a matter of life and death. If illegal medicines or substances enter pharmaceutical supply chains, for example, the repercussions could be devastating.

(4) Fair and inclusive: Supply chains can span the globe. They have a big impact on all of us and can touch many lives in many different countries – from a garment factory in Bangladesh to a luxury store on Rodeo Drive in LA. The suppliers and trading partners in a global supply chain are many and varied, so for end-to-end sustainability companies need insight into activities at all levels of a supply chain.

Read on to find out how one social enterprise owner is changing world, one macaroon at a time.

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Kurt Cavano is the vice chairman and chief strategy officer of GT Nexus, a cloud based supply chain platform provider. It helps companies to manage their logistics and trade processes. Kurt is responsible for maintaining the company’s track record of innovation and market success, and for guiding key customer, industry and partner relationships.