Supply chain sustainability is defined as embedding environmental, social, or corporate governance considerations as raw materials are sourced, converted into products, and delivered to the market.
This blog examines how supply chain sustainability solutions reduce waste, conserve energy, and lower emissions. In addition to environmental benefits, companies that implement supply chain planning with sustainability also reduce supply chain costs associated with storage, shipping, and expiring products.
Supply chain sustainability benefits companies and consumers
Planning with supply chain sustainability as a goal delivers on the three Ps of the bottom line: people, profits, and the planet.
People: Consumers and key stakeholders increasingly expect the brands they buy and support to address sustainability issues.
- New consumer research finds that 57% of consumers are willing to change their shopping habits to reduce their environmental impact, and 71% of consumers who have indicated that traceability is vital to them are willing to pay up to a 35% premium.
- This survey of employees finds that more than 70% of workers would choose to work at a company with a strong environmental agenda. The survey also finds that nearly 40% of millennial’s have chosen a job because of company sustainability; more than 60% of workers said a strong sustainability plan would affect their decision to stay at a company.
- According to a report from investment research firm Morningstar, Investors have been prioritizing sustainability even during the COVID-19 pandemic. Sustainable funds reached record highs in 2020 with over $51 billion in new investments, more than double the previous record set in 2019. There are many reasons for sustainable investing’s accelerated popularity in 2020, including the worsening climate crisis, the coronavirus pandemic, and the Black Lives Matter movement. Additionally, more and more investors realize they can express their sustainability preferences through their investing. The report also finds that sustainable funds outperformed conventional funds and indexes, on average, last year. Three out of every four sustainable equity funds ranked in the top half of their Morningstar Category in 2020.
Profits: Although many people think there is a tradeoff between sustainability initiatives and profitability, research shows otherwise. Organizations that plan with climate change in mind secure an 18% higher return on investments than companies that do not. And the World Economic Forum cites that many reports find a direct correlation between sustainable practices, share prices, and business performance. A great example would be when the hospitality industry initiated towel reuse programs back in 2014 and the subsequent savings on water and energy.
Planet: The Earth has limited environmental resources. The UN Environment’s Global Resource Outlooks 2019, which examines trends in natural resource use, finds that usage has skyrocketed over the past five decades as population and economic growth have increased. According to Joyce Msuya, Acting Executive Director of UN Environment, “The Global Resources Outlook shows we are plowing through this planet’s finite resources as if there is no tomorrow, causing climate change and biodiversity loss along the way.”
Success in supply chain sustainability planning
Here are some areas where green supply chain efforts are seeing success:
- Shipping: More accurate demand planning enables better lead times, allowing for bulk shipments to warehouses, distribution centers, and retailers, as well as avoiding rush charges, saving the company money while reducing the carbon emissions from shipping.
- Inventory: Vanguard Predictive Planning™ enables supply chain professionals visibility across the entire network to optimize the fulfillment of each order and to purposefully position inventory closer to the consumer providing both faster availability and lower emissions.
- Expiring Inventory: In food and beverage supply chains, there is the potential to reduce food waste and spoilage while maximizing profit. Efficient demand planning processes combined with an accurate demand forecasting solution help optimize operations, improve labor productivity, and minimize loss while maximizing profit.
Solutions for supply chain sustainability
With growing concerns around the environment and traceability, it has never been more important to start the journey to supply chain sustainability.
Consider the following Vanguard solutions to help build a sustainable supply chain:
- An AI-based platform capable of performing reverse logistics and repair lifecycle tracking, reducing waste and environmental impact of returned goods. One Vanguard customer, a leading snack and soda company, uses Vanguard’s cloud-based S&OP solution to automate their extensive forecasts for equipment repair and refurbishment plans.
- A control tower provides end-to-end inventory visibility to make more informed decisions, harnessing data to detect events quickly that could impact your inventory, enabling organizations to reduce waste and optimize outcomes.
- A multi-enterprise collaboration hub allows supply chain professionals to engage with key stakeholders quickly, both internally and externally. This provides transparency, trust, and traceability across the entire supply chain.
- A multi-echelon inventory optimization (MEIO) balances inventories across the entire distribution network, considering the interdependencies between echelons. Implementing a robust inventory management method is critical for organizations to manage the environmental impact successfully from the flow of goods and services throughout their supply chain.
The integration of an end-to-end, AI-based supply chain planning platform, such as Vanguard Predictive Planning™, reduces costs and increases efficiency across planning areas while offering a wide range of sustainability benefits.
The future of supply chain sustainability
Support to prioritize supply chain sustainability as a planning goal has grown, but adoption remains selective. Nearly half (49%) of all companies have corporate supply chain sustainability goals, but another 35% lack such objectives, according to research from the Massachusetts Institute of Technology (MIT) Center for Transportation and Logistics and the Council of Supply Chain Management Professionals (CSCMP).
Organizations recognize that embedding sustainable practices within the supply chain is good for business – creating a vibrant corporate culture, more engaged customers, and bottom-line growth.
Wherever you may be on your journey to supply chain sustainability, Vanguard helps you explore and capture new opportunities. Request a demo to learn more about how Vanguard makes supply chains sustainable.