Supply Chain Sustainability – Why it is important & Best Practices – In conversation with Manish Kumar, MSc in Supply Chain from University of Plymouth UK.
Over the last 30 years, supply chain sustainability has become one of the most dynamic and prolific decision management research fields.
For a long time, most consumer companies paid relatively scant attention to whether their suppliers managed the social and environmental impact of their business activities. This is beginning to change, as consumer companies have come to appreciate the extent to which their supply chains contribute to global sustainability challenges, as well as the effects that poor sustainability management can have on their growth and profitability. A few leading consumer businesses, along with civil-society institutions, have created a widening array of practices and tools for working with their suppliers to lessen sustainability impact and have begun to realize the benefits of their efforts. Their experiences illustrate the possibilities for many more companies to initiate similar activities.
In this interview with Manish Kumar, who is pursuing MSc in International Logistics and Supply Chain Management from University of Plymouth UK we explore current trends in supply chain sustainability and how companies can manage their supply-chain impact that may well be best positioned to gain from the boom in consumer spending that is expected to take place over the next decade and beyond.
The outcome of our conversation is available on video and transcription here.
FOCUS ON SUPPLY CHAIN SUSTAINABILITY
What is supply chain sustainability and how has the sustainability landscape changed since your professional experience?
There are many definitions of sustainable supply chain but the simplest way to define is by three P model i.e. People, Planet and Profit.
A supply chain can be considered sustainable if it meets the three criteria i.e. It should be profitable, cater to the planet and considerate towards People. Here catering for the planet means reducing Air, water and soil pollution. Similarly, being considerate towards people would include working towards welfare of all types of Suppliers, Employees, Distributors, Customers and Local community.
The important point to be borne in mind is that the entire supply chain has to be sustainable i.e., from extraction of raw material for the product to the use and final disposal of the product by the users.
In the past 30 years, the concept of sustainability has changed drastically. Initially, it was not widely discussed till the lowest level and not religiously implemented also. Even if it was discussed and implemented, it was tackled in a piecemeal manner.
By piecemeal approach I mean, that the environmental and social sustainability were treated separately.
Secondly, it was never considered along the entire supply chain by an organisation.
However, things have changed nowadays. The government, organisations, business houses and people across the globe are putting in effort to make the entire supply chain sustainable.
The concept of sustainability is being taught from primary schools and widely being discussed at every forum across the world till the highest level. Nowadays, even the customers want to know the origin of the products they are buying and the manner in which it would be disposed of after usage. Thus, customers are considering the sustainability of the entire supply chain of the product.
You would have also come across many reports and findings which highlight that there has been growth in sale of sustainable products. A large number of customers are seeking sustainable products and are willing to pay extra for the same.
Thus, I can say that there is awakening towards a sustainable supply chain. All organisations and customers are taking effort and moving towards embracing sustainability.
We hear all the time companies are tackling the pressing supply chain issues like workers voices, living wages, deforestation. How can we push the conversation forward on these supply chain issues of sustainability?
The discussions on supply chain issues can be expanded outwards by taking inside – outside approach. Here inside outside approach means, mapping the entire supply chain from the perspective of sustainability.
As per ISO 20400, there are 33 social sustainability issues and 4 environmental sustainability issues along the supply chain of a product. The issues like workers voice, living wages, deforestation is part of the 37 issues mentioned in the ISO 20400.
Thus, all the 37 sustainability issues should be considered and risk arising out of it should be mapped along supply chain.
Once sustainability risks are identified, they need to be ranked and risk mitigation measures should be taken in collaboration with suppliers, distributors and retail.
All stakeholders along the supply chain need to be encouraged to reduce negative impact on society and planet. They should be encouraged to take third party certifications to boost consumer confidence. In addition, self-certification can also be sought from vendors while undertaking procurement.
Once, this process is followed, the conversation is automatically pushed along the entire supply chain and everyone would be encouraged to tackle sustainability issues.
I have recently undertaken the entire process for some category products for an organisation. The process triggered the conversation on sustainable supply chain issues and helped the internal as well as external stakeholders of an organisations to appreciate and take action on sustainable supply chain risk.
Cost is the primary impediment to sustainable supply chains, with smaller companies finding it particularly difficult to afford the upfront costs of making a supply chain more sustainable. How can a supply chain be sustainable for small and medium-sized enterprises?
It is generally true that cost appears to be a big obstacle in making supply chain sustainable esp. for small companies, however, nowadays, even smaller companies can make their supply chain sustainable by collaborating among themselves or with an aggregator by optimally utilising the six drivers of supply chain.
Transportation. There are a substantial number of vehicles which are not carrying full load while moving goods. This leads to lower profit and environmental penalty. Thus, smaller companies can collaborate with each other to reduce the running of empty vehicles. Similarly, electric vehicles could be used for last mile delivery and in fact vehicles of one company can also deliver goods of other companies when they make an effort to collaborate.
Facility and Storage. All the small companies can use efficient lighting systems and solar energy at manufacturing and storage facilities to cut down carbon footprint. They can also use the storage facility of each other during transit by collaborating with each other.
Information System. Usage of IT systems in a phased manner would increase the visibility along the supply chain, thereby improving the forecasting accuracy and preventing the stock outs. One does not need to change the full IT system in one go. They can start with small changes and increase it incrementally. They can also use the cloud services and pay as per usage. They can also work on a profit sharing mechanism with IT companies, who can take care of the entire IT system of small vendors.
Inventory. Inventory is the biggest cost in a supply chain. With the use of an information system, one can get transparency along the supply chain. This would lead to reduction in inventory level and cost.
Sourcing. There is a great demand for vocals for the local post pandemic. Even companies like Amazon have authorised their procurement managers to source products locally. This would lead to lower carbon footprint and the same can be highlighted by smaller companies while selling the products.
Pricing. Once a product has a better green footprint, the company can promote their product from a sustainability perspective. Nowadays, a large number of consumers are ready to pay slightly higher prices if the product is sustainable.
All these measures can be undertaken by smaller companies to reduce the upfront cost for making their supply chain sustainable.
Making supply-chain decarbonization happen it’s not easy, many organizations are struggling with their Scope 3 decarbonization efforts. And, as delivery timelines are longer and targets are generally vaguer, program leaders tend to get away with underperforming efforts. How can we concretely decarbonise the supply chain?
It is very easy to cut down Scope 1 and 2 emissions but difficult to cut down Scope 3 emissions as it involves cutting down emissions along the entire supply chain of an organisation. The suppliers, manufacturers and distributors all have different agendas and concepts of the supply chain.
I agree with you that the delivery timeline is longer, however, it is an asset as the capacity and capability of all countries and organisations are different. Thus, everyone has adequate time to become net zero by 2050.
Similarly, the goal is also quite clear, that every company, organisation, country has to be carbon neutral by 2050.The way in which every organisation can become carbon neutral has been left to them as resources available to each organisation is different.
POSCO. For example, the major steel giant POSCO, a South Korean Company, has made a detailed plan to become carbon neutral by 2050 by utilising various innovative solutions like use of HyREX, FINEX, CCS method, making lighter steels etc to meet their goal.
Similarly, the Costa coffee has embarked on a mission to become carbon neutral by 2040. The 95% of emissions of the company are Scope 3 emissions and it aims to eliminate all of them using renewable energy, use of electric vehicles, making products biodegradable and reducing waste to landfill. By 2040, it would utilize the CCS method to cut down carbon emission and had published a detailed plan and is following it too.
Amazon. The ecommerce company like Amazon has also planned to become carbon neutral by 2040 along its entire supply chain. It plans to power its entire operations by 100% renewable energy by 2025. Similarly, by 2030, it aims to make 50% of shipment carbon net zero.
Thus, companies across different sectors are planning and using different innovative solutions as per their capability and capacity to become carbon neutral by 2050. Nowadays, customers are in favour of reducing carbon footprint and the government is also providing the full support for it. There is no better time than now for companies to decarbonise their activities.
FOCUS ON INSPIRATION
What advice would you give to a student wanting to follow your career path?
I will give three advice to students.
First – Dream because if you don’t dream, how will your dream come true?
Second – Convert your dream into action and execute.
Third – At any point of time you feel defeated, do not give up. Take a pause, recuperate and pursue your dream again with full vigour.
Could you suggest a must-read book?
The book ‘Old man and the sea written by Ernest Hemingway’ is a must-read book for the people.
The main character of the book Santiago was unable to catch fish for 84 days but he did not give up
When he caught Marlin fish on the 85th day, he spent days and nights protecting his catch from sharks while enroute to the harbour to sell the fish.
The quote from the book ‘Man can be destroyed but defeated’ would be motivating and inspiration for today’s youth to pursue their dreams without giving up.
Is there a person in your life who has inspired you or continues to inspire you?
The current Prime Minister of India, Sri Narendra Modi is my source of inspiration.
He is quite vocal about sustainability and climate crisis. In spite of all adversity, he is navigating the country towards finding sustainable solutions.
In fact, under his tutelage, India has achieved the target of meeting 40% energy requirement from non-renewable sources, nine years ahead of schedule, a target which was to be achieved in 2030.
Would you tell me a personal wish for the future?
This is the first time I am seeing that the people across the globe ranging from government, business organisations, NGOs and common people are concerned about climate change. I wish the world will become net carbon zero by 2050.
Manish Kumar is a veteran officer with 22 years of experience in Supply Chain and Operations and presently pursuing Masters in International logistics and supply chain management from Plymouth University. He is passionate about Sustainable Supply Chain management and would like to help companies to become carbon neutral by reducing their Scope 3 emissions along the supply chain.
During his internship, he has worked on ‘Inclusion of sustainability in Procurement’ project as per ISO 20400 and has also volunteered for working on a project which deals with regenerative farming methods for reducing carbon footprint and plastic waste in urban areas.
He also holds a MBA degree in ‘Strategy and Leadership’ and MSc in ‘Defence and Strategic studies’. He is an avid reader and regularly shares his thoughts on Sustainability issues on various forums.