Green Supply Chain Management: Is it Only for the Big Guys?

Is it possible for mid-size companies to take a similar road, making investments – albeit smaller ones – to improve the sustainability of their international supply chains and support fair trade policies?

What is Green Supply Chain Management?

Green supply chain management is not just an environmental issue. According to environmental consultants Resource Management Associates, a sustainable supply chain also involves social factors (child labor, for instance) and economic factors (say, paying workers a living wage).³ A company seeking a green supply chain must know the level of environmental, social, and economic impact its business operations have on vendors and customers. That includes the entire manufacturing process – from where the raw materials are obtained, through what happens in the plant, to the use and ultimate disposal or recycling of products.

The Consumer Case for a Green Supply Chain

The case for sustainable supply chains starts with consumer attitudes. A 2017 study of 4,000 consumers by sustainability consultants NMI suggests that buyers favorably view companies that pursue policies considerate of the environment and society, noting that sustainability “has become a fundamental cultural shift.”⁴ According to an analysis of the NMI study by Fair Trade USA, a pro-sustainability organization, 58 percent of consumers are more willing to try fair trade products, while 33 percent are less concerned about price when they buy from companies that support fair trade. Moreover, 54 percent of consumers are more likely to be repeat buyers of these products.⁵

Food Navigator, a food industry trade publisher, notes that younger buyers are especially focused on supporting companies using green supply chain management policies, with 54 percent of Millennials and 40 percent of Generation X saying they consider the environmental impact of products before buying them.⁶

Further, there is a cohort of consumers that simply refuses to buy from non-sustainable supply chain companies. Sustainable Brands, a worldwide global advocacy group promoting sustainability, reports that its 2017 survey of 16,000 global consumers found that, for the first time since 2009, more consumers say they have punished companies for their behavior (28 percent) than have rewarded them (26 percent). Overall, the number of those who are “punishing” brands is up by 9 percent since 2013.⁷

Given these shifting attitudes, Entrepreneur magazine says businesses that focus on the connection between economic and social issues can create marketing opportunities that expand their customer base. Emotional issues drive a good part of consumer behavior, and buyers want to feel good about the companies they buy from. For example, attention to the issues of deforestation or hunger in the developing world can become marketing opportunities if a company uses recycled paper and electronic receipts, or if it supports a charity that nourishes hungry children by donating some percentage of profits.⁸

Fair-Trade Products: The Business Case

But the case for green supply chain management goes beyond shifting consumer attitudes. It may actually save companies money by simplifying and streamlining operations and improving service levels, according to industry newsletter Supply Chain Dive.⁹ “Now, the green alternative is frequently the low-cost alternative. Positive economics around sustainability has taken hold and the supply chain – and society – are better for it,” the newsletter writes.

Green supply chain management and fair trade can also influence a company’s future growth, according to management consultancy McKinsey & Company. McKinsey reports that almost 50 percent of the enterprise value of consumer-goods companies is based on projected future growth. Sustainability issues, such as global warming, environmental pollution, and fair-trade practices will have a major impact on that future growth because companies need affordable, reliable supplies of energy and natural resources – as well as local and regional permission from consumers, investors, and regulators – to do business around the world.¹⁰

Key Strategies for Improving Supply Chain Sustainability

To get up to speed with a truly sustainable supply chain, experts suggest starting with a pre-qualification survey to assess whether suppliers share the business’s sustainability approach. Among the issues to look at are environmental-management practices, compliance with environmental regulation, and the supplier’s own buying practices and sustainability policy. Then, once a supplier is in place, monitoring and auditing is important.¹¹

McKinsey recommends some key strategies for improving the sustainability of supply chains, especially for consumer products companies:¹²

• Identify critical issues across the supply chain (which can be challenging if a company doesn’t have visibility into the suppliers of its suppliers). Examples of questions companies may wish to ask include, What types of pollutants are coming from manufacturing operations? Or, are coffee plantations hiring underage workers to cultivate and harvest coffee beans?
• Set goals based on accepted scientific information. For example, based on recommendations from the World Wildlife Fund and CDP (a non-profit organization that encourages disclosure of environmental data), General Mills announced in late 2015 that it would endeavor to cut emissions “from farm to fork to landfill” by 28 percent within 10 years. To reach this goal, the company has pledged to obtain 100 percent of its top-priority ingredients from sustainable sources by no later than 2020.
• Once a green supply chain management plan is in place, monitor compliance and help supply chain partners comply, McKinsey says. Some companies are having suppliers use digital tools to manage and audit compliance. Unilever, for instance, uses a free software tool to collect data about whether farmers in its supply chain are using sustainable practices, with the goal of procuring 100 percent of its agricultural content from sustainable sources by 2020.

According to GreenBiz, a pro-sustainability publication, some companies are going further, making compliance-monitoring transparent to their customers. Case in point: Six multinational apparel companies have made available an online map showing real-time and historical trend data related to their Chinese suppliers’ air pollution, soil contamination, and wastewater going back at least eight years.¹³

Ecovadis, which rates companies’ supply chain sustainability, recommends that small and medium businesses looking to follow these larger company examples keep in mind these key best practices:¹⁴

• Procuring C-suite support based on the business case for sustainability;
• Identifying a sustainability leader;
• Finding out which sustainability issues matter most to key stakeholders; and
• Communicating a sustainability agenda on a regular basis to partners.