The importance of sustainability in business organizations are increasing day by day. In every aspect of a business, now it is important to implement sustainable operations to display that the business is following global standards. However, it is extremely difficult to implement sustainability, in “supply chain management” for new organizations. The increasing demand for sustainable supply chain is due to the influence of sustainable supply chain on the well-being of environment and society (Morana 2013). On the other hand, it is also true that business organizations can also gain tremendous advantages through sustainable supply chain. One of such advantage of implementing sustainable supply chain is increased brand value because of consumer concern with the environment (Golicic and Smith 2013). On the other hand, it is also stated that sustainability provides greater efficiency for an organization. Despite of upfront costs and investment in sustainability, it can decrease overall expenses in the long term (Seuring 2013). Besides, in most of the countries, governments are also focusing on increasing sustainability by drafting rules and regulations that the companies are bound to follow in order to avoid penalties and fines. Until now, no systematic steps are available that can help an organization to have supply chain management with sustainability implemented. Therefore, it is also a controversial matter. In this report, a probable solution is provided to the problem. In order to do that literatures from several sources are gathered and combined in this next part of the report.
Supply Chain Sustainability
Supply chain sustainability refers to the management of environmental, social, and economic impact upon organization along with the promotion of good government through the lifecycles of services and products. The key aim of the supply chain sustainability is to establish, and encourage growth of social, economic and environmental value for all stakeholders, which serves as the bridges for products and services to the business industry (Martínez-Jurado and Moyano-Fuentes 2014). At each step of product life cycle, significant environmental, social, and economic impacts on people are found. Additionally, governance and responsibility towards the stakeholders is important at each step of the supply chain system.
In the current globalized economy, outsourcing business operations doesn’t indicate that the responsibility of the company ends, once the product or service is sold, rather the sustained and leading companies are understanding their key role in the lifecycle of their products and services. The key for managing the brand integrity is the management of supply chain sustainability. It is also important for management of operational costs and ensure business continuity. The supply chain sustainability is essential for several reasons, for instance, a company start a sustained journey of supply chain management for complying with laws and regulations and to be associated with the regulations and laws, supporting the international principles for sustainable business conduct (Golicic and Smith 2013). Moreover, organizations are continuously undertaking initiatives for gaining better social, economic and environmental impacts upon the business, to meet the basic needs to the society, which ultimately leads to business benefits. Thus, through management, good governance throughout supply chain management, and seeking improvement of environmental, economic, social performance the business organizations attempt to meet the interest and needs of their own as well as their stakeholders.
While attempting to start the supply chain sustainability program for the organization, the marketer needs to evaluate the threats and opportunities in the internal as well as micro and macro level of external landscape. These efforts in turn helps in identifying issues of highest priority in supply chain for the company and then to evaluate the threats, while help to build the internal support for moving forward (Tseng et al. 2015). The first step is building business case for the supply chain sustainability. In a situtaion of building business case for a company, the governance, management and transparency are crucial, which requires managing business risk, realizing the efficiency of the organization and the means to create the sustainable products. The next step is to understand the external landscape via a thorough market research. This step is followed by understanding the expectations of stakeholders; based on which vision is established followed by the establishment of sustainability expectations for the supply chain, and determining the roles and responsibilities of stakeholders (Tseng and Hung 2014).
It is necessary to solidify the supply chain sustainability for supply chain, which is an important step. Wu and Pagell (2011) mentioned that codes of conduct play the vital role in setting up and managing the expectations for the suppliers and customers.. While developing the codes of conduct, international standards need to be consulted. This can outline the adaptation of writing the codes of conduct. To develop the code of conduct, it is necessary to consult with the stakeholders that are shareholders, investors, and the customers. The key steps needs to follow during establishing the sustainability expectation for supply chain. Te first step is mapping the supply chain. As opined by Closs, Speier and Meacham (2011), the companies should include the stakeholders while the establishment of the sustainability expectation and identify the important social and environmental factors and as well as the challenges. After that, it is necessary to build a strong and positive partnership with the stakeholders. The next step is to communicate the expectations. The responsible persons including the stakeholders need to focus on implementing supply chain sustainability. It is a critical step to communicate the expectations via the supplier code of conduct by involving the suppliers in the sustainability efforts. The Global Environmental Management Initiative helps the organisations to establish the value chain and improve the supply chain sustainability Wu and Pagell 2011). In such case, the cross-functional teams also need to be consulted for the specific supply chain management.
After targeting the suppliers, it is necessary to collect data from them via the benchmarking questionnaire, which is the starting point. The organizations can incorporate the code of conduct with the special focus and the weight of the self- assessment by the help of GRI guidance (Brindley and Oxborrow 2014). The base line assessment improves the sustainability for the supply chain. The communication with the suppliers back is critical for the future communication in the constructive way for the business practices in the target areas. The organization needs to develop the training program and the capacity-developing program for the employees (Wolf 2014). In case of establishing the sustainability for the supply chain, the organization needs the external resources to support the efforts in the specific sectors. These programs will help to develop the performance. After the implementation of the audit program, it is necessary to execute the action plan and communicate about the plan with the stakeholders. The assessment and the audits can be paired with the incentive programs, which reward the sustainability efforts to drive the sustainability performance. Many of the organizations cover both the environmental and social performance to improve the sustainability of the supply chain. As opined by Brindley and Oxborrow (2014), collaboration with other organization can be effective in case of supply chain management, which helps to set up the sustainability expectations.
This section involves determining the scope so that the resources can be put to efficient use. The organizations may choose to focus on the key suppliers from which the organization directly sources. Although multiple hot spots are there in in the supply chain, there are many areas which need immediate attention in the supply chain. The main purpose of determining the scope is to identify the suppliers to engage with the noting program boundaries and change over time. The supply chain needs to be mapped for understanding the scope of managing sustainability. It shall help in tracing the key activities of the organization. The supply chain of services such as hospitality can be mapped particularly. It is recommended that focusing on the individual product can be a starting point. For mapping the supply chain, the identification of core product or service is necessary. For every product or service, the flows of information of materials need to be traced. Further, it is crucial to gather information on human rights, environmental corruption and labour rights. Segmenting the supply chain is necessary so that the risks to society, economic development or business can be identified. Several companies tend to plot each risk event on a grid. In the grid, when mapping on the left the two axes are “likelihood of occurrence” and “severity of consequences,”. Additional dimensions can be incorporated to create the risk ranking (Ahi and Searcy 2013).
In this section, the engagement with suppliers is discussed. The core objective of engagement with the suppliers is to develop a shared mindset regarding the problems on sustainability. Engagement with suppliers comprises of four levers: setting expectations, monitoring and evaluation, remediation and capability building and partnership (Alexander, Walker and Naim 2014).
In the first level, the organization communicates about the sustainability expectations to suppliers and incorporates new expectations. In the first step, sustainability may be improved by increasing awareness of the organizational expectations for performing sustainably. The two communication modes must be considered- existing customer supplier communications and adding sustainability to the new forums. Through communication, the supply chain professionals can help identify the sustainability requirements in business. Therefore, the sustainability expectations can be increased by identifying the organizational issues and priorities (Alexander, Walker and Naim,2014).
At the second level, monitoring and evaluation involves self-assessment of suppliers on their sustainability performance. It also includes conducting the on-site evaluations. Effective auditing may be done by considering a number of factors such as preparation of factory workers, having informal conversations and being aware to protect the need of worker’s confidentiality (Azadi et al. 2015).
At the third level, the suppliers in the organisation tend to address the issues of poor performance. They tend to provide training at this level and resources to support the sustainability improvement and performance. Further, the remediation activities include creating a corrective action to achieve compliance within a reasonable timeframe. The organization must define a roadmap for the rising expectations. The supplier relationships must be terminated if the issues for xero tolerance are encountered (Beske and Seuring 2014).
Lastly, partnership involves the support to supplier ownership for addressing the root cause of sustainability performance. The organizations take decisions to engage with sub-tier suppliers and overcome certain obstacles. The organizations participate in the industry collaboration and increase the voice to sub-tier suppliers. Further, the organizations must optimize the supply chain and shorten the steps by creating multiple groups of cooperatives and eliminating middlemen.
To follow the sustainability strategies, the organizations need to determine roles and responsibilities. Firstly, they require internal alignment as a lack of internal alignment can adversely impact the supply chain sustainability performance. There are three main levels of internal alignment. It includes governance ad oversight by the Board members and the executive leaders, implementation by the Supply chain professionals and cross-functional coordination by the business managers. The executives must clearly communicate the organizational vision and approach to supply chain sustainability. They follow written and verbal methods of communication to emphasize the importance of business sustainability. Further, the business managers can assume roles and responsibility towards cross functional coordination. The supply chain professionals must provide required input to strategic planning. They must add the required input in the processes throughout the company. For implementing the sustainability in the decision making processes, the experts must communicate and coordinate with every team on the supply chain. Lastly, in case of implementation by the supply chain management professionals, the personnel must select new suppliers having high sustainability practices and capabilities. They must engage with the existing suppliers. The organization must also integrate sustainability in the sourcing and purchasing decisions (Brandenburg et al. 2014).
Selecting the suppliers is a crucial process as it shall allow the professionals to look at the entire picture and review performance of the firm. The professionals must select the suppliers based on “mutual transparency”. The organizations must expect that the suppliers shall share the information honestly. They shall work with the suppliers to achieve excellence in the work and finish it within realistic timeframe. The sustainability concept must be integrated by experimenting with the scorecards (Pagell and Shevchenko 2014).
One of the important tools in supply chain sustainability is “industry collaboration and multi-stakeholder partnerships”. Collaboration can result in overall efficiency of the supply chain practices by following a few strategies like pooling resources, extending reach, avoiding conflict and reducing duplication. Several top companies must collaborate with the root causes of the sustainability issues. The two types of collaboration methods are- best practice sharing and join standards implementation. In the first method, the company focuses on collaboration with a single industry or across multiple sectors. In case of “joint standards and implementation”, the collaborations are specifically directed to one sector where it aims to create consistency with the organizational expectations (Seuring 2013).
There are multiple opportunities are risks involved with industry collaboration. The benefits or opportunities that can be created with the industry collaboration is that it can leverage with the suppliers. The partnership with the supply chain sustainability can shoot up the leverage. It is possible through direct partnering with the suppliers. It can also add to credibility with the stakeholders where the company awareness can be demonstrated. Further, it can add resource sharing. Industry collaboration can help the organization to pool its resources. It helps to share the cost of establishing the expectations and engament with suppliers (Tseng, Lim and Wong 2015).
However, there are risks involved in industrial collaboration. It is argued that collaboration may lead to resource draining. While the industry collaborations may lead to time and cost efficiency, it may also lead to substantial impacts and not always deliver best results. Further, there may be unwillingness to change course. There is a chance that the other participants may not be willing to change approaches and get alignment with the company. It may also lead to internal commitment. Industry collaboration may have the risk to challenge the ability to get internal commitment.
In the recent time, more number of stakeholders have demonstrated their enthusiasm and willingness to partner with the companies. The business can work with the local authorities and improve capacity to address the root causative factors of sustainability challenges.
It is necessary to establish or set comprehensive performance goals. Explicit objectives can be set for supply chain sustainability. Goal setting is a collaborative process n which the organization has responsibility to meet objectives. The organizations need to go through a challenging process and defining the unrealistic goals. Goals are designed at the higher level for the entire business. Micro-level targets can be achieved to get the overall performance against goals. Further, the organizational vision for supply chain sustainability must be straightforward. The goals such as meeting stakeholder and customer expectations, expanding in new markets and reducing costs must be implemented. The organization must establish objectives for ensuring broad commitment and realistic goals. Goals must also be set for achieving environmental standards, complying with human rights and following supplier management systems. Further, goals for internal performance must be set. One off the greatest obstacle that is faced by the organization is to meet the impact objectives and support suppliers to meet the performance objectives of suppliers. The organizations must advise or consult with the leaders to support increasing attention from the professionals of the supply chain management (Wolf 2013).
It is necessary to monitor or measure the processes and practices. For measuring the supply chain sustainability goals, the organizations need to obtain data on the professionals of supply chain management and the suppliers. The existing data and metrics must be assessed in a unified manner. The data shall be collected applying methods of integrity. Further, transparency must be ensured. It is challenging to collect data and obtain supplier information. Several technology companies that provide such resources including Fair factories Clearinghouse, Sedex and others. The progress must be measured and reported publicly on an annual basis. Sustainability reporting is a primary step for communication between the stakeholders and the organisation.
Conclusion
It can be concluded that, sustainability in supply chain management is important. However, it is a difficult process. This report has analyzed various aspects of supply chain management along with methods that can implement sustainability in the supply chain management. However, a long process requires special attention and proper investment. Without proper attention and investment, it would be tough for any organization to develop an appropriate supply chain management. Among all the methods, it can be stated that goal setting and measurement methods are very important. Without setting a goal it is not possible for any organization to achieve sustainability in supply chain management. Simultaneously, it is also important to evaluate the performance of the company’s supply chain sustainable to find out whether it is working properly or not. In order to find out the efficiency of sustainable supply chain, the management of the organization will have to collect feedback from the employees of the organization and from the suppliers. Besides, it is also important to implement transparency in terms of communication and the methods that will be applied across the supply chain management of the organization. In order to facilitate effective communication different platforms related to information technology can be adapted. It can also help to collect data from suppliers and employees.
References
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Alexander, A., Walker, H. and Naim, M., 2014. Decision theory in sustainable supply chain management: a literature review. Supply Chain Management: An International Journal, 19(5/6), pp.504-522.
Azadi, M., Jafarian, M., Farzipoor Saen, R. and Mirhedayatian, S., 2015. A new fuzzy DEA model for evaluation of efficiency and effectiveness of suppliers in sustainable supply chain management context. Computers & Operations Research, 54, pp.274-285.
Beske, P. and Seuring, S., 2014. Putting sustainability into supply chain management. Supply Chain Management: An International Journal, 19(3), pp.322-331.
Brandenburg, M., Govindan, K., Sarkis, J. and Seuring, S., 2014. Quantitative models for sustainable supply chain management: Developments and directions. European Journal of Operational Research, 233(2), pp.299-312.
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Martínez-Jurado, P.J. and Moyano-Fuentes, J., 2014. Lean management, supply chain management and sustainability: a literature review. Journal of Cleaner Production, 85, pp.134-150.
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