The Best Supply Chain Sustainability Plan is a Resilient One
Keith LaBotz - March 24, 2022
Supply chain sustainability is an attractive proposition, but the devil is in the details. And a lot of those details are subject to change.
Uncertainty won’t keep us from pursuing a great idea like sustainability, but a plan that lacks resilience can. That’s why you want a resilient plan for improving supply chain sustainability.
Transitioning to a sustainable business model involves some trial and error, and unexpected changes in regulatory requirements are always possible. A resilient sustainability plan minimizes these challenges and keeps your efforts on track no matter what transpires.
Creating a resilient plan is simple if you take the right approach to creating a sustainable supply chain and this post shows you how.
Scrutinize Details for Hidden Risk
The excitement surrounding sustainability initiatives can overshadow the downside, so it’s prudent to scrutinize the details and think holistically about changes' impact.
External regulatory changes also affect supply chains, so awareness of global developments can give you a heads up. International policymakers are hinging plans on unprecedented assumptions, which might be unsustainable.
Play the Devil’s Advocate
One of the easiest ways to expose these risks is to play devil’s advocate - coaxing the devil out of the details. Questioning the process, thinking holistically about the impact of changes, and reading between the lines will smoke him out.
Remain flexible to accommodate unexpected changes in priorities. These may even be present unrealistic goals stemming from ambitious commitments made by executive leadership.
Deloitte’s 2022 CxO Sustainability Report reveals 89% of CxOs agree there’s a climate crisis, and 88% believe we can limit the worst impacts of climate change with immediate action. A near 90% agreement confirms that executives tend to build consensus, and solidarity is only good if it comports with reality. These agreements can obligate a company to deliver on promises it cannot keep when it doesn't.
Monitor the Global Picture
Here’s a limited set of global issues that can ultimately impact regulatory actions and require compliance. Significant assumptions and longstanding geopolitical conflicts are not included, and that devil will come out when policymakers address the details down the road.
- Every G20 country is failing to meet commitments made in the landmark Paris Agreement to stave off climate change.
- The economy is fragile, and business viability is more pressing for global businesses and governments.
- If the past is an indicator of future performance, sustainability may fail to gain traction outside the G20 without some unforeseen change occurring.
- It is assumed climate and supply chain models are accurate.
- Government planners will provide infrastructure on time, and the entire G20 will transition to a sustainable model.
- Supply chains are driven by profitability to drive innovation organically. Government regulation is disconnected from these natural market forces, interfering with continuous improvement.
- The assumption is the rest of the world will eventually follow regardless of the regional existential threats.
- China has been open about decoupling its economy from the EU and US. Punitive measures for noncompliance could drive China and India to this end, shifting power to Asia.
- There is no way to prevent emissions from the majority of the world's population from overriding the shrinking birthrate of a sustainable G20.
- G20 business leaders commit companies to these assumptions, which means supply chains must act without knowing how things will develop.
- Public trust in governments is declining globally, putting sustainability in the crosshairs. Pew Research found the majority in Germany, the Netherlands, South Korea, and Singapore felt confident the international community could significantly reduce climate change. Majorities in all other countries disagreed, with more than 60% in France and Sweden unconvinced.
Sustainability may not happen if we wait for global powers to get their act together, so how does a company move forward with a resilient sustainability plan?
Ingredients for a Resilient Sustainability Plan
The answer comes from Yossi Sheffi, Director of the MIT Supply Chain Management Program. His book, Balancing Green: A Practical Guide to Corporate Sustainability, argues that business executives' personal opinions on environmental sustainability are irrelevant. Sheffi points out that ecological sustainability is only feasible if a business is profitable and successfully addresses public relations, regulatory burdens, and a green consumer segment.
Green Logistics Satisfies Three Essential Sustainability Requirements
Sheffi presents three primary rationales for corporate sustainability efforts: (1) cutting cost, (2) reducing risk, and (3) achieving growth. He promotes green logistics, echoing many of the conclusions in my previous post on agile logistics and sustainability.
- Green logistics is a greener version of lean logistics. Lean logistics focuses on operational efficiency, increasing profits and value, while green logistics builds on this foundation by considering environmental impact.
- The three conditions Sheffi gives for corporate sustainability are satisfied. For example, a green logistics process might account for and minimize greenhouse gas (GHG) emissions and delivery failure risks while maximizing profitability.
- Continuous improvement aims at reducing resources, increasing value, eliminating waste.
- Energy usage is minimized, decreasing the byproducts of producing, transporting, storing, and consuming energy.
Green Logistics Creates a Resilient Plan
Agile logistics enables resilience, and green logistics is agile. Supply chains with lean processes pivot more quickly, and green logistics solutions that are user-configurable create a resilient approach. Further gains result from adopting a shipment-centric supply chain model, effectively transforming the entire enterprise into one big logistics process.
Example of a Resilient Solution
ProfiTOUR minimizes labor costs and GHG emissions by automating vehicle scheduling and routing. The process is tightly integrated with BigMile, so carbon reporting for regulatory agencies is seamless. Carbon accounting and delivery costs are manageable at the SKU level. ProfiTOUR is highly configurable at the user level, enabling rapid response to unexpected changes.
Sustainability initiatives come with some risk and it often hides in the details. Anticipating potential problems and a resilient plan will keep efforts on track no matter what the future brings. Green logistics is the key to a resilient sustainability plan.
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