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Special Edition: Sustainable Supply Chain

Challenges and benefits of implementing a sustainable supply chain

By Rory Harrington , 08-Nov-2011
Last updated the 08-Nov-2011 at 11:43 GMT

Challenges and benefits of implementing a sustainable supply chain

The incorporation of sustainability throughout the supply chain involves constant innovation, commitment from company leadership and a realization that it is an indefinite process, said Datamonitor.

But companies prepared to make a long term pledge to supply chain sustainability will reap the rewards both in financial and brand enhancement terms, Mark Whalley, consumer analyst for the group, told FoodProductionDaily.com.

In the first part of our special edition on sustainability in the supply chain we look at the steps needed to implement such a system, as well as the potential benefits and pitfalls.

Implementing a sustainable supply chain

In global industries such as food processing and packaging, supply chains are long and complex. So how do companies embark on what can be a daunting task?

Patrick Penfield of Syracuse University, in the US, highlights the importance of the long term commitment needed by companies in order to make sustainability work as key. He decries the short termism that dominates many commercial cultures and calls on business chiefs to lead the change.

“CEOs must be sustainability leaders. They have to be relentless about instituting a culture of eliminating waste, using environmentally-friendly processes and products, conserving resources as much as possible,” said Penfield.

He adds that education of employees is “imperative” to show them the economic and societal benefits of sustainability. This should be followed by a sustainability audit of a firm’s supply chain to develop a baseline measure in order to gauge where the outfit needs to go.

Penfield suggests the audit should focus on energy use, environmental costs, material recovery, water usage, transportation, products, processes, reverse logistics, packaging and social responsibility.

Only once this is complete can deficiencies be determined, the process of improving sustainability performance begin and the laying down of goals and objectives, he said.

However he cautions that companies need to develop objective that “make sense “for themselves. “Incremental steps towards the goal should be the plan,” said Penfield. “These goals should be incorporated into the overall objectives of the organization.”

Challenges and opportunities

While the theory seems neat and achievable, Datamonitor analyst Whalley said the reality is more complicated.

He explained that while many companies are making significant efforts in the area of sustainability, there remains a good deal of consumer skepticism around the issue, with the suspicion that so-called ‘greenwashing’ is commonplace.

A second challenge is that although consumers declare that sustainability in products is important to them, there is little evidence that it actually has a major effect on buying habits

“An issue is that companies don’t always get much credit from consumers for the sustainability initiatives they introduce,” said Whalley. “A second challenge is that sustainability advances quickly become commoditized. Before long everyone has it - and that is a problem for brands who are trying to market a product and make it stand out as a sustainable one.”

 

Indefinite trend

So what is the incentive where does this leave food and packaging players looking to boost sustainability in the supply chain?

The Datamonitor expert said there are significant benefits for companies that fully embrace the sustainability ethos.

“There can be cost savings, for example, if companies reduce the amount of packaging,” he said. “But just as importantly, sustainability fits into the overall ethic of a brand. You can make claims regarding sustainability and corporate social responsibility with much more conviction if, say, you source an ingredients from a sustainable source.”

But key to success is a long term approach to sustainability, he stressed.

“Sustainability is not just a long term trend, I would go as far to say it is an indefinite trend,” said Whalley. “Consumers very skeptical of greenwashing and if they consider that a company is only being sustainable in the short term or is being opportunistic, this can be counter -productive. That is one reason why big companies such as Nestle, P&G and Unilever take a long term approach.”

And the fact that sustainability advances quickly become commoditized is a positive driver for innovation. Companies that don’t keep up can be seen as lagging behind or lacking commitment.

“From an objective point of view this is a benefit as the competition to be more sustainable drives advances and new initiatives,” he said. “Those that do not invest in sustainable initiatives will be more conspicuous and it can become a reason not to buy a product.”