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Sustainable supply chains, what does it mean?

admin2022-08-257

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Ravi Krishnaswamy: A supply chain is a vast network between large companies and their suppliers to develop, manufacture and distribute finished products to end users. More companies are becoming increasingly aware that their supply chain and sourcing decisions have a critical impact not just on the environment, but on society as well.

FROM raw materials sourcing to production to final delivery, the journey of a product in today’s global supply chain is rife with environmental and societal issues.

Excessive energy and water consumption, high waste production with low reuse rates, human rights issues and abuse of labour are just some of the core issues plaguing supply chains globally.

A supply chain is a vast network between large companies and their suppliers to develop, manufacture and distribute finished products to end users.

More companies are becoming increasingly aware that their supply chain and sourcing decisions have a critical impact not just on the environment, but on society as well.

Tackling climate change and shouldering social responsibility are progressively becoming business priorities for organisations.

A truly sustainable supply chain fully integrates environmental and societal values into its model at every stage. This means it is good for the planet, and employees and local communities are compensated and treated fairly.

As consumers and investors today become more conscious about their carbon footprint, they demand more transparency about where their products come from and how they are made.

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With decarbonising supply chains now in the spotlight, addressing Scope 3 emissions is essential for companies to achieve carbon neutrality, or net-zero.

Scope 3 emissions are indirect greenhouse gas emissions that occur upstream and downstream of the value chain (i.e., transport of supplies and products, business travel, and product disposal).

The supply chain is a major source of Scope 3 emissions. In the aerospace sector, Airbus alone possesses a network of roughly 8,000 direct and 18,000 indirect suppliers from more than 100 countries that supply everything from parts and components to systems and services.

In 2022, the lack of commitment to reduce Scope 3 emissions led a majority of Boeing investors to put a resolution to a vote and passed a requirement for Boeing to do so.

Geopolitical disruptions such as the Covid-19 pandemic, ongoing conflict in Ukraine, and the United States and China trade war have also exposed the constraints of today’s global supply chains.

For example, the semiconductor shortage amid the Covid-19 pandemic saw deficiencies at all points of the supply chain.

The industry is heavily concentrated in East Asia and the lack of diversification, combined with increased demand put a strain on the already limited supply. These shortages also have had a ripple effect.

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