Companies are under growing pressure from regulators, investors, and customers to show stronger commitment to the environment and social responsibility. As part of this, they are required to disclose their supply chain emissions, which is becoming more obligatory. Under Greenhouse Gas (GHG) reporting standards, emissions from supply chains fall under Scope 3. Also known as value chain emissions, these typically represent the largest portion of a company’s total GHG emissions. Sustainability in the supply chain has become an essential corporate strategy to remain competitive in the global energy transition.
A lack of disclosure presents risks to investors and the company itself. Several major Canadian fashion retailers discovered the severity of such risk when it surfaced that their Chinese manufacturers were using forced North Korean labour. In 2024, Canada will be implementing The Fighting Against Forced Labour and Child Labour in Supply Chains Act which requires companies to submit yearly reports on all imported and manufactured goods. 2024 will also see new mandatory ESG reporting requirements for Canadian financial institutions. It's reasonable to expect similar reporting requirements to eventually extend to all sectors and entities.
What is Supply Chain Management?
Supply Chain Management is the practice of overseeing and coordinating all the activities involved in the production and delivery of goods and services, from sourcing of raw materials to distribution to end customers. It involves planning, organizing, and controlling the flow of goods and services, as well as the management of relationships with suppliers, manufacturers, distributors, and customers. The goal of supply chain management is to ensure that the right product is delivered to the right place at the right time and at the right cost, while also minimizing waste and maximizing efficiency and profitability.
What is "Sustainable" Supply Chain Management?
While conventional supply chains focus on minimizing waste, and maximizing efficiency, and profitability, sustainable supply chain management adds the goals of upholding environmental and societal values while ensuring long-term viability. The aim of a sustainable supply chain is to create a closed-loop system that considers the entire lifecycle of a product, from sourcing of raw materials, to production, distribution, and end-of-life disposal. It seeks to reduce waste, greenhouse gas emissions, and other harmful impacts, while promoting ethical sourcing, fair labour practices, and collaboration among all stakeholders.
For most companies, building a sustainable supply chain begins by creating policies which detail the terms under which that company will engage third parties in its supply chain. For example, requiring a supplier to minimize or eliminate plastic waste in product packaging. Larger companies are in a better position to influence their supplies by leveraging their account, but that does not mean that smaller companies also cannot promote sustainability with their suppliers.
What are some of the benefits of a Sustainable Supply Chain?
A sustainable supply chain can bring several benefits to the originating company and its suppliers. These include:
reducing costs through increased efficiency and waste reduction
reducing environmental impact and resource consumption
optimizing logistics to save on transportation costs and storage
improving ethical practices and social responsibility
enhancing brand reputation and customer loyalty, and
fostering innovation and collaboration.
Which Canadian companies have established a sustainable supply chain?
Here are a few examples of Canadian companies that are committed to establishing a sustainable supply chain.
Interface: a global commercial flooring provider, Interface set an ambitious goal to achieve net-zero carbon emissions by 2040. The company has implemented a closed-loop recycling program, which allows it to reclaim and reuse materials from end-of-life products, reducing waste and resource consumption.
Lush: a cosmetics company known for its handmade, natural products, Lush has implemented a variety of sustainable sourcing initiatives, such as sourcing organic ingredients, using renewable energy sources, and reducing waste. They also support various community and environmental initiatives, such as reforestation programs and animal protection campaigns.
Tentree: a Canadian clothing company that maintains a sustainable supply chain by prioritizing the use of eco-friendly and recycled materials, partners with manufacturing suppliers that adhere to social and environmental standards, and emphasizes fair trade and ethical practices. They aim to source sustainable materials, ensure transparency and traceability in their supply chain, and work towards reducing the environmental impact associated with conventional production processes.
Why is it important?
Becoming a sustainable supply chain is important because it helps to reduce a company’s negative environmental and social impacts, and provides long-term value for companies and society as a whole. It also contributes to the achievement of the United Nation's Global Sustainable Development Goals and the transition to a more sustainable and equitable future.
For ways to improve sustainability in your supply chain, check out our Sustainable Business Operations page or contact us for more.
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