Define & Commit:

Companies, manufacturers specifically, are under greater pressure today to measure and document their environmental and societal impacts.  Major manufacturers are asking their upstream supply chain partners to report on their impacts as part of sustainable supply chain initiatives.  Sustainable supply chain programs may be initiated to comply with environmental regulations, like the European Union’s RoHS (Reduction of Hazardous Substances) or California standards, or to strategically position with customers and investors, or to improve efficiency and save costs.

To get started with making a company a sustainable supplier in their supply chain, there needs to be a commitment and a defined approach to establishing a sustainability program.

Top management commitment

  • Assign one corporate owner for overall supply chain risk. Company procurement, operations or another central department should own overall supply chain risk management, with the right budget, resources and IT infrastructure to ensure logistics and regulatory compliance. [1]
  • While one function “owns” supply chain risk, other functions (legal, compliance, finance, ethics, corporate social responsibility, operations, business units) should be part of a proactive cross-functional approach to supply chain risk management, crisis management and post-crisis learning. [2]
  • Key departments in the company should partner to ensure well-strategized approach and areas for opportunity
  • Integrate environment and safety functions into the supply chain process using the same approach as any other business priority
  • Educate and inform company’s procurement professionals about internal strategies and external priorities
  • Set the expectation that sustainability is the responsibility of every procurement professional
  • Outline corporate values or principles

Business case

  • Company must develop a business case to understand the drivers for a sustainable supply chain, for making a change or for implementing an improvement.  Internal drivers or influencers may include impacts, costs and resources.  External drivers may include customers, stakeholders and regulations.
  • Company must understand the “voice of the customer” which includes requirements from customers, non-government organizations, purchasing agents, legislation and the community.   Through hazard and risk assessments, including health & safety, corporations can prioritize which metrics they apply to their company and industry and can then create corporate sustainability goals. In this define stage, a company may consider entering into collaboration and partnerships with other organizations and strategic entities.
  • Understand the marketplace
    • Gauge industry best practices
    • Identify stakeholder and customer concerns
    • Know current and future regulatory requirements facing the world’s supply chain
    • Engage, create dialogue, and collaborate with third parties and industry’s major influencers such as NGOs, industry consortiums, and others
  • Possible factors that relate to the overall supply chain risk [3] that should be considered when developing the business case:
    • Third party risks (supplier, vendor, distributor, agent, consultant, venture partner or partner)
    • Labor and human rights risks (including child labor, slave labor).
    • Health and safety risks
    • Ingredient/component and product quality/safety risks
    • Private or public procurement risks
    • Regulatory risks (specific to the industry in question)
    • Corruption, fraud or money laundering
    • Misrepresentation/false advertising
    • Environmental impact
    • Climate change/sustainability impact (water, energy, other resource use)
    • Business continuity and crisis management

Vision - Establish a sustainable supply chain vision and set objectives and targets 

Corporate Policy - Establish sustainability expectations for the company’s supply chain.  Reflect on corporate values, the marketplace, and key impacts including compliance, Health & Safety, labor practices, and human rights.  Understand the impacts of the products or services that the company delivers