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I hear it over and over, this myth, that says “sustainable” doesn’t equate with “profitable.” But is it true?

As the global economy becomes even more complicated, international producers are recognizing that “sustainable” actually brings with it added value, beyond just the good feelings engendered when “doing the right thing.” A 2013 PricewaterhouseCoopers (“PwC”) report revealed that, of 500 supply chain executives interviewed who were actively pursuing sustainability as a corporate strategy:

  • 25 percent experienced increased customer satisfaction (read: “more repeat sales”);
  • 35 percent saw improvements in the environmental impact of their company (read: “enhanced compliance with legislation”) and
  • a full 43 percent recognized cost reductions in their supply chains (read: “more profits.”)

Here are three steps you can take to improve your company’s sustainability and capture the hidden wealth that might be trapped in its supply chains.

1. Map your supply chain universe:

Diagraming every contributor to your operation may sound like an obvious strategy, but many corporations do not track the participants in their supply chains and are often unaware of the full reach of their enterprise. By identifying and categorizing each contributor, you can determine which present the biggest challenges to your overall sustainability process. It may be that some suppliers are so afoul of your standards that you’re better off replacing them altogether. You may also learn that some offer strategic sustainability benefits that your enterprise has not yet accessed.

Once identified, some companies group their suppliers into tiers, based on preferred business practices, cost control factors or compliance management. All suppliers can then be assigned appropriate performance indicators for both production and sustainability, and the parent corporation would then have an accurate and trackable sustainability system in place.

2. Collaborate with your suppliers

Off-shore producers can gain critical industry insights by evaluating how the practices of their suppliers impact the supply chain as a whole. Sustainability includes not just clean environmental and economic practices, but also the less-obvious social and ethical practices, ignorance of which may cloud the credibility of the company.

Ergo, to achieve a fully functioning and sustainable enterprise, collaboration among all supply chain participants is a critical element for the success of each of them. Clearly, you selected these supply chain contributors based on how their parts and materials enhanced your proprietary products. When you work with them to improve their internal controls and processes, you are also helping them to help you achieve your corporate goals. And, truly successful collaborations should expand beyond the factory floor, and result in improved regulatory compliance, improved civic and community relations, and even the development of innovations that can improve the profitability of both organizations.

3. Create a clear plan to establish and maintain sustainability

The PwC report indicated that organizations with a clearly defined sustainability plan were three times more likely to experience increased revenues, reduced costs, and market share gains. Having a plan also assisted in maintaining focus throughout the company on both the sustainability goal and the financial bottom line. Study participants stated that keeping the plan handy made it easier to balance clean practices with appropriate expenses. The question for the C-Suite shifted from “what’s the lowest cost?” to “what’s the lowest sustainable cost?” When sustainability was routinely factored into the decision-making process, the decision itself became both a better business practice and a more defensible argument for board members and shareholders.

A fully fleshed out plan will include details on how suppliers all through the chain will manage each aspect of their particular production processes, from the selection of environmentally sound materials to the use of appropriately compensated labour.

No company can afford to risk its livelihood or its reputation in today’s intense global market. I have been advising off-shore producers about sustainability options in China and Asia for almost two decades.

In my book, you can learn how to avoid some of the pitfalls that can occur in these markets. You can also take your own quick ethical risk assessment here :http://vantagecompliance.com/23-questions-to-ask-yourself-about-ethical-risks-in-your-supply-chain/. (Estimated 4 minutes duration, and with an instant result via email).

For assistance to evaluate the sustainability practices of the participants in your supply chain you are welcome to contact me directly. I can be reached at (+61) 413 089 020 or via email: carsten@vantagecompliance.com

 

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