No longer restricted to smaller markets or isolated geographical locations, today’s small and medium-sized businesses can access the global marketplace through strategic interactions with globally situated supply chain networks. Internationally based suppliers offer lower manufacturing costs and faster turn-around times because of their focus on their core competencies. Off-shore producers of virtually any size can reduce costs and improve profits by taking advantage of these lucrative production zones.
For many of these companies however, “implementing sustainable practices” is lower than “profitability” on the priority list. What many don’t understand is that doing sustainable business is also very good for business in general. These days, more and more off-shore producers are building sustainable practices into every aspect of their off-shore endeavors.
Sustainability Respects Environments
In too many cases, the reduced costs in offshore sectors can also represent increased stress in the physical environment surrounding the location of the factory or manufacturing plant. In Asia, where much of the world’s production is now taking place, it is not uncommon for local companies to cut corners and avoid regulations to eke out a little more profit from already low-cost contracts. For the manufacturers who hold those contracts, the resulting reduced product quality can threaten their company’s reputation and their customers with potentially devastating negative consequences.
Beyond the company, the impact on the physical environment can also cause environmental damage that affects not just the factory and business, but potentially the entire region or industry. Accordingly, many of today’s off-shore producers include the risks and rewards created by implementing sustainable practices when evaluating the actual cost of accessing these global manufacturing hubs.
Three Pillars of Sustainability
Societies throughout history have risen and fallen based on how they engaged with their physical environment. Today’s global society stands on the foundation of the industrial revolutions of the past two centuries, during which factory emissions of harmful carbon-based gasses began eroding the earth’s atmosphere. In 2005, the World Summit on Social Development (WSSD) identified three “pillars of sustainability” – central elements around which healthy practices should arise – that all societies should follow to reduce the negative impact of past activities on future generations:
This pillar encompasses an array of topics that affect all facets of human health and welfare. From ensuring clean air to protecting civil rights, WSSD participants encourage global enterprises to be aware of their impact on the social circumstances of the geographical regions in which they do business.
The atmosphere is not the only planetary element adversely affected by man’s destructive industrial activities. Elevated climate temperatures have caused escalating droughts and devastating floods on all continents. Deforestation has eliminated millions of oxygen-producing trees. Shrinking polar caps endanger the lives of millions of arctic and antarctic creatures. The long-term environmental impact of every industrial activity should be as relevant to corporate decision making as the potential economic impact on the enterprise.
It is this pillar that presents the biggest challenge. Governments and societies disagree on what connotes “sustainable” economic development. The poorer regions of the world are more likely to accept unhealthy conditions if it means their populations will earn more. But the wealthier regions aren’t doing themselves any favors by exploiting this vulnerability because both regions share the same ecosystem.
Unsustainable Business Practices are Expensive
Most consumers aren’t aware of the impact of environmental disasters on their daily lives. In late 2011, for example, the cost of computer hard drives rose substantially, but not because of holiday pricing schemes. Instead, the increased cost was attributed to the devastating floods in Thailand where much of the hard-drive parts manufacturing industry is situated. The country lost more than AU $58bn because of the environmental disaster, and consumers all around the world paid much higher prices for their new computers.
Shift the Board Room to Change Corporate Behaviour
To properly engage all enterprise aspects in pursuing sustainable corporate goals, the delegates to a roundtable discussion hosted by the Guardian in 2013 determined that leadership discussions should shift to a “resource efficiency agenda,” as opposed to simply a “profitability” plan. The “resource efficiency agenda” would establish the real value of “ecosystem services” like water, fuel, and land to the enterprise, and balance them as equals to other corporate assets. When this mindset is adopted, it was much easier for participants to make the business case for embedding sustainability into their daily activities throughout the corporation.
While no one company can prevent the type of disaster experienced in Thailand, when all companies work in harmony with sound sustainable principles, they can reduce the likelihood that such tragedies will not be repeated in the future. And by incorporating those practices into all aspects of their company (and advertising that fact), most enterprises will find that their economic agenda improves as well.
No company can afford to risk its livelihood or its reputation because of a failure to recognize the value of implementing sustainable business practices. In my book, you can learn how to plan a shift to better business practices. To mitigate common risks in your supply chain, including fraudulent vendors and factories, contact me today. I can be reached at (+61) 413 089 020 or via email: firstname.lastname@example.org