Benefits, challenges for organisations adopting sustainable supply chains
This shift towards sustainability has also been shown to deliver sustainable investment returns over the long term, making the organisation’s debt and stock more attractive to investors.
The goal of transitioning to a low-carbon economy, including achieving the net zero goals set for 2050, rests on the green transition of organisations’ supply chains. Supply chains for most organisations account for a significant part of the emissions attributable to them.
The Scope 3 emissions from supply chains are at least ten times the emissions from Scopes 1 and 2 for most organisations. Therefore, supply chains play a big part in the transition strategy for many organisations. From an environmental, social and governance (ESG) perspective, a responsible leadership approach is crucial to driving an organisation’s supply chain transition strategy.
This leadership approach enables the S and G pillars of ESG to drive the achievement of the E pillar, and it is needed to incentivise the right behaviours across many stakeholders in the organisation.
Therefore, organisations must understand the benefits they stand to reap and the challenges they must overcome in their efforts to transition their supply chain, including:
One of the key benefits of transitioning to a sustainable supply chain is the potential for long-term financial stability. By adopting circularity, which minimises waste and encourages recycling and reusing, organisations can operate more efficiently and reduce costs.
This shift towards sustainability has also been shown to deliver sustainable investment returns over the long term, making the organisation’s debt and stock more attractive to investors.
Furthermore, sustainable supply chains can foster high customer loyalty, including high employee attraction and retention rates.
Some challenges organisations must navigate include the high initial upfront costs of funding these transition initiatives. These funding demands would have to compete with the immediate short-term pressure to deliver dividends for investors, and organisations would have to balance these competing demands to ensure that such initiatives get allocated the required funds.
Organisations may also find themselves ahead of the curve in the jurisdiction where they operate, where such jurisdictions have yet to mandate the reporting of critical information required by organisations to make decisions on their transition, thereby requiring more effort.
In addition, organisations must adopt digital transformation across their overall supply chain processes to transition to a sustainable supply chain.
