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Or Each was headed by an MNC considered to be a “sustainability leader”—one in the automotive industry, one in electronics, and one in pharmaceuticals and consumer products. They task a point person on staff with extending the firm’s sustainability program to first- and lower-tier suppliers. When a customer places an order for a product, the … This approach is effective because the MNCs are hands-on: They offer training to suppliers and provide some incentives for implementing sustainability practices. For companies that invest in more sustainable and transparent supply chains, there are potential benefits across the entire business, including: Digital transformation in the supply chain allows companies to meet and exceed sustainability benchmarks while also innovating and growing their businesses. Companies now have a much greater ability – and obligation – to demonstrate corporate social responsibility and to share best practices for green supply chains and sustainable logistics. Thus, green supply chain … 2 Notes: 2 We interviewed more than 50 operations and supply chain leaders at global corporations, as well as our own and external experts in environmental sustainability. Reward suppliers for cascading sustainability requirements to lower-tier suppliers. All these concerns mean that lower-tier suppliers are unquestionably the riskiest members of a supply network. For more information about the research, see “The Missing Link? Sustainable Supply Chain Definition and Examples complete with current case study Slideshare uses cookies to improve functionality and performance, and to provide you with relevant advertising. Many multinational corporations have committed themselves to using suppliers with sustainable social and environmental practices, but suppliers—especially those low in the supply chain—often don’t comply with standards. In addition, sustainability activities can create important efficiencies. And on two occasions, firms have made changes to comply with MNC requirements (such as using key performance indicators to monitor supplier sustainability). The three MNCs also participate in the Carbon Disclosure Project’s (CDP’s) Supply Chain Program, a global data-collection platform in which suppliers disclose information about their carbon emissions. For many businesses, it took the arrival of COVID-19 to deliver the sharp jolt of realization as to just how outdated and vulnerable their supply chain operations were. Supply Chain Management with Zara as an Example. How successful supply chain management works is demonstrated by Inditex, one of the largest textile companies in the world based in Arteixo (Spain), with its fashion brand Zara. Suppose it does business with a foam manufacturer that has many other big customers in the electronics, appliance, and health care industries—each of which has different sustainability standards. And so on. If American and Japanese automakers rely heavily on a certain seat maker, for example, they can demand that it adhere to their sustainability standards. The first-tier suppliers are then in a tough spot. There are major supply chain sustainability and social responsibility elements to the program. Sustainable Supply Chain Definition and Examples complete with current case study Slideshare uses cookies to improve functionality and performance, and to provide you with relevant … Sustainable supply chains: why placing ethics over profits pays off Companies may talk about ethical supply chains, but if they don't independently monitor and audit suppliers, nothing will change However, even before the pandemic was upon us, some fundamental changes to consumer behavior had been causing global supply chain managers to begin reevaluating their operations. https://www.hollingsworthllc.com/best-supply-chains-companies-around-world The three MNCs have also created preferred-supplier programs aimed at fostering peer learning about sustainability. Although the tension in the exchange of resources between developing and developed countries lies at the heart of current sustainability activities, what these companies are actually doing to manage their supply chain has not yet been explored in depth in the literature. Goods can also flow in a reverse direction in a supply chain from the customer back to producers for purposes such as returns, reuse and recycling. In this example, the e-commerce company operates a website, and that website sells various products. For example, Pacific Gas and Electric (PG&E) uses response from the Electric Utility Industry Sustainable Supply Chain Alliance survey to gauge performance of its top tier suppliers on important aspects of environmental performance, including greenhouse gas emissions, energy and water usage, and waste generation. Sustainable supply chain management (SSCM) has become an established field of research. Business with effective sustainable procurement programs and solid commitment to sustainable supply chains see measurable ROI: They win more business and see sales revenue increases of up to 20%. sustainable supply chains, for example: • How does this driver influence the introduction of sustainable procurement? Firms such as Microsoft, Johnson & Johnson, and Walmart use this platform to engage their suppliers in being transparent about their environmental impact. If exemplary MNCs are having trouble ensuring good practices among their lower-tier suppliers, then “regular” firms, in all likelihood, are faring even worse at this. Several of these suppliers have started to set their own sustainability requirements for the suppliers they use. Of course, the main obstacle to implementing these changes is the associated cost. The automotive corporation, for instance, has a strong commitment to supplier diversity. Arguably, they need more incentives as well: Companies must reward them for hitting all three Ps—that is, not just cost, quality, and delivery goals but also social and environmental ones. And typically they don’t know much about the sustainability requirements imposed by MNCs—but even if they do, they have no incentive to comply. As one exasperated manager said while describing this conundrum, “I am just using the supplier you asked me to use!”. Most of the first-tier suppliers we interviewed told us that such training had led them to make substantial changes in their manufacturing processes and to begin asking their suppliers to adopt similar sustainability standards. Survey suppliers on their environmental, health, safety, and labor practices and on their procurement practices. One corporation, for instance, invites its most socially and environmentally responsible suppliers to join an exclusive group that enables them to strengthen relationships with the MNC and exchange best sustainability practices with one another. “The Missing Link? In 2018, we’ll continue to see progress in sustainable supply chains. Typically, these MNCs expect their first-tier suppliers to comply with those standards, and they ask that those suppliers in turn ask for compliance from their suppliers—who ideally ask the same from their suppliers. One such change has been the huge rise in demand for next-day shipping. “The demon in this place,” one of them said, “is the [lower-tier] suppliers that I know the least about.” Another said, “I don’t have control over the ones that pose the highest risks, so I’m losing sleep over them.”. Sustainable supply chain management should focus on improving recycling numbers, using more recycled materials, and reducing the amount of packaging used overall rather than eliminating all … Via industry organizations, share resources with competitors and major suppliers to achieve sustainability goals. These managers are responsible for maintaining a good and sustainable relationship with suppliers, focusing on reducing environmental impacts and improving social conditions throughout the supply chain. Digital transformation and the growing sophistication of digital supply chain technologies are playing a major part in the evolution of supply chain transparency and sustainability. 1700] defined SSCM as “the management of material, information and capital flows as well as cooperation among companies along the supply chain while taking goals from all three dimensions of sustainable development, that is, economic, environmental and social, into account which are derived from customer and stakeholder requirements. Encourage first- and lower-tier suppliers to take advantage of sustainability training programs offered by industry organizations. Supply chain sustainability (SCS) is a holistic view of supply chain processes, logistics and technologies that affect the environmental, social, economic and legal aspects of a supply chain's components. A sustainable supply chain is one that fully integrates ethical and environmentally responsible practices into a competitive and successful model. The RBA, for example, requires its full members to conduct approved audits annually for at least 25% of their own high-risk facilities and 25% of their high-risk suppliers’ facilities. It requires its first-tier suppliers to allocate 7% of their procurement spending to minority suppliers. Supply chain sustainability is a complex issue, and the more people who are working to solve it, the better. Today, it is a much more holistic term. These principles are built upon the realization that socially responsible practices and products are not only good for people and the planet, but are also good for building positive brand awareness, competitiveness, and long-term profitability. These fall into four broad categories: The MNCs we studied set and monitor social and environmental targets for their first-tier suppliers regarding second-tier suppliers. We also studied a representative set of each MNC’s suppliers—a total of nine top-tier and 22 lower-tier suppliers, based variously in Mexico, China, Ta… The Strategic Role of Procurement in Building Sustainable Supply Networks,” by Verónica H. Villena, Production and Operations Management (May 2019), and “On the Riskiness of Lower-Tier Suppliers: Managing Sustainability in Supply Networks,” by Verónica H. Villena and Dennis A. Gioia, Journal of Operations Management (November 2018). Provide training and foster peer learning among first-tier suppliers to help them improve their procurement practices with lower-tier suppliers. We rely on logistics service providers for all of our transportation and much of our distribution center operations and work with them to drive efficiency improvements and innovations to make our supply chain more sustainable. Different functional units of an MNC (engineering, procurement, sustainability) may pursue different agendas in interacting with first- and lower-tier suppliers—with results that do systemic damage to the corporation’s overall sustainability effort and undermine its credibility. The MNCs in our study have successfully addressed some of the problematic sustainability practices of their suppliers. About the art: Edward Burtynsky’s photographs explore the manufacturing landscapes of China and their central role in the global supply chain. In this article we describe various ways that MNCs can defuse the ticking time bomb those risks represent. … Supply Chain Examples. Our Coalitions . To move towards a sustainable supply chain one needs to include considered metrics into the specifications and evolve the procurement process. What is Sustainable Supply Chain Management (SSCM)? Embracing environmentally sustainable … To understand the situation and develop ideas for tackling it, we conducted a study of three supply networks. Furthermore, most lower-tier suppliers are not well known, so they receive relatively little attention and pressure from the media, NGOs, and other stakeholders. As ethical supply chain practices become a greater and more immediate priority for businesses, compliance goals and sustainability benchmarks are also becoming more standardized. Like it or not, they have to work with preapproved suppliers—but they are held accountable if those companies mistreat workers or harm the environment. However, a responsible supply chain is not necessarily sustainable. 2016).However, major trends and shortfalls in SSCM research include the need to comprehensively address stakeholder influences and to elaborate upon appropriate approaches to … First, there are supply chains that operate within legal limits and comply with agreed-upon contractual requirements. For example organisations need to consider the whole life cost of goods and services from cradle to grave. Audit suppliers regarding sustainability standards. At three of the companies, temporary workers made up nearly 50% of the workforce, and turnover rates sometimes reached 100%, making it difficult to implement viable environmental, health, and safety programs. But, realistically, ours is a global economy and we will always have to rely on some international sources for certain raw materials and manufacturing capabilities. When we asked a representative at one supplier why his company had violated a 60-hour workweek limit, he gave us a frank explanation: “We didn’t want to tell our customer that we can’t produce its products on time, because otherwise it’s going to try to find someone else that can. They can increase efficiencies for suppliers, who can use a standardized self-assessment or audit to satisfy many customers and thus avoid duplication. (For the specific selection criteria, see the “About the Research” sidebar.) Part of this will mean decreased reliance on overseas suppliers and manufacturers. There are two parts to your message—communicating your overall goals and then outlining the standards that each contractor and supply chain member must meet to contribute to those overall goals. The MNCs should also work directly with their suppliers’ procurement units on the best ways to disseminate sustainability requirements throughout their supply networks. The following are illustrative examples of a supply chain. For example, Seuring and Müller [28, pp. There is a sustainability course for you. There is a growing need for integrating environmentally sound choices into supply-chain management. To further encourage first-tier suppliers to cascade the MNCs’ sustainability requirements into their own supply networks, MNCs can use supplier sustainability awards, long-term contracts, and preferred status. And to encourage widespread dissemination of best practices, they need more direct contact with the procurement people at their first-tier suppliers. The three MNCs in our study have taken a number of steps to promote suppliers’ social and environmental responsibility: These are all beneficial measures that other companies should consider adopting. But our customer didn’t give us enough notice to hire enough skilled people to do the job.”, First-tier suppliers, for their part, rarely concern themselves with their own suppliers’ sustainability practices. Many of the 22 lower-tier suppliers in our study are small or medium-size private firms that provide little information to the public—characteristics that, in effect, make them almost invisible. Whether due to changing regulations or seeking good PR, many companies are working to reduce pollution and other issues in their chain. Green supply chain of child’s crib manufacturer. It has six, 15-hour modules. To alleviate that problem, MNCs could invite suppliers’ procurement personnel to their sustainability training sessions (along with environmental, health, and safety personnel) and encourage them to participate in industrywide sustainability training. The generic supply chain begins with the sourcing and extraction of raw materials. Additionally, when MNCs help their first-tier suppliers become full members of an industry association, those suppliers must then comply with industry standards, which means they have to assess their own suppliers’ sustainability. We know that logistics optimization through technological innovations and data integration can make supply chains more efficient and more financially sound. In 2018, we’ll continue to see progress in sustainable supply chains. Firms can also borrow some of the specific strategies that our MNCs use to spread good practices throughout their supply networks. Read Item ; Business Sustainability Risk and Performance Index 2020. Forest Positive Mobilising resources to build a forest positive future. The MNCs we studied delegate elements of lower-tier-supplier sustainability management to their first-tier suppliers. To explore this problem—and identify solutions—the authors studied the supply networks of three MNCs deemed to be sustainability leaders. The problem, ironically, often starts with the MNCs themselves. What’s more, all those scandals involved first-tier suppliers. That’s often because they’re struggling with sustainability issues themselves. We should add that although companies at every level of the supply network need to provide more training and incentives for their procurement officers, supplier firms are likely to do so only if MNCs lead the way. The raw materials are then taken by a logistics provider to a supplier, which acts as the wholesaler. A third shortcoming we observed is that although our three MNCs devote considerable effort to developing their first-tier suppliers’ sustainability capabilities, they have little direct contact with their first-tier suppliers’ procurement personnel. Twenty years ago, the word sustainability was almost completely synonymous with eco-friendliness. 6 Sustainable Supply Chains: A Guide for Small- to Medium-sized Manufacturers Examples of Supply Chain Sustainability in Business In addition to reviewing existing research in supply chain sustainability… (4) They were certified as having a large percentage of plants with effective quality-management systems (ISO 9001), environmental management systems (ISO 14001), and safety-management systems (OHSAS 18001). Our MNCs collaborate with their competitors and major suppliers to develop and disseminate industrywide sustainability standards. SAP offers a comprehensive portfolio of software to help businesses maintain agility and move forward even in times of disruption. For example, PwC calculates that carbon emissions must be reduced by 6.3% per year until 2100. In order for a strategic supply chain sustainability plan to work, it’s important that benchmarks, targets, and guidelines are clearly spelled out. As a relatively young discipline, sustainable supply chain management is evolving, and new models of sustainable procurement are emerging. The MNCs we studied make a point of collaborating with international organizations and NGOs that share their goals. They should make the same message clear to their procurement officials and create incentives for them to pursue not only economic goals but also environmental and social goals. Sustainability concept and its relationship with supply chain management The concept of sustainability is designed around there elements, environmental, social and economic development. In China and Taiwan we visited 10 lower-tier suppliers, all of which had marginal environmental practices, dangerous working conditions, and chronic overtime issues. Each was headed by an MNC considered to be a “sustainability leader”—one in the automotive industry, one in electronics, and one in pharmaceuticals and consumer products. … As a result, those people are poorly informed about the MNCs’ sustainability requirements and cannot communicate them clearly to their own suppliers, much less enforce them. Sustainable supply chains work by setting consistent standards. Even when they do attract attention (for sexual harassment problems, for example, or chronic overtime demands), we found that they do not feel the need to address the issues involved. Start there. Currently, SSCM plays a crucial role in mature markets as well as in emerging economies (Esfahbodi et al. The first-tier suppliers we interviewed noted that the MNC periodically checks to see if the target is being met and creates opportunities to help them network with minority lower-tier suppliers. Work with major first-tier suppliers to map the firm’s supply network. Countless reasons to adopt a more sustainable supply chain exist, from taking advantage of government benefits to committing to a mission that speaks to your customers. Contact the team. But all corporations can and should do more. The hoped-for cascade effect was seldom occurring. Alternatively, MNCs could engage the top executives at their first-tier suppliers and explain the importance of building a sustainable supply network, with the goal of motivating them to catalyze the dissemination of sustainability requirements to lower-tier suppliers. A company’s entire supply chain can make a significant impact in promoting human rights, fair labour practices, environmental progress and anti-corruption policies. Starbucks is a leading brand that claims to be sustainable; Let’s see if Starbucks could be considered a case study for the success of sustainability in supply chains Sustainable Supply Chain Initiative (SSCI) Launches Public Consultation on Primary Production Scope. Sustainability Measures: As major companies and countries around the globe move towards sustainable production, all supply chains become impacted. Remember, all those suppliers were connected to model firms that were working proactively to encourage sustainability. Let’s look at two different examples of a supply chain. The activities involve the entire stages of the product’s life cycle, from procurement of raw material, manufacturing, use and reuse till the final recycling or disposal. (2) They were members of the Carbon Disclosure Project (CDP) and the United Nations Global Compact. The Strategic Role of Procurement in Building Sustainable Supply Networks,”, “On the Riskiness of Lower-Tier Suppliers: Managing Sustainability in Supply Networks,”. Definition of Sustainable Supply Chain Management (SSCM): SSCM may be perceived as the proper management of related environmental, social, and economic impacts in constructing and maintaining effective and efficient global supply chains. Ideally, multinational corporations will use a combination of approaches—direct, indirect, collective, and global—to encourage sustainable practices throughout their supply networks. Goods can also flow in a reverse direction in a supply chain from the customer back to producers for purposes such as returns, reuse and recycling. 12 shares Share on Twitter; Share on Facebook; Share on Linkedin ; Consumers expect more from the brands they buy from than ever before, and an ethical supply chain is now a requirement in the experience economy. This may explain why most of the lower-tier suppliers in our study lacked programs to dispose of toxic waste and in fact had no environmental management program whatsoever. These strategies are hierarchical. Additionally, the three MNCs work with their major suppliers to map the connections and interdependencies in their supply networks, including those at the lower-tier level. In fact, 83% of supply chain … A supply chain is the end-to-end system that creates products and services and delivers them to the customer. Examples include fundamentally redesigning the supply chain network by decentralizing production using 3D printing or developing innovative business models that include both the public and private sectors. They require first-tier suppliers to set their own long-term sustainability goals. Green supply chain can be defined as a means of recognizing the complex network of activities which are involved in delivering a finished good to the end user or customer. Consider the embarrassing scrutiny that Apple, Dell, and HP endured not long ago for sourcing electronics from overseas companies that required employees to work in hazardous conditions, and the fallout that Nike and Adidas suffered for using suppliers that were dumping toxins into rivers in China. Social and environmental concerns were notably absent. United States Several directors of the three MNCs we studied viewed this as a big problem. Collaboration can make sustainability initiatives more feasible. Fueled by consumer demands, increasing regulations and a mounting business case, steering supply chains in a more sustainable … The following are illustrative examples of a supply chain. Awareness is key. While the first two decades of the sustainable procurement field focused on codes of conduct, supplier compliance, and auditing, procurement professionals in the vanguard today are looking to do much more with their sustainable procurement efforts. MNCs, too, are handicapped by ignorance. The ethical supply chain: Definition, examples, stats . Sustainable Supply Chain Definition. Countless reasons to adopt a more sustainable supply chain exist, from taking advantage of government benefits to committing to a mission that speaks to your customers. Dr. Madhav Durbha is the Group Vice President of Industry Strategy at LLamasoft, where his team helps customers and prospects solve various supply chain … Through understanding ways to mitigate ethical supply chain problems, this gives hope to many companies to move towards a greener manufacturing process. Management ( SSCM ) this, MNCs need to consider the electronics maker Flex, a responsible supply chain logistics... Aimed at fostering peer learning among first-tier suppliers by using sustainability performance indicators that capture their requirements for specific., ahead of receiving mandates from their workers s photographs explore the manufacturing landscapes of China and central. Also created preferred-supplier programs aimed at fostering peer learning among first-tier suppliers to allocate 7 % Global... Sustainability beyond first-tier suppliers studied the supply networks, a responsible supply chain of child ’ s at. 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