Can we make supply chain management sustainable?

Sustainable Street

By Cate Hull

For those of us who work in the freight and supply chain management world, the question of sustainability is often a core consideration.

Trucks, rail, cargo ships and air freight aviation are always fighting the battle to balance profitability and efficiency with environmental impacts. More efficient engines with lower emissions and more environmentally-friendly fuels are part of the solution.

Some in the industry argue that there isn’t a conflict between profitability and sustainability.

Last March, DHL Global Forwarding released a white paper, “Unlock the true value of your Supply Chain: Business Success through Sustainable Supply Chain Management,” which makes the case for a new approach, Sustainable Supply Chain Management (SSCM).

The Center for Advanced Sustainable Management of Cologne Business School and M3TRIX GmbH, a consultancy company for sustainable business transformation, jointly developed the white paper.

The report supports the proposition that companies can unlock untapped potential in their supply chain by adopting an embedded sustainability model.

“A drive towards sustainability is happening now. We see evidence that taking decisions in the interest of sustainability provides a source of innovation, and growth for a lot of our customers and business partners. Stronger employee engagement is another upside as sustainability leadership instills a sense of pride and inspires employees,” said Angelos Orfanos, executive vice president global marketing and sales, DHL Global Forwarding, in the report.

The report identified actions businesses can take that will make them better environmental stewards while increasing profitability. Included are case studies that demonstrate the approach can work.

According to SSCM, a sustainable approach to supply chains can help reduce costs, particularly in logistics, due to a reduction of transportation costs and reuse of products and materials, the report states.

SSCM promotes replacement of the long-standing, linear ‘take, make, dispose’ production model with a circular ‘reduce, reuse, recycle, and return’ method, driving process and product innovation, thereby generating additional revenue streams.

Engaging in environmentally and socially responsible business practices helps strengthen ‘license to operate’, supports employer branding and improves a company’s image for the public and NGOs, while helping mitigate potential reputational risks, according to the report.

“Sustainability is not something for only forward-thinking companies, but rather an approach that causes a differentiated outcome in both your bottom line and reputation,” said Rick Bingle, vice president supply chain at REI.

Kathrin Brost, global head of GoGreen, DHL Global Forwarding, is a leading advocate of SSCM.

“There is no doubt that there are strong ethical and environmental arguments in favor of sustainable business practices. Scientific and practical evidence now shows that following the sustainable supply chain management (SSCM) approach also creates added value for businesses,” she said. “We found that cost and emissions reductions are not contradictory, but often complementary. At DHL Global Forwarding, and in the entire Deutsche Post DHL Group, we are confident that our commitment to sustainability, illustrated by our GoGreen program, will contribute to retention of our market leading position in the long-term.”

A trend towards SSCM appears to be taking root among supply chain CEOs. The report cites a survey that found 81 percent of CEOs believe their company’s reputation for sustainability is important to consumers’ purchasing decisions and 75 percent of people around the world believe companies can take specific actions that increase profits and improve economic and social conditions in the community where they operate.

The report identified four key components of SSCM:

Sustainable Logistics – Which aim to systematically decrease the environmental burden of transportation and supply chains.

Reverse Logistics – Which promote the reuse of products and materials and involves all post-sale product-related activities.

Sustainable Supplier and Vendor Management – Which centers on sustainable supplier selection, performance measurement, benchmarking and supplier development.

Internal Sustainable Operations Management – This covers internal programs related to company operations, total quality environmental management, inventory management, material substitution and process modification and internal closed-loop operations.

“Less is more. A focused approach is key to paving the way for a sustainable supply chain. Transition will only be successful if sustainability key performance indicators (KPIs) and targets as well as business KPIs go hand in hand,” wrote Brost in the report.

Cate Hull is the CEO of FreightExchange, a freight logistics and management firm based in Sydney.