A sustainable value chain responsibly adds value to a product or a service as it makes its way from a supplier to a customer. As a growing number of enterprises are coming to learn, this is critical as they vie for business in increasingly competitive markets.
Companies can add value by making a process more efficient, by sourcing more ethical or climate-friendly raw materials for a product or by utilizing renewable energy. A sustainable value chain also offers significant business benefits, including potential cost savings and reputation enhancement.
Yet executives are frequently unfamiliar with the concept of a sustainable value chain and its potential value to the business. All too often, executives look at value chains exclusively through the lens of risk management and economic value, not realizing that sustainability can—and should—also be a part of the equation. That’s why it’s crucial to educate executives about a sustainable value chain and arm them with information.
A first step: Ensure executives understand that, for many companies, the supply chain is responsible for most of their impact on the environment. Enterprises can make a big difference by altering their supply chain versus tweaking other business operations.
Then, as you prepare to present the benefits of a sustainable value chain to your company’s executives, consider the following list of major benefits:
- Reducing risk. When companies work with suppliers that share their sustainability goals, processes run more smoothly. This can reduce supply chain disruptions and mismatches between supply and demand. In addition, companies can weather global crises better by sourcing materials locally and reducing reliance on overseas third parties.
- Cost reduction. Sustainable sourcing, which can include working with local suppliers, can help reduce overhead costs. According to the World Economic Forum, supply chain sustainable sourcing practices can help lift revenue by as much as 5% to 20%. In this way, sustainability can create a platform for growth.
- Better compliance with legislation. Put asustainable value chain plan in place and track metrics with supply chain management systems. This shows regulators that you are committed to complying with environmental laws and regulations and doing your part to help lower carbon emissions.
- Avoiding company brand damage. Enterprises that prioritize a sustainable value chain may have less chance of facing scrutiny for a supplier’s poor environmental practices or having an incident at their own manufacturing site with environmental implications.
- Reducing ethical sourcing risks. Building sustainability into your value chain enhances transparency and can help you ensure your suppliers are engaging in sound, ethical business practices.
- Gain a competitive advantage that can attract new customers. More and more consumers are gravitating toward companies that are committed to addressing global issues likedeforestation, human rights and water security. They’re willing to pay more for products made by companies that reflect their values. In the International Trade Centre (ITC) survey of retailers in large European markets, 85% reported an increase in sales of sustainable products in the past five years.
- Enhanced interest from investors. Activist investors make choices based on sustainability and environmental impact, and they want more transparency. Asolid, sustainable value chain can pique investor interest.
At GEP, with today’s top business challenges in mind, we help companies seamlessly transform their supply chain through a combination of strategy, software and managed services. Click here to learn more.