Environmental impact of global supply chains is leading to its continuous scrutiny, and framing of stringent regulatory provisions

Industry : Research    

“Environmental Sustainability” involves working to protect the earth’s resources and act in a way that best serves the interests of safeguarding the natural world, enabling the environment to support human life. It is a broad category that covers numerous concerns, such as biodiversity loss, resource depletion, pollution, and climate change. Business enterprises have a big impact on the environment, as they generate waste, emit greenhouse gases, disturb natural habitat, and consume the precious resources of the earth. Therefore, sustainable environment is crucial for all the business enterprises, irrespective of the industry they operate in. It is imperative to protect the resources of the earth from getting depleted by activities such as infrastructure development, technological development, resource exploitation, etc.

Crop yields are already declining due to extreme weather brought on by climate change, and water shortage is also rising. It also runs the danger of upsetting supply chains and driving up raw material costs. Businesses are required to address the underlying causes of climate change while also strengthening their own resistance to its effects and achieving competitive development by adopting a sustainable business model. Business enterprises are deemed environmentally sustainable when an organization conducts its operations without causing harm to the environment or the people, hence protecting its future business. Businesses that practice sustainability are prepared for the future and are taking the lead in combating climate change and getting ahead of the curve of carbon taxes (a levy imposed on businesses that emit carbon dioxide through their operations).

Businesses have significantly impacted the environment and have turned it into a serious concern that needs to be addressed. They need to evaluate and find out ways to keep a check on their activities, as they develop and evolve. Businesses enterprises can handle environmental concerns in the following ways:

1. Production process is one of the key activities that holds the largest percentage share for harming the environment. Every step of the production process, from resource extraction to manufacture and distribution, has the potential to have a detrimental impact on the environment. In addition, industrial production processes, particularly in industries such as transportation, energy, and manufacturing, have the potential to harm the environment. Therefore, a holistic strategy incorporating technical advancements, policy interventions, and sustainable habits is necessary. By embracing greener production methodologies, putting energy-saving measures in place, cutting emissions, and advancing the ideas of the circular economy, businesses are vital agents of change.

2. Businesses need to take into account the impact of their product lifecycles and supply networks on the environment as well. Companies can improve their bottom line and have a beneficial environmental impact at the same time by focusing on tactics to promote sustainable sourcing, reduce waste production, and minimize consumption of energy. Adoption of eco-friendly practices supports a company in enhancing its reputation, attracting consumers who are conscious of the environment, and reducing the negative effects of business operations on the environment.

3. Conducting environmental impact assessments is one of the vital strategies that needs to be considered. These assessments assist businesses in comprehending the precise environmental consequences of their activities, goods, and services. Through identification and assessment of their environmental impact, businesses minimize adverse consequences and maximize resource utilization. Reducing environmental effects frequently entails implementing sustainable technologies and production techniques. Businesses can develop sustainable sourcing of raw materials and collaborate with suppliers who follow ethical environmental standards by incorporating sustainability into their supply chain management.

4. Putting into practice efficient ‘waste management’ techniques is another crucial element. Businesses can implement recycling initiatives, cut down on wasteful packaging, and promote material reuse. By giving priority to the concepts of the circular economy, companies can reduce waste and increase resource efficiency. This entails adopting end-of-life disposal processes that are responsible and supporting robust, repairable, and recyclable product design.

Supply chain & procurement leaders are focusing on the following to ensure environmental sustainability is practiced by business enterprises in all sectors:

Heeding the call on climate change

Every company has an obligation to implement policies that lessen their impact on the environment and contribute to the creation of a more sustainable future. Since suppliers directly impact a company's Scope 3 emissions, supply chain optimization can significantly mitigate the negative environmental impact of the organization. A typical consumer company's supply chain bears the responsibility for over 79.9% of its greenhouse gas emissions and over 89.9% of its impacts on the environment, including geological resources, biodiversity, water, land, and air. The International Labor Organization (ILO) estimates that by 2030, high temperatures will cause over 2.1% of all working hours to be lost globally, or over 79.9 million full-time jobs. This has a substantial impact on jobs.

Adhering to requirements related to laws and regulations

1. Government mandates: Governments across the globe have enacted laws and programs to encourage sustainable practices. For instance, public procurement processes must take ethical, social, and environmental considerations into account, according to EU Public Procurement Directives. The US Green New Deal and the EU's Circular Economy Action Plan are additional similar examples.

2. Sector-specific mandates: Certain laws are in place in many businesses to guarantee ethical procurement decisions. For instance, a number of certifications and standards in the textile sector, like the Better Cotton Initiative (BCI) and the Global Organic Textile Standard (GOTS), mandate that businesses use sustainable materials to reduce the negative impact on the environment by their operations.

3. International standards: Standards such as ISO 14001 and 26000 provide businesses the direction on how to set up and keep up with sustainable practices. These standards deal with numerous concerns such as sustainable supply chain management, social responsibility, and environmental management systems.

4. Reporting provisions: Companies are frequently obliged to reveal their sustainability performance in order to show their dedication to sustainable procurement and to gain the trust of stakeholders. A popular framework that offers an extensive set of requirements for reporting on sustainability is the Global Reporting Initiative (GRI).

GVR's recommendation for implementing Environmental Sustainability

Perform reporting and analysis: Reporting on sustainability is essential for monitoring the progress of a company. For instance, teams can compare the environmental impact of a product before and after it is made using sustainable techniques by analyzing its life cycle. In addition, ‘spend analysis’ is essential for pinpointing the primary sources of risk and finding ways to shift procurement practices in the direction of sustainable ones. Businesses can streamline this process by using procurement software, which functions as a centralized database and tracking tool for orders, deliveries, suppliers, and budgets.

Monitor progress with the help of KPIs: The selection of KPIs for sustainable procurement is contingent upon the specific objectives and ambitions of the organization, as there are numerous options. A few recommended KPIs include greenhouse gas emissions, waste reduction, and spending percentage on eco-friendly goods and services.

Establish a framework for sustainability policies: It aids businesses in committing to their objectives through tangible measures. The framework must cover -

1. Clearly defined duties and responsibilities for suppliers, business divisions, and senior management, among other stakeholders participating in the procurement process.

2. A strategy for keeping track of performance that involves routine supplier audits and reporting on the status of reaching sustainability goals.

3. Specific objectives and targets, such as carbon footprint reduction by over 39% by 2030 or an increase in the usage of renewable energy sources by over 19% by 2028.

Evaluate suppliers' sustainability: Suppliers should be questioned about the KPIs and sustainability objectives laid by them to determine how sustainable the supply chain is. In case they don’t have it in place, questionnaires need to be filled by them to gather requisite information or certifications from third-party sources can also be referred.

Streamline operations: Below practices should be focused to achieve operational efficiency -

1. Encourage business travelers to carpool and prefer public transportation in order to cut down on greenhouse gas emissions.

2. Focus on optimization of goods transportation by either deploying hybrid / electric vehicles or by collaborating with delivery service providers who utilize green solutions.

3. Implement measures to save water, such as wastewater recycling, rainwater harvesting, installation of water-efficient equipment, etc.

4. Emphasizing on the usage of renewable or recycled materials in packaging or products.