How Investing in a Sustainable Supply Chain Cuts Costs

In recent years there has been a growing push for companies to improve their supply chain sustainability. With the majority of a company’s climate impacts originating from its supply network, improving supply chain sustainability efforts can significantly reduce a company’s overall environmental impacts.

Supply chains are often extremely complex, and addressing the indirect environmental impacts from them can be a daunting and expensive task. However, improving sustainability efforts in a supply chain can have long-lasting effects that enhance business practices and dramatically cut costs with relatively small investments.

This article examines how investing in a sustainable supply chain can reduce your business’ costs over time.

  1.  Increased Efficiency

One of the most immediate ways that sustainable supply chains improve businesses is through increased efficiency. Sustainable supply chains reduce unnecessary steps and procedures, and maximize efficiency. The majority of a company’s environmental impacts typically come from its Scope 3 emissions, which can include:

  • Shipping
  • Manufacturing processes
  • Waste generation and disposal
  • Fuel and energy-related activities

However, sustainably-focused supply chains can eliminate a number of these activities through increased communication and a reduction of unnecessary processes. Additionally, environmentally-conscious networks can lead to:

  • Minimized waste
  • Streamlined production
  • Minimized shipping
  • Reduced energy costs from renewable sources
  • Minimized material usage

Companies can use quality control management software, audits, and third-party certifications to assess and modify their supply networks to improve efficiency, and ensure environmental efforts along the way.

Reduced costs go hand-in-hand with improved efficiency. Costs are quickly cut when sustainable supply chains eliminate unnecessary steps and suppliers, and supply chain transparency gives businesses more control over where their spending is directed.

  1.  Risk Reduction

Studies found that during the height of the Covid-19 pandemic, companies with greater supply chain sustainability were far better equipped to handle supply chain disruptions. By increasing communication throughout the supply network, businesses were more able to anticipate and prepare for major obstacles and shortages.

This kind of resilience extends beyond major global disruptions and helps prepare companies for any kind of socioeconomic and environmental obstructions. Many companies employ factories in developing nations that lack substantial health and safety precautions, which can lead to major incidents like the 2012 Bangladeshi factory fire. By improving sustainability through improved social and environmental efforts, these tragedies can be prevented and companies can be better prepared to handle unforeseen incidents.

The resilience that comes from an optimized supply chain helps companies prepare, plan, and avoid major disruptions. Sustainability efforts also lend a hand in increasing resilience and risk reduction as supply chains that are powered primarily through renewable energy sources are far less likely to face heightened costs due to fluctuating oil prices. Renewable energy sources are typically cheaper and significantly more stable compared to fossil fuels, and result in high savings after initial installation investments. 

  1.  Greater Customer Approval and Brand Reputation

As the threats of climate change increase, a growing number of consumers are adopting ethical shopping practices to push the market towards sustainability. Environmental efforts in a company lend a competitive edge in an increasingly green-focused market, especially as 85% of consumers worldwide switch their buying habits to be more sustainable.

Improving supply chain sustainability is one of the most efficient and impactful ways a company can improve its environmental and social footprints. Building sustainable credentials with consumers and clients can dramatically affect brand reputation, and being able to quantify environmental efforts throughout the value chain will solidify your company’s repute as a responsible organization.

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