Developing Sustainable Global Supply Chains Darian Global Sourcing

Sustainable Supply Chains

It has become increasingly apparent that sustainability should be a key focus for businesses and consumers in 2021, with the COVID-19 Pandemic and climate crisis highlighting the impact of global supply chains on natural resources and the environment.

The ‘Capgemini Research Institute’ latest report signifies that 79% of consumers changed their shopping preferences based on social and environmental impacts, demonstrating it is a factor that could place businesses above competitors in their selected industries. They also found that over 60% of business executives they spoke with confirmed that sustainability is crucial to increasing brand value, customer loyalty and overall profits. This is because the commitment to saving the environment and becoming carbon neutral creates an emotional connection between the brand and consumer, where both entities can play their part in reducing pollution and achieving carbon neutrality.

It is therefore vital to establish sustainable global supply chains to ensure the longevity of businesses in 2021 because most customers seek to buy ethically produced products from sources that care for the environment and share the same moral values.

We are getting to a position where consumers are starting to reward sustainable brands

Eelco Smit, Senior Director of Sustainability at Philips, 2020.

The Strive to be Carbon Neutral

Developing Sustainable Global Supply Chains Darian Global SourcingIn April 2021, the UK Government released a new target to slash the country’s emissions by 78% by 2035, helping us to reach more than three-quarters of our way toward the net-zero target by 2050. The goal of achieving net-zero by 2050 relies massively on the impact of businesses and the way they source products. UK companies can set an example to their competitors by striving to reach this target, and customers will be willing to support this cause for the good of the environment.

The pursuit of becoming carbon neutral is important for businesses because they control the interests of their employees and customers, thereby transforming sustainability into a public, moral and civil duty. We have reached a stage where businesses need to comply with environmental legislation, such as the Environmental Protection Act of 1990 which brings together the control of: pollution, raw material usage, waste minimisation and energy efficiency. By striving to become carbon neutral, businesses are helping the country and the world protect the environment, whilst building a positive brand and company ethos.

Ethical Supply Chain Practices

Developing an ethical and sustainable supply chain will help improve your company image in the eyes of customers who want to help the environment. Having a supply chain that minimises harm to the environment will also improve the happiness of the workers at a company because it proves you are committed to doing everything you can to be more sustainable. The statistics below support the benefits of sustainable products for both customers and businesses;

Developing Sustainable Global Supply Chains Darian Global Sourcing

Source:  Capgemini Research infographic

Before developing a green supply chain, businesses need to take into account the ethical practices of their procurement strategy along with the effect it will have on customers. Essentially, you want your supplier to have the same company ethos and values, ensuring you can trust one another to operate morally and environmentally.

One question typically asked about a new supplier is whether they engage in fair labour practices so that all of their staff are paid fairly for the work they conduct. Another focus should be their compliance with environmental legislation so that their products are cruelty-free and eco-friendly. The transportation of goods is also hugely important to global supply chains because, ideally, you want the most sustainable methods of transport and the least amount of distance for maximum sustainability.

These factors are important because your company will be partnering with the supplier – so sharing the same beliefs and values will generate more trust and efficiency.

Green Procurement Trends following 2021

The graph below depicts the rate of goods imported to the United Kingdom between 2017 and 2021, measured in GBP(£) billions.

Developing Sustainable Global Supply Chains Darian Global Sourcing

Currently, goods imported to the UK advanced 1.1% from the previous month to a seven-month high of GBP £51.83 billion in July of 2021, following a 3.2% rise in the prior month. Both purchases of goods and services imports increased 1.1%. Overall, the goods imports were up from non-EU countries by 2.7% but fell from EU countries by 0.5%. This reveals that the majority of British goods are imported from nearby, with supply chain travel distance becoming shorter and more sustainable.

The graph above also shows a clear reduction in the procurement of goods since the start of the COVID-19 Pandemic, with 2020 falling to less than £40 billion worth of imported goods as opposed to the highs of the previous years. Nevertheless, the rate in which goods are being imported and procured are increasing again, with expectations to meet and exceed the previous levels in the coming years. The pause in the procurement and import of supplies during the Pandemic has given companies time to re-evaluate their global supply chains and source from countries closer. This has improved sustainability because of less travel time, and the lockdowns have encouraged more businesses to be conscious of their supply chain contingencies in times of adversity.

Negatives of Global Supply Chains

When developing sustainable global supply chains you get the positives of choosing manufacturers and suppliers from around the world, providing flexibility and best value when sourcing products. However, there are also negatives associated with global supply chains that need to be taken into account during the development phase to ensure production and inventory levels are managed.

Negative impacts consist of political, economic and social issues in different countries which could jeopardise the production and transportation of supplies. Problems involving social unrest, large scale protests/strikes and even war can affect the rate at which supplies are produced and delivered. In areas prone to conflict, the transportation of goods also becomes difficult as the supplies need to be protected to avoid potential damage or military intervention. Similarly, countries that are subjected to natural disasters such as hurricanes, tropical storms, flooding or wildfires could have goods destroyed, or delayed transportation for long periods of time.

There are also different standards and regulations when procuring goods across borders, as different laws can prohibit certain items and quantities from being transported out of specific countries. Communication barriers are another issue, as differences in language can interfere with supply chains and procurement involving foreign companies. This leads to issues with setting up meetings, forming agreements and the general speed of the procurement process, potentially requiring translators and interpreters as additional costs.

All of these negative impacts need to be understood before forming a supply chain – otherwise, companies will source from areas of high risk resulting in less sustainability and efficiency.

Sourcing Global Supply Chains

Finding and developing a global supply chain that is sustainable should be the goal for businesses that want to find the best value products within an effective timescale.

Darian Global Sourcing can help companies find a sustainable global supply chain that is flexible, reliable, and provides the greatest value for money. We take into account all locations and formulate the potential risks and rewards to help you make an informed decision on your global procurement strategies. We will guide you to grow your business to beat competitors by partnering with a supplier that you can rely on.

For more information call Liz Samandi on +44 (0)1858 433096 or visit our contact page, and our expert team will be pleased to assist you.

References

Sustain-Community. 2020. Why Sustainability Is Important in Business: Growing Consumer Preference. [ONLINE] Available at:

https://sustain-community.com/sustainability-is-important-in-business/#:~:text=Why%20Sustainability%20Is%20Important%20in%20Business%3A%20Growing%20Consumer,intention%20to%20lower%20consumption%20impact%20on%20natural%20resources. [Accessed 9 September 2021].

Capgemini Research Institute. 2021. How sustainability is fundamentally changing consumer preferences. [ONLINE] Available at:

https://www.capgemini.com/research/how-sustainability-is-fundamentally-changing-consumer-preferences/?utm_source=pr&utm_medium=referral&utm_content=cprd_none_link_pressrelease_none&utm_campaign=CPRD_cri_cpr. [Accessed 9 September 2021].

Trading Economics. 2021. United Kingdom Imports. [ONLINE]

Available at: https://tradingeconomics.com/united-kingdom/imports#:~:text=Imports%20to%20the%20UK%20surged%2012.9%20percent%20from,17.4%20percent%20while%20services%20imports%20advanced%200.6%20percent.

[Accessed 9 September 2021].

BizFluent. 2019. The Disadvantages of Global Supply Chain Management. [ONLINE] Available at: https://bizfluent.com/about-6629439-information-technology-international-business.html. [Accessed 9 September 2021].

SupplyChainBrain. 2021. Six Steps to an Ethical and Sustainable Supply Chain. [ONLINE]

Available at: https://www.supplychainbrain.com/blogs/1-think-tank/post/30725-six-steps-to-an-ethical-and-sustainable-supply-chain#:~:text=%20Six%20Steps%20to%20an%20Ethical%20and%20Sustainable,the%20reputation%20of%20an%20organization%20is…%20More%20. [Accessed 9 September 2021].