Three Point Approach to measure supply chain sustainability

Three Point Approach to measure supply chain sustainability

Large corporations are becoming more institutionalized with regard to sustainability measurement and reporting. In 2015, more than 80% of S&P 500 corporations submitted a sustainability report. However, there are still significant differences in the quality, organization, and content of sustainability reporting. This is especially true when it comes to reporting on supply chains' sustainability performance.

 Large businesses generally have extremely intricate supply chains that have broad consequences. As a result, there might be thousands of indicators used to report on the sustainability of the supply chain. Consequently, deciding what and how to report in this area is a substantial challenge.

Reporting and Measurement Framework

Eight important factors are grouped into three categories focused on teamwork, communication, and the sustainability context.

First, the larger context in which the chain occurs must be expressly taken into account in any attempt to measure and report on supply chain sustainability. As a result, every link in the performance chain needs to be connected to environmental and social standards. These connections set sustainability reporting and measurement distinct from other types of reporting.

The following are the main contextual factors:

• Analyze all relevant effects. Because of the various economic, environmental, and social circumstances present in the supply chain, identifying consequences can be difficult. However, both good and negative repercussions on the global, regional, and local levels must be taken into account. Setting priorities and identifying implications can both be done by using value chain mapping as a starting point.

• Establish objectives and goals based on science. Sustainability objectives and targets must originate from sources other than the supply chain. It can be challenging, but it is possible to translate science-based thresholds, such as those in the planetary limit's framework, to the supply chain level. For instance, PwC estimates that until 2100, carbon emissions must be cut by 6.3% year. begin there.

• Construct context-based indicators. Indicators monitor the success—or failure—of goals and aims. Therefore, performance in relation to science-based goals and targets is expressed via context-based metrics. The Centre for Sustainable Organizations offers thoughtful examples of context-based carbon, water, waste, and social indicators even if these are still in the early stages of development.

Second, to monitor and report on sustainable performance, there needs to be broad collaboration with key partners throughout the supply chain. Simply stated, sustainability is too vast to tackle alone. Depending on the chain, various supply, manufacturing, transportation, warehousing, and retail chains may be considered key contributors. Some approaches for collaboration are as follows:

• Include all significant supply chain participants. The only method to locate hotspots and prevent shifting impacts amongst participants is to take into account all of the key players. Consider the fact that the sportswear business PUMA's supply chain partners were responsible for 94% of the organization's overall environmental effect, according to the company's first environmental profit-and-loss report. Most of these effects extended well beyond first-tier suppliers.

• Expand the chain's capability. All measurement and reporting are based on solid data. Key players might not have the ability to produce accurate and valid data, though. Well-established initiatives are in place at businesses like General Electric Co. to assist suppliers in addressing environmental, health, and safety concerns. The creation and reporting of important sustainability indicators require similar efforts.

• Align the systems for data collecting and analysis. Data collecting and analysis systems must be compatible across all major players. Boundaries must not cross each other to prevent double counting. Cloud-based reporting and other collaborative technologies could be useful, especially for real-time reporting. However, relationships are crucial; this is more than just a technical problem.

Third, the supply chain's sustainability performance must be adequately conveyed. This is crucial because supply chain management is predicted to become more transparent. Improved communication may also motivate important participants to take action to raise their performance. Important communication factors include:

• Totally disclose everything. Reporting should make it clear to interested parties where the biggest effects are occurring in the supply chain. Make the data and analysis supporting the measurement and reporting as accessible to the public as possible. There are numerous instances of how and why Unilever adopted extreme transparency in its supply chain.

• Bear in mind what is important. This may appear to be at odds with the necessity to take into account all important implications. But that is to make sure nothing important is overlooked. It is essential to maintain focus because measuring and reporting at the supply chain level requires a lot of work. The focus of CDP on carbon and water is a good illustration.

Realistic as You Move Forward

The process of getting a product into a customer's hands is all included in supply chain management. This includes the production, distribution, retailing, and procurement. Even more operations, such product recovery, reuse, recycling, or disposal, must be taken into account if reverse supply chains are included. Due of the vast breadth, it may be challenging to measure and report sustainability performance. 

There are difficulties in each step of the structure. For instance, some challenges have more obvious science-based aims and targets than others. The level of data quality can differ significantly along the chain. The expectations of various stakeholders vary greatly. In addition, there are undoubtedly additional approaches to organize supply chain sustainability reporting.

The framework serves as a compass rather than a road map and is meant to condense the basics. To that end, adding decimal places to impact computations is rarely a part of measuring and reporting supply chain sustainability.

 The most crucial ideas are to take action, identify problem areas, and connect supply chain performance to the larger world. It's unlikely that any reports or indicators will be flawless at first, but that's okay. The most important thing is to start, then work with key individuals all down the chain to develop better over time.