Our benchmarking survey set out to find what sets sustainability leaders apart from the rest. 57 percent of the respondents were classified as leaders in sustainability based on the steps they’ve taken in preparation for a greener future and supply chain. 89 percent of businesses state that increasing sustainability is a strategic or high priority, and the overwhelming majority are either leaders or advanced.
But what distinguishes leaders from the rest?
The differentiator for sustainability leaders is their approach towards operational changes. They’re rethinking every part of their operation, from a single package to their distribution process. We found three key strategies that could serve as a blueprint for other supply chains:
The first step in optimizing operations towards sustainability is rethinking the current processes within your supply chain. The “circular economy” might not be a mainstream approach yet, but sustainability leaders are pushing to make it a reality. Circular economy projects enable the re-sale, re-use or upcycling of previously sold products. This can include the product itself, or the materials uses to manufacture and deliver them, often by the manufacturers themselves. Circular economy projects can be hard to do because they run counter to the traditional one-way flow of goods from producer to consumer.
While this approach is at odds with the traditional supply chain, it can significantly cut costs for both consumers and manufacturers and reduce emissions and waste dramatically. Leaders are four times more likely to be implementing circular economy projects than advanced supply chain organizations. Unsurprisingly, 71 percent of sustainability leaders in our survey have either implemented or are in the process of implementing a circular economy project.
H&M and Zalando are among the latest fast fashion brands creating sustainability initiatives in hopes of making the fashion industry more circular than linear. The goal is for the fashion industry to make better use of the planet’s scarce resources through long-lasting design, repair, reuse, resale and recycling clothing.
Both retailers have opened second hand clothing retailers for consumers to shop more sustainably. Zalando launched their free digital application called “Zircle” in July 2018, acting as a marketplace for consumers to resell clothing items. In 2019 alone, Zircle extended the life of more than one million fashion items.
H&M is a majority-owner of Sellpy, a Swedish online second-hand shop. In 2021, Sellpy expanded availability in over 20 more European countries. The retailer believes second-hand is currently one of the fastest growing market segments in the fashion industry. With more than 20 million euros invested in Sellpy, H&M has collaborated with Sellpy to give the brand access to an H&M warehouse in Poland.
A company’s sustainability efforts should not only fall on the shoulders of supply chain leaders. Strategic partnerships play a key role in helping businesses achieve their sustainability goals. By partnering with the right suppliers, supply chains can unlock new innovations and join in on partnerships to reduce emissions. These types of initiatives are universally leveraged by leaders: 98 percent ranked supplier sustainability as either “important” or “very important.”
When picking a supplier, companies can make sure they meet specific sustainability requirements and certifications. Major retailers have led the way by making supply sustainability a key part of their vetting process for new vendors.
Packaging has an incredibly big impact on supply chain sustainability. It is typically used and discarded, often several times, while goods move from the manufacturer to the store shelf to the end consumer. Additionally, co-packers, shelf re-stockers and even customers themselves might throw away plastic packaging rather than recycle it. That waste – not to mention the resources used to replace it – adds up fast.
Leaders are three times more likely to be shifting to more sustainable packaging materials than advanced supply chain organizations.
Leaders are three times more likely to be shifting to more sustainable packaging materials than advanced supply chain organizations: 77 percent said they’ve prioritized the use of sustainable packaging materials, conscious of packaging waste costs and its impact on the environment
IKEA, known as a multinational retailer of ready-to-assemble furniture, is a leader in the pursuit of sustainable packaging. IKEA has been looking for ways to upgrade to sustainable packaging since they began phasing out single use plastic in January 2020. The company has since set a new goal of phasing out plastic from consumer packaging in two steps: an all new range of products by 2025 and then their current running range by 2028.
In an effort to contribute to a world without waste, the company is searching for innovative solutions to replace cardboard as the source material of the classic IKEA flat packs. The goal is to create packaging surrounding IKEA products be as sustainable, affordable, and protective as possible.
ESG: the latest supply chain imperative
The latest concern in supply chain sustainability – and across all industries – is the concept of ESG, standing for Environmental, Social and Governance. All three words are paired with their own set of responsibilities, activities and business processes deep within every part of an organization. ESG will only continue to rise in importance in the coming years thanks to initiatives passed by local governments.
Environmental represents conservation of the natural world, Social represents consideration of people and relationships, and Governance represents the standards for running a company.
While there is no exhaustive list of ESG examples, a few related issues to each principle are:
- Climate change
- Carbon emissions
- Air and water pollution
- Energy efficiency
- Waste management
- Water scarcity
- Customer satisfaction
- Data protection and privacy
- Gender and diversity
- Employee engagement
- Community relations
- Human rights
- Labor standards
- Board composition
- Audit committee structure
- Bribery and corruption
- Executive compensation
- Political contributions
- Whistleblower schemes
The Environmental pillar of ESG is the current focus for most companies’ sustainability initiatives – as well as the focus for the rest of the blog. However, Social and Governance will rise in importance in the coming years.
Keep sustainability at the core of your supply chain operations
In order to incorporate sustainability to your supply chain, you must remember to keep it as a core focus in everything your business does. Supply chains are fast-paced, constantly evolving to keep up with rising customer demands and expectations. Instead of considering sustainability a trade off to delivering goods quickly, increased productivity or saving costs, work on adapting sustainable processes to your supply chain one step at a time.
In short, everyone knows that sustainability is important. Most supply chain operators think it comes down to being leaner and more efficient, but leaders make sustainability central to their supply chain operations.
Want to learn more on what current supply chain sustainability leaders are doing? Visit our benchmarking practice or download the full Benchmarking report for more details on the survey results.
For further insight on supply chain sustainability based on the Supply Chain Benchmarking survey, download the infographic and supply chain performance guide on sustainability.