Nine top tips for making your supply chains more sustainable and resilient
Over the past 12 months, businesses have faced a ‘perfect storm’ of pressures on global supply chains. So, how can we create more sustainable, resilient, equitable and responsible supply chains for the future?
Businesses of a range of sizes and sectors have been grappling with the ongoing energy crisis, increasing extreme weather events and international trade frictions in recent times – plus all manner of other challenges placing immense pressure on global supply chains.
With this in mind, edie recently hosted a webinar and masterclass on the theme of ‘supply chain sustainability: Moving from risk to resilience”.
These online events, hosted in association with BSI and Carbon Quota, initially look place on Wednesday 15 February 2023 and are now available on demand. Also participating were expert speakers from Ibstock Brick and Golden Agri Resources (GAR).
During the events, speakers explored why engaging suppliers is crucial to delivering on net-zero carbon and biodiversity commitments. They also explored the evolution on best-practice methods for identifying and rectifying human rights abuses in supply chains and enhancing social sustainability in key supplier regions more broadly.
Here, edie rounds up nine of the top tips provided by expert speakers during this recent webinar and masterclass.
- Start with an appropriate common goal
The supply chain is often the part of a business’s value chain where the greatest deal of negative impacts occur. CDP estimates, for example, that the average large multinational corporation will generate 11.4 times more emissions in its supply chains than its operations. Supply chains can also be hotspots for waste, water use, deforestation, modern slavery and child labour, depending on the sector.
Whether it’s on emissions, forests, nature, human rights or another topic, speakers emphasised the importance of having a common goal for your business and its suppliers to work towards.
Ibstock Brick, for example, has a 2040 net-zero target for operations and is aiming for a net-zero value chain before 2050. The firm’s group sustainability manager Michael McGowan said this target was not only designed with binding climate targets in the UK in mind, but with the scale of ambition and pace of action across the building materials value chain.
- Assess your data baseline and plan to improve your data
As one would expect in a discussion on emissions in the supply chain, the importance of collecting high-quality data and interpreting it effectively was emphasised during the webinar.
Carbon Quota’s co-founder Nathan Tiller discussed how, at the beginning of a data collection journey, the process may seem overwhelming and you may be asked questions you don’t have answers to.
“What it comes down to is focusing on what you can do… everybody has to find a place to start,” he said.
Tiller walked attendees through Carbon Quota’s levels of data quality. Most firms, he said, start with using at least some spend-based proxy figures. He urged listeners “not to spend too much time here” and prioritise collecting more specific data, to reach a higher level of integrity. For example, more specific data could be calculated using factors such as where manufacturing occurs and how much energy is expended using the process, as data on the emissions associated with the energy grid is publicly available through organisations like the International Energy Agency.
The aim from here is to use digital platforms to collect actual supplier-specific data to achieve more granularity, starting with Tier 1 suppliers. Tiller explained that many larger businesses are reaching this stage on their data journey at the moment, and it will likely be some time before they have specific data from a range of suppliers below Tier 1.
- Beware of ‘data fatigue’
As more end-user businesses request data from suppliers, the question arises as to how these suppliers – often small businesses with tight margins – should allocate the time and resources to respond. Dilemmas also arise at end-user businesses when suppliers report data in different ways and at different speeds.
To this latter challenge, Tiller noted: “Your job is to keep up with the fastest, and pull along the slowest…. You have to work with the differences that exist. Even with them, you can make something of it.”
To the former, Tiller recommended the creation of a “very simple” questionnaire for end-user businesses just starting out, with four or five questions relating to your most material topics.
GAR’s chief sustainability communications officer Anita Neville similarly urged companies in the same sector, for example consumer goods, to collaborate to create a single template for sustainability disclosures questionnaires.
Acknowledging that such a streamlining of this process is likely a way off, Neville said end-users and larger suppliers can “seek to minimize workloads” by “creating a common language” across the supply chain. In this way, different stakeholders understand what is being asked of them. In GAR’s space, palm oil, a shared language between manufacturers, traders and growers is important. None of these groups are homogenous, Neville emphasised, with some growing happening at scale but much of the industry accounted for by smallholders working on two hectares or less.
- Start in your ‘hotspots’
Once you have data beyond the basic level of spend-based proxy numbers, you can start to identify which suppliers contribute most to things like your emissions, water or waste footprint.
Starting with these suppliers, Ibstock Brick’s McGowan explained, can be beneficial. It prevents efforts from being spread too thinly and it enables deeper, more focused collaborations. From these collaborations, learnings can then be rolled out elsewhere.
Within the last 18 months, Ibstock has completed a materiality assessment covering its Scope 3 emissions from suppliers. It revealed that around 60% of these emissions come from just 40 suppliers, so it has opted to prioritise work on climate mitigation here. These are mainly suppliers of goods and services.
GAR’s Neville also spoke of “the value of doing, then sharing”. In this, she meant that larger players can either implement innovative solutions in their own operations or at their largest suppliers, before “customizing” them and providing them to smaller suppliers.
- Meet suppliers face-to-face
All webinar speakers agreed that creating sustainable, resilient supply chains depends as much on communication and collaboration as it does on good data. GAR’s Neville described transparency as “the start of the journey, not the end”.
“Trust trumps everything,” she said. £You can have the best tech, the best systems, but if you don’t have relationships with suppliers – trust which you generate by being able to talk in their language – then you really can’t get very far.”
“Through the pandemic, we pivoted as much as we could, but we couldn’t do any field work. We were worried that this might stall our progress.”
Ibstock Brick’s McGowan also spoke of the importance of in-person meetings and not “hiding behind” digital communications. His business held its second supply chain engagement day with a climate focus late last year and 26 suppliers were represented.
He elaborated@ “Our [digital] system is at the very early stages – we’re just building it and it’s not mature yet. But net-zero won’t happen unless we collaborate and engage and speak 1:1 with our suppliers. Supplier engagement days are vital. We can have the best [digital] system in the world, but the most important thing is direct communication and collaboration.”
- Avoid a top-down approach
Building on discussions regarding face-to-face meetings, GAR’s Neville emphasised that suppliers should be collaborated with – not talked at. Trust, she said, will not be built by larger end-users simply telling suppliers what to do. Suppliers want to know the benefits of the work, for their buyers and themselves. They also want to know how they will be supported through the process, with any training, tools or finance.
She said: “If you can start from the intention of being helpful in return for data, emphasise that this is about strengthening the relationship, offering assistance, then that goes a long way.”
GAR regularly hosts supplier conferences on specific topics but also provides deeper 1:1 coaching sessions for suppliers struggling with issues they feel they cannot overcome themselves.
- Measure and communicate risk and opportunity
Much of the webinar focused on reducing emissions in the supply chain and other environmental impacts. Failure to take these actions doubtless brings moral and reputational risks for businesses, but could also cause financial risk, which is not always well-understood.
In order to build the business case for risk mitigation – and for investment in resilience-building initiatives such as climate adaptation – McGowan explained that Ibstock Brick assesses the potential disruptions, likelihood of risk, potential financial impact and recovery time of key climate risks. It covers physical, input-related, and regulatory risks, plus risks related to external stakeholders.
It also looks at the opportunities of taking action to prevent these risks, such as longer-term agreements with suppliers, or chances for innovation or skills development.
- Challenge your assumptions on social inequality and human rights abuses
After the webinar, we hosted a 30-minute masterclass on tackling modern slavery in supply chains with BSI. Representing them on this session was BSI Knowledge Solutions’ director of sectors and standards Anne Hayes.
Hayes started by defining modern slavery and emphasising that, at present, more people are living as slaves than ever have at any other point in history. At least 24.9 million people globally are thought to be in forced labour, the majority of which are women and children.
Hayes called this “an issue that is part of our lives and we cannot ignore”. She highlighted that, while some sectors and parts of their supply chains are well-known as human rights risk hotspots, professionals should dig deeper and look into precisely where risk is and who is impacted. For example, the UK Government has stated that British nationals account for more than one-third of modern slaves in the UK, whereas the assumption is that the most-represented groups are migrants.
Hayes also noted that companies can no longer use the excuse of not being in direct control of supplier practices, arguing that “nobody in the UK escapes the shadow of modern slavery overseas”. Businesses have responsibilities in their organisations, across their supply chains and in the wider operating environment under international frameworks and, increasingly, under national laws.
- Acknowledge that human rights issues have environmental impacts
There is often said to be an increasing knowledge of the links between environmental issues and social issues, but the link between human rights abuses and environmental harm is not always acknowledged.
“This is not just about the social justice factor – modern slavery does impact the environment,” Hays explained. “Combatting slavery can help to protect the environment, as some environmentally damaging practices will cease to be profitable without slave labour”.
One practice that she highlighted as an example was the clearance of mangrove forests in the Bay of Bengal. Slaves are forced to cut down forests to make way for fish farms. This releases carbon and also reduces coastal resilience to extreme weather. Then, in time, the industrial fish farming harms the nutrient balance of the waters.
The UN’s Sustainable Development Goals are a valuable tool for many businesses to link impacts and targets in social and environmental issues. Any business claiming alignment with the Goals should be advocating, as per Goal 8, for an end to modern slavery by 2025.