Greening the Supply Chain: Trends and Challenges in the Current Landscape

Modern business owners inherited an economic landscape that focused on profitability at the expense of the environment (Vachon, 2008). Effective supply chain management demands a keen eye for profitability and flexibility, as the modern business landscape is as competitive as it is dynamic (Zugang, Anderson, & Cruz, 2012). There are several forces pushing businesses to adopt more sustainable practices, including increased government regulation and public pressure (United Nations, 2016). Regardless of the reasoning behind these transformations, socially responsible corporations that focus on a sustainable supply chain may be able to embody both characteristics. After a brief overview of the elements of a supply chain, the tenets of sustainability, and current challenges for commerce, this paper will provide examples of corporations that demonstrate strategies for greening the supply chain. When major companies take the initiative to put environmental concerns at the forefront of their planning and strategy, the benefits extend beyond their profit margins.

Background

A brief discussion of the elements of a supply chain and the definition of sustainability are necessary before specific corporate strategies are discussed. It is also important to describe the contemporary context in which businesses are operating. 

Elements of a Supply Chain

Understanding the elements of a supply chain is the starting point to see how it can be made more sustainable. These elements include procuring raw materials, manufacturing goods, and transporting the finished product to retail locations (Mentzer et al., 2001). Essentially, a product must be made, moved, and sold. The goal of an effective supply chain is to maximize profits by overseeing all of the processes and participants connected to the business cycle of a particular good or service (Mentzer et al., 2001). Traditional manufacturing is not the only place to look for greener supply chains. The service industry, with its production of various experiences and retail opportunities, is also seeking ways to insert sustainable endeavors into their logistics (McPherson, 2018). Innovative supply chain professionals should be investigating each element of their supply chain in order to maximize profit. Contrary to popular belief, one way to do this is to consider sustainable options. 

Sustainability

Sustainability refers to the level to which a good, process, or entity can lessen or negate environmental impact (Sneddon, Howarth, & Norgaard, 2006). The process by which an organization adopts policies and practices that promote sustainability is known as “going green” or “greening” (Griskevicius, Tybur, & Van den Bergh, 2010). While there are some entities that have been practicing it for much longer, sustainability has been a hot button issue for the past ten to twenty years (Griskevicius et al., 2010). One major concern of sustainability-minded people is the carbon footprint of a process, company, or individual. Environmentalists aim to reduce carbon emissions and thereby reduce the thinning of the ozone layer (Sneddon et al., 2006). A primary method to reduce carbon emissions is to utilize energy sources that do not come from fossil fuels (Sneddon et al., 2006). Proponents refer to this as “clean” energy. The supply chain requires energy for each of its steps and parts, so it is a good place to look when considering greener business practices. 

Current Challenges for Commerce

Companies are increasingly seeking sustainable solutions to their supply chain challenges. The United Nations (2016) listed several reasons that companies make efforts to green their supply chain, including avoiding legal repercussions and the associated fiscal penalties, meeting consumer expectations, and increasing profit. One driving force to seek sustainable solutions comes from the response to recent environmental catastrophes like storms, floods, and wildfires (McClimon, 2019). McPherson (2018) used the term “climate resiliency” to describe the goals of the proactive solutions on trend companies are delivering to their consumers. Acting in this way extends organizational resiliency to the consumers and their communities. Another factor influencing the drive to green the supply chain is the new generation of workers entering the labor pool (McClimon, 2019). These younger people, who are influenced by Greenpeace and overall tend to be more environmentally conscious, may influence corporations to seek sustainability as a pillar of their operations and corporate philosophy. 

Examples of Sustainable Supply Chains

There are several examples of companies that have sought sustainable solutions to the challenges of their supply chains. Procurement of raw materials is one area that companies can focus on, like the food company that facilitated a transformation on its farms from using fertilizer to using a sustainable compost system (Scott, 2019). Another company restricted its suppliers based on their ability to responsibility source wood and actively avoid deforestation (Scott, 2019). One beauty and chemical company worked with its suppliers to lessen carbon dioxide emissions (Scott, 2019). The following examples detail the multi-leveled work several major corporations are doing to green their supply chains. 

Walmart 

Though once lambasted for its corporate irresponsibility, retail giant Walmart has dedicated resources to focus on sustainability in an effort to challenge its current competitor, Amazon. According to their Global Responsibility Report, Walmart (2018) recognized the need for sustainable practices as they seek to maintain prominence and increase profit. Some of the popular retail company’s goals include procuring raw materials from sustainable sources, conserving environmental resources with their agricultural suppliers, and conserving energy in their factories. As a major retailer in the United States, Walmart is in a position to green the supply chain of the companies that depend on it to sell their finished goods. 

Ford

Ford, the vehicle manufacturing and retail company, is another organization that has committed to greening its supply chain. As reported in their recent Sustainability Report, Ford (2018) has dedicated resources for conducting detailed risk analysis on each element of the supply chain. The goal is to find areas to increase conservation efforts and lessen destructive practices. In addition to seeking socially responsible sources for their raw materials like rubber, tin, and cobalt, the company is shifting production to incorporate renewable raw materials like recycled plastic, coconut fibers, rice husks, and wheat straw (Ford, 2018). 

FedEx

A third example of an organization working to increase its sustainability is FedEx. This delivery company has sought to reconfigure their logistics to reflect more environmentally responsible choices. The company has found several ways to reduce its fossil fuel consumption and carbon dioxide emission, including alternative fuel sources made from forest waste, hybrid vehicles that run on electricity, and recycled packaging (FedEx, 2018). The company has several sustainability goals for the near future, such as renewable energy at its warehouses, fuel efficiency for its delivery trucks, and lower emissions for its airplanes (FedEx, 2018). Since they are in the business of logistics, FedEx’s sustainability efforts have a trickle-down effect and end up greening the supply chains of businesses that count on them for transportation. 

There are many examples of corporate initiatives to create a more sustainable supply chain. Although seemingly antithetical at first glance, the innovative use of high-quality renewable materials is having a positive fiscal effect on companies (FedEx, 2018; Ford, 2018; Walmart, 2018). Each aspect of the supply chain can be evaluated for opportunities to reduce environmental harm. Corporations may benefit from lower costs as supply chains are made more efficient. They may also see higher levels of consumer interest in response to their push for sustainability, as environmental concerns figure largely in the decision-making process of many modern consumers (Zugang et al., 2012). Lastly, as leaders in the corporate landscape, entities like Walmart, Ford, and FedEx are positioned to affect change by creating more sustainable supply chain practices for themselves and the companies that rely on them. 

Conclusion

In the past, business practices have been incompatible with sustainability (Vachon, 2008). Companies have caused deforestation, used harmful pesticides, and contaminated water supplies. Offshoring and outsourcing of manufacturing may temporarily reduce production costs through tax benefits and lower labor standards (Sneddon et al., 2006). However, the ultimate price is paid when corporations must account for an enormous logistical carbon footprint. While acceptable some time ago, perhaps due to consumer ignorance, those actions and attitudes would probably not be as welcome in today’s world (Zugang, et al., 2012). The examples provided of sustainable supply chains demonstrate that modern commerce does not require profit and planet to be mutually exclusive. As more consumers and business owners turn towards greener options, innovations that halt the destruction of the planet will become more prevalent. A green supply chain can improve a company’s bottom line and contribute to a better existence on Earth.

References

FedEx. (2018). 2018 Global citizenship report: Multiplying opportunities. Retrieved from http://csr.fedex.com/pdf/FedEx_2018_Global_Citizenship_Report.pdf

Ford. (2018). Sustainability report 2017/2018. Retrieved from https://corporate.ford.com/microsites/sustainability-report-2017-18/index.html

Griskevicius, V., Tybur, J. M., & Van den Bergh, B. (2010). Going green to be seen: Status, reputation, and conspicuous conservation. Journal of Personality and Social Psychology, 98(3), 392–404. doi: 10.1037/a0017346

McClimon, T. J. (2019). 5 corporate social responsibility trends for leaders to watch in 2019. Forbes. Retrieved from https://www.forbes.com/sites/timothyjmcclimon/2019/01/03/5-corporate-social-responsibility-csr-trends-for-leaders-to-watch-in-2019/#35c21aff553d

McPherson, S. (2018). 8 corporate social responsibility (CSR) trends to look for in 2018. Forbes. Retrieved from https://www.forbes.com/sites/susanmcpherson/2018/01/12/8-corporate-social-responsibility-csr-trends-to-look-for-in-2018/#79a413d840ce

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Scott, M. (2019). Companies look to supply chains for sustainability gains. Forbes. Retrieved from https://www.forbes.com/sites/mikescott/2019/02/11/companies-look-to-supply-chains-for-sustainability-gains/#1b39cde51c55

Sneddon, C., Howarth, R. B., & Norgaard, R. B. (2006). Sustainable development in a post-Brundtland world. Ecological Economics, 57(2), 253-268. 10.1016/j.ecolecon.2005.04.013

United Nations. (2016). Global sustainable development report. Retrieved from https://sustainabledevelopment.un.org/globalsdreport/2016

Vachon, S. (2008). Environmental management and manufacturing performance: The role of collaboration in the supply chain. International Journal of Production Economics, 111(2), 299-315. doi: 10.1016/j.ijpe.2006.11.030

Walmart. (2018). 2018 Global responsibility report. Retrieved from https://corporate.walmart.com/2018grr/

Zugang, L., Anderson, T. D., & Cruz, J. M. (2012). Consumer environmental awareness and competition in two-stage supply chains. European Journal of Operational Research, 218(3), 602-613. doi: 10.1016/j.ejor.2011.11.027