Sustainable Supply Chain Management

A supply chain is a coordinated network of companies that has the purpose of developing,
manufacturing and delivering the product to the final customer and the management of it has as
primary focus the maximization of efficiency and customer’s satisfaction.
When we talk about sustainable supply chain there are additional concerns that revolve around the
environmental harm that the supply chain brings with its operation (e.g., energy consumption,
deforestation, pollution) and the developing and putting into practice the solutions or harm
reduction practices to solve those problems.
The entity of the problems that supply chain bring are
not always clear to everybody unless an overall view is
provided.
Since raw materials are not always available or may not
be available in adequate quantities in every country, they
must be imported, creating a global market among all
countries.
Supply networks become intricate and frequently
interconnected through the physical exchange of raw
materials at various stages of production.
This indicates that raw resources typically travel across
numerous nations. In this regard, a reliable assessment
of the environmental effects of supply chains must take
into consideration the movement of goods, frequently
over great distances. Additionally, environmental
performance might fluctuate greatly between places as a
result of various production methods, technologies, fuel
combustion, etc.
Image 1 shows the intricated and numerous travels that
aluminum does during its transformation journey along
the supply chain from raw material to finished product.
All this involves a great consumption of resource and
especially fuel with a great ghg emission as a
consequence. More than 80% of the ghg emission are
caused by supply chains.

But how sustainable supply chains works and how can it be

1 Global physical trade networks for
aluminum and EU 28 position (2012)achieved?
It can basically be divided in three components:
 Green supply chain: concerns every environmental (impact) aspect of a company’s product
or processes such as its design, materials sourcing, logistics and proper disposal or material
reuse.
As an example we can cite the logistic company Americold that uses cutting edge
technology to get the most out of every kilowatt hour.
 Transparent supply chain: disclosure and transparency about all stages of the supply chain
(end to end).
 Circular supply chain: a win-win model where at the end of the products life cycle it is
disassembled, and part can be used as raw material to start the cycle again.
Internal perspective
When discussing topics about industries, supply chain and sustainability it’s also important to talk
about corporate social responsibility (CSR), a relatively new concept that alludes to the idea that
each industry and business affects the planet in some way. It aims at social accountability and at
making a positive impact on society and at the same time at the economic part of the business. It is
strictly related to the triple bottom line concept that connects the economic growth with the social
progress and the environmental matter. These three areas may be divergent for companies because
seeking one of them will have a negative impact on another, often on the economic one and
companies are not willing to give up on it and favour the more sustainable related goals.
Many big companies show their interest in being excellent CSR examples, from using and investing
in renewable energy to giving back to communities and contributing to medical research.
It’s not about becoming a non-profit organization but doing business in such a manner that
everybody can benefit from it in a direct or indirect way, or at least nobody has to suffer because of
it. A great example is the big pharma Johnson & Johnson which is very active being as green as
possible and in giving its contribution to social progress. Now more than 50% of their global
electricity use comes from renewable sources thanks to their investments in energy systems all
around the world and they claim that by 2025 they will source 100% of their energy from renewable
sources and by 2030 will achieve carbon neutrality for their operations. Furthermore, they are
working to eliminate preventable and curable blindness in under-resourced communities through
“Sight for Kids”, a program co-founded by Johnson & Johnson Vision and Lions Clubs
International Foundation. They are able to reach over 3 million children or low-income student
annually in Africa, Asia and North America.
Companies that want to provide transparency on the company’s contribution to sustainable
development usually disclose their environmental, social and governance goals, as well as its
progress towards them, in the sustainability report. The drivers that get companies to sustainability
reporting are several and different: some may do it because of voluntary adoption of standards,
other because of directives and regulations. Since there are not yet general directives or guidelines
for sustainability reporting it is interesting to see the result that The Centre for Sustainability and
Excellence had in its annual research for Sustainability reporting trends 2018 that looked at 475
companies from different sectors (CSE, December 2018). It came out the top 5 trends and
challenges:
1) Companies in Europe tend to focus and commit to specific strategic objective, regardless of
their sector and location of operations.
2) Expansion of the social impact goals to their business partners.
3) Adoption of the UN SDGs. (a great example, again, is the company Johnson & Johson
which in its SR disclose its commitment by setting goals and KPS to measure the success in
reaching these goals).
4) Use of specific reporting guidelines to add integrity, transparency and reliability to their
reports.
5) The struggle to get the credibility they deserve despite the fact of using reporting guidelines.

A very recent news (2022), from the European Council, announce that the EC gave the approval
to corporate sustainability reporting directive. This means that in the next years, approximately
from 2025 , companies that satisfy certain criteria will be required to publish their sustainability
report, where is disclosed what is their environmental and societal footprint and will be
available to anyone. These new rules will apply to large public-interest companies with more
than 500 employees, companies with more than 250 employees and over 40 million turnover
and to companies listed on regulated markets (except micro undertakings). SMEs will be
included in the list from 2028.
Upstream Perspective
Supply chain management is complex due to the large number of players, the lack of available data
(transparency), and that companies can only indirectly influence decisions made by suppliers and
the resulting effects. The deeper you go into the supply chain the more difficult is to have any kind
of influence or power over the different tiers of suppliers that are involved. That’s why it is
important the presence of foundation or programs that are renowned like the CDP or IFRS
Foundation (ISSB, established in November 2021) that set globally accepted accounting and
sustainability disclosure standards and give legitimacy and credit to companies that are active in
sustainability matters.
Talking about ISSB which stands for International Sustainability Standards Board, it will form a
comprehensive global baseline of sustainability disclosures that will need in the assessment of
enterprise value. The new standards proposal has been developed to respond to the requests from
G20 leaders, IOSCO and for sustainability-related risks and opportunities information that
companies may need. By the end of 2022 the new standards should be issued.
The CDP organization provides a snapshot of company’s environmental performance. To the
companies that agree to participate will be assigned a score for different matters such as
deforestation-free, water-secure and 1.5-degree. Johnson&Johnson is one of the companies that, as
said before, due to its attention to environment and the use of renewable energy sources got an A
score for climate change in 2022 and B score for water security 2022 and in a world where
sustainability is more and more important will give a boost in value.
Beside the way they operate companies should invest energy also in the choice of their suppliers,
make sure they really are up to their standards, from general moral and ethics to labor practices.
Usually, these information are found in the supplier code of conduct. Since the goods are a result of
every step of the supply chain is important that the sustainability is a concern of all tiers. Beside a
responsibility this will be driver for being chosen as a supplier or not, for example at Volvo they
claim “We always focus on cost and quality. Now, we are bringing sustainability into the
negotiations as well”.
Transparency along the supply chain is also important for LCA (life cycle assessment), an objective
method of assessing and quantifying the environmental load and potential impact associated with a
product or service. This assessment should be carried out by a third party, because that’s the best
way to demonstrate that a product whether is or not better than other from a environmental point of
view. In early 2021 the investigation of websites involving "sustainability" claims on goods and
services by the European Commission revealed that more than half of them were unlawful. 37% of
these deceptive "green" assertions were supported by ambiguous and general remarks, while the
remaining 59% lacked factual facts and evidence to back them up. LCA should be carried out in
order to make green claims without the risk of greenwashing.
Another important topic is traceability. Being sustainable means that companies should be able to
see everything in their supply chain, from the smallest raw material to finished products.
Traceability can be applied to also create a safer world. For example, The World Health
Organization estimates that around 11% of medicines in developing countries are counterfeit and
the Newsweek reported that in 2015 circa 100.000 to 1 million people die to falsified drugs every
year. Traceability provides information on pharma products such counterfeiting alert, expiry date
that would allow to avoid this.
China experienced a severe food safety crisis in 2008 with the Chinese milk scandal. In the incident,
milk, infant formula, and other food products and ingredients produced by Sanlu Group were
tainted with the chemical melamine, causing newborns to develop kidney stones and other renal
problems. Using traceability could have helped in avoiding this, again.
Circular Economy
An economic system known as a "circular economy" aims to reduce resource consumption and
waste. A closed-loop system is created by circular systems, which use re-use, sharing, repair,
refurbishment, re-manufacturing, and recycling to decrease resource inputs and lower waste,
pollution, and carbon emissions. The secret to developing this economy is to employ goods,
machinery, and infrastructure for extended periods of time, which increases the value of these vital
resources.
The InBev 100+ Accelerator is among the best instances of major international corporations
cooperating to assist the circular supply chain. As a worldwide incubation programme, The 100+
Accelerator was introduced in 2018 to assist in resolving supply chain issues relating to water
management, circular economy, sustainable agriculture, and climate change. In their sustainable
innovation plans, the partners support startup funding and pilot programmes. To date, the 100+
Accelerators start-ups have collected more than 1,000 tonnes of glass debris, refurbished electric
vehicle batteries that store renewable electricity, erected the first solar thermal system at an AB
InBev plant, and developed green cleaning techniques to use less water and energy. The 100+
Accelerator welcomed Coca-Cola, Colgate-Palmolive, and Unilever this year.
Circular supply chain, despite the interest, are still quite far from being a largely used practice.
In the UK, for instance, only 9% of plastics are recycled, while overall recycling has been at 45%
since 2017 with a substantial portion of collected items being burned rather than recycled.
If I may add some personal thought, I was quite surprised when visiting my brother’s family in
London told me that they do not recycle plastic because there is no waste management for such
compound. If the situation in one of the most developed country in the world is this, we can only
imagine what happens elsewhere. On the other side aluminum cans are recycled and reproduced at a
high rate in the UK. The difficulty with supply chains is that different entities in the chain undertake
these tasks, including consumers, stores (if they accept can returns), trash management firms (even
within this category, firms that handle garbage "pre-processing" may differ), aluminum producers,
and can makers.
Along most of the supply chains product parts have increased, and production has been centralized
in the majority of human supply chains in order to achieve two crucial goals: performance through
part specialization (many specialized materials and designs that add functionality) and financial
efficiency through economies of scale (large plants that share fixed costs and deliver to a wide area
with an elaborate distribution system). To recycle and remanufacture products or components,
collection systems would need to travel large distances to return from the place of use to the place
of manufacturing. In addition, it is exceedingly challenging to gather enough of the parts due to part
specialization to make recycling. Supply chain are too complex, in order to make them circular or at
least partly, they need to be completely revised and all actors need to collaborate with each other.
The world is taking a good turn though, slowly we can see how the major companies around the
world are increasingly paying more and more attention in this matter and try to implement them.
The big of the fast-fashion industry, H&M, in 2018 sourced 57% of their material from recycled or
sustainable sources, with the aim of reaching 100% by 2030. The Take Care concept was tested in
Germany in 2017 by H&M. The goal is to motivate and instruct clients on how to care after their
clothing in order to increase the lifespan of those items. It has an in-store repair station where
consumers can bring clothes from any brand to fix, as well as online help for tasks like getting rid of
stains, reattaching buttons, or recycling old jeans.
Also at Johnson & Johnson commitment to use circularity is an important matter. The company
claims to increase the use of recycled materials in packaging, decrease its reliance on the single-use
model, and guarantee that 100% of plastic packaging will be reusable, recyclable, or compostable
by the year 2025 through design, partnerships, and investments.

Global Supply Chain

The main issue of global supply chain in terms of sustainability is that is composed by multiple
buyers and supplier. Due to globalization, cutting costs, downsizing capital investments, and
releasing goods first to market are now crucial strategic goals. But a lack of visibility is intrinsically
tied to risk and an absence of control. The key for planning and execution in a multi-tier supply
chain is located beyond the company's boundaries, thus any issues are out of its control. Visibility
often terminates with Tier 1 suppliers. The lack of visibility comes with risks. For instance, Tier 1
and 2 suppliers prefer to restrict a manufacturer's sight when it comes to a sophisticated product
since they view their supply chain as private. However, a business without clarity will not be able to
be proactive if one of those lower-level suppliers has an issue, such as going bankrupt.

A multi-tier supply chain must take reputational risk into account. For instance, a few years ago,
Foxconn workers threatened to commit mass suicide as a result of their unfavorable working
conditions. Foxconn manufactures electrical goods for companies like Apple. Through supplier
association, Apple was linked to this, which hurt their reputation. Even if this is an extreme
scenario, the point is that reputation could be at stake without better visibility of the entire supply
chain.
Moreover, small firms further down the supply chain may be unfamiliar with the concepts of
"responsible sourcing" and "corporate sustainability." That’s big companies should help small
businesses understand in practical terms what is sustainability, its benefits and how to reach it or at
least the correct path toward it. Training and education are the base that this company should
provide to suppliers in all tiers.
Among the benefits that should be levered on to guide businesses toward sustainability there are:
- Reduced running costs through using resources more efficiently
- Reduced injury rates, absence rate and error rates through protecting worker’s physicial and
mental health
- Supporting communities through providing work and decent conditions, which will have a
good repercussion to the employer.

Again, a great example of sustainable and responsible global supply chain come from the company
Johnson & Johnson that through their program of sustainable procurement take the responsibility to
have suppliers that fully understand the importance and take ownership of growing their own
sustainability programs.
They have set an ambitious goal to enroll suppliers covering 80% of their spend in their Sustainable
Procurement Program by 2020.
For the 10th consecutive year, Johnson & Johnson maintained membership in the Billion Dollar
Roundtable, which is a a collection of corporations that spend at least $1 billion yearly with
certified minority-, women-, veteran-, LGBT-, and disability-owned businesses and promote best
practices for supplier diversity.
They say that with a focus on generating effect along their whole value chain by assisting their
suppliers in creating their own supplier diversity programmes, the company will continue to expand
and improve its supplier diversity programmes.

The social side of sustainability

Social issues in the supply chain are characterized as aspects of business operations that have an
impact on community development, welfare, and human safety. By optimizing these operations,
supply chain management (SCM) aims to increase firm profitability. Not simply the economic,
technical, and legal aspects of the supply chain require consideration. There are many more factors
as well. The most significant of these is customers' growing ethical and social concern over how
goods are sourced, created, and delivered. That’s why usually companies that are active in
sustainability in supply chains have a supplier code of conduct, a statement of the behaviors which
an organization expects of its suppliers and their staff. Despite this there many issues along the
supply chain, especially on the social level. This happens because at the lowest levels of the supply
chain the big corporation do not have any power and often do not have any information about the
issues either.
Is incredible how the topic of slavery comes out in such modern days. And this is a problem of the
suplly chains. Millions of individuals are taken advantage of every day to satisfy our insatiable want
for inexpensive goods and services, which range from consumer electronics and clothing to services
like shipping and cleaning. In various forms, forced labour is thought to be practised by
approximately 27.6 million people globally. There are 3.9 million persons who are pushed into
forced labour by the government and 17.3 million who are exploited in the private economy. This
covers the supply chains of foreign companies that provide our products and services.
Every step of the supply chain, from the extraction or harvesting of raw materials like cocoa or
cotton to production and shipping, is susceptible to slavery. The reality is that either women are
forced to make coffee for one of our most well-known companies or children are forced to mine
cobalt for the newest cell phones.
Another example is sulphur mining by hand in an active volcano in Indonesia. In East Java, the Ijen
volcano employs several hundred men. They gather the yellow sulphur lumps that crystallise by the
acidic crater lake every day. After being treated, the sulphur is utilized in manufacturers
domestically and overseas to bleach sugar, produce matches and fertilizer, and vulcanize rubber.
This is a great example of exploitation, people are paid very little, from 10 to 15 dollars a day in
exchange of very long and intensive work hours. The miner carries up to 90kg loads for many
hundreds of meters several times a day. Many of them loose their teeth because of the toxic gasses
and more than 70 miners died in the last 40 years because of the fumes that can suddenly swirl from
fissures in the rock.
Social issues have always been present, but fortunately with the emergence of external stakeholders
like NGOs, the media and civil society actors the unethical behaviour of firms has been highlighted
and the firms have been encouraged to take up effective strategies against these social issues.
All these social issues can be addressed by using all the tool that have been listed the section before,
from the application of corporate socially responsible practices to selection of suppliers that operate
according to a code of conduct that leads towards sustainability (both social and environmental). All
these must be done along the entire supply chain, since almost always the problems rise at the
lowest tiers. Collaboration is the key for success.
 Consumers expect today’s brands and companies to demonstrate
support for the health of people and the planet. At Johnson &
Johnson Consumer Health, we don’t prescribe to the idea that you
can either be sustainable or profitable. We know that we have a
responsibility to be both.
— Katie Decker, Global Leader Essential Health (J&J)

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