Sustainability Chapter 4_Supply_Chains MC PDF

Sustainable Supply-Chain Strategies You ordered a pair of leather shoes. They arrived in a plain box with minimal labeling, and came wrapped in delicate paper. The shoes themselves are glossy and flawless. You’re happy with the shoes themselves, but you wonder what kind of journey did all of the mat...

Sustainable Supply-Chain Strategies You ordered a pair of leather shoes. They arrived in a plain box with minimal labeling, and came wrapped in delicate paper. The shoes themselves are glossy and flawless. You’re happy with the shoes themselves, but you wonder what kind of journey did all of the materials, the leather, rubber, paper, packaging, go through to make it to your door? You would feel better if you knew the company who made them utilized a Sustainable Supply Chain (SSC) by offering details about how and where each part of the shoe was sourced. Beyond the boundaries of the office or the factory lay thousands of kilometers of roads and airspace that all play a part in the story of our planet. These expansive networks, frequently an afterthought, are the arteries through which goods flow, impacting ecosystems and communities far beyond our immediate surroundings.  The Great Unbundlings Globalization has brought greater convenience and access to any conceivable product. Yet the amount of emissions-producing and environment-destroying traffic has increased exponentially over the past few decades. The term for this is known as the Great Unbundlings: an “unfolding” of the journey raw materials, unfinished and finished goods would take before reaching their final destination. Journeys previously constrained by local geography now crisscross across the globe. The first unbundling is that of products and physical goods, brought about by the shift of labor- intensive manufacturing to countries with lower costs, facilitated by containerization and bulk carriers The second unbundling is that of services and administration, back-office functions like accounting and customer service due to declining telecommunication costs. Steps for Making Your Supply Chain Sustainable Map Supply Let’s go over some of the Reporting Chain steps your organization can take in order to implement sustainable Stipulate Supplier Materiality practices upstream in your Requiremen ts Analysis value chain: Analyze Gaps, Derive Measures  Mapping Your Supply Chain (1 / 2) Before you can implement any sustainable measures, you need to get a “lay of the land” of your supply chain or network. Beyond your direct suppliers, you’ll want to illustrate all steps in your supply chain that can affect your overall sustainability, including impacts and risks. [PLACEHOLDER – Link to Modal of full screen Illustrate and Visualize your supply chain: graphic] the most important product and service streams: include procurement costs or sales volumes. Compile the activities of direct suppliers and sub-suppliers: Gather information all the way back to raw materials usage going beyond direct suppliers. Categorize direct supplier and sub-supplier sites: Location has a influence on risk of negative impact on environment and humans.  Mapping Your Supply Chain (2 / 2) Example: Manufacture of Example: components in Activities engineering Activities of others; natural sector Of direct suppliers and sub-suppliers events Factors Example: beyond Emission of company air pollutants control Aspects Parts of the activities or products or services that lead Example: to (potential) impact on the environment or people. One sustainability aspect can cause one or more Adverse impacts. health effects from Example: air pollution Supply disruption Impacts due to supplier ceasing Negative (or positive) changes in the environment or for stakeholders production due to brought about by activities, products or services in the company’s Graphic Credit: exceeding supply chain. Federal Ministry for the emissions limit Direct or indirect negative (or positive) impacts on the business Environment, Nature Conservation, Building and Nuclear Safety  Materiality Analysis After mapping your supply chain, you’ll want to perform a Materiality Analysis (MA) determining which operational areas have the greatest impact on your company’s environmental footprint and its affects on your stakeholders. Gathering data on each area of your supply chain is a whole endeavor in itself, covered in the Data and Reporting chapter.Category An example of one activity isExample outlined here: Activity: Purchase of raw materials Sustainability Impacts Water Scarcity Health and Environmental damage from use of chemicals Dangerous working conditions and child labor Affected groups Workers Local Communities Particularly vulnerable Female Workers groups Female members of local communities Gap Analysis & Plan of Action After the Materiality Analysis, your firm will want to assess where you need to fill in the gaps. The Gap Analysis, is a company’s way of measuring current performance against desired performance. Your organization can then determine measures in order to meet your business objectives while meeting ESG- aligned supply-chain management practices.  Analyzing Gaps and Measures Your Gap Analysis needs to address three fundamental patterns of action, shown in the table When below: a business… …then it should… … causes or could cause negative … take the steps necessary to end or avoid such impacts through its own activities… impacts. … compensate for damages that could have occurred. … contributes or can contribute to … take the steps necessary to end or avoid the negative impacts through its own impact going forward. activities… … use its influence to reduce any remaining impacts as much as possible. … compensate for damages as much as possible, if necessary in cooperation with other businesses involved. …is directly linked with negative … use its influence over the origin of the impacts of the products and services negative impacts with the goal to prevent or of another company as a result of its reduce the impacts in question. business relationship to that company… Clarifying Supplier Requirements with a Code of Conduct Your suppliers should be made well-aware of what ESG standards your company expects them to follow. That’s why it’s important to draft a Code of Conduct (or Supplier Agreement) that’s worked directly into your supplier contract which makes it legally binding. For instance, your Code of Conduct could outline your firm’s expectations regarding greenhouse gas emissions, or commitment to avoiding dumping waste into waterways. It can also specify what constitutes fair labor practices that may exceed the standards of the supplier’s host country. Finally it can stipulate expectations for transparency, intolerance of corruption, and compliance with international regulations. Reporting on Your Supply Chain Operations In this final step of integrating sustainable practices into your supply chain, you will include information about your supply chain’s sustainability in your corporate disclosure report to stakeholders. One example of which aspects of your supply network to disclose is the Logistics Performance Index, outlined on the next slide. More on this topic in Chapter [X] Data and Reporting.  Logistics Performance Index Developed by World Bank, the Logistics Performance Index (LPI) is a benchmarking tool that measures the efficiency of a country’s logistical network. The LPI identifies challenges and opportunities in trade logistics and gives business leaders an idea of how they may improve their performance. Although the LPI is a tool for measuring a nation’s logistical performance, individual businesses still may use its criteria to report on their own impact. The LPI is scored out of a maximum possible 5.0, the result of a weighted average across six key dimensions: Efficiency of clearance processes; Quality of trade and transport related infrastructure; Ease of arranging competitively priced shipments; Competence and quality of logistics services; Ability to track and trace consignments; Timeliness of shipments in reaching destination within a scheduled or expected delivery time;  Freight Transport Options Sea Sent in either containers or bulk. Generally slow. Rates vary widely depending on how busy the route used is. Profitability varies considerably. Requires double handling as goods are transported to and from port. Emissions are low, but ships burn bunker fuel which is one of the most polluting fuels. Road Most widely used transport method for its accessibility and flexibility. Road networks across most continents are well developed and widespread enough to allow for all variety of logistical operative needs to be met. Requires little investment. Good for short-medium term solutions. Rail Slow inland transport. Uses fixed infrastructure. Less prone to disruptions, but goods must be double hauled to and from the rail network. Usually paired with steady and heavy bulk loads, such as coal. Many carriage operators have been privatized in Europe. Considered ‘greener’ overall from Road transport.  CO2e Emissions by Transport Mode 2000 1800 The chart 1600 pictured right CO2e per ton-kilometer 1400 gives you an 1200 idea the 1000 disparity in 800 emissions 600 between modes of 400 transport. 200 0 Air (short-haul) Air (long-haul) Truck Rail Sea  Cutting-Edge Spotlight: UAV Delivery Drones Originally known for their aerial photography capabilities, hold promise in addressing the challenging 'last-mile' delivery hurdle, particularly in remote or otherwise inaccessible regions. Their lightweight design, speed, and minimal emissions make them an increasingly viable option for transportation. While companies like Amazon are testing drone delivery projects, traditional transport methods still dominate end-point delivery. Despite their potential, drones face obstacles such as noise pollution and regulatory restrictions in many airspace areas.  Sustainable Warehousing A sustainable supply chain places as much emphasize on where we store our inventory as how move it around. Every step of a storage facility, from construction to distribution, plays into meeting ESG goals: Energy and water use Safety of internal environment for employees Management Pollution Transport Materials Waste BRREAM (Building Research Establishment Environmental Assessment Methodology) is one of the standards businesses are adopting in ensuring their warehouses are ensuring their warehouses meet green building criteria.  Sustainable Warehousing BREEAM weighting criteria Pollution 7% Energy The chart to the right illustrates the Transport 21% 9% criteria weighted by BREEAM to evaluate a warehousing site on their sustainability Waste score. 8% Although other regulatory bodies may use slightly different criteria, it gives you Wellbeing a good idea of what to expect when Ecology 16% 11% taking into account the sustainability performance of your warehousing, storage, or distribution centers. Management Materials 13% 14%  Reverse Logistics Reverse Logistics is about efficiently redirecting the flow of products during the end of their lifecycle away from landfills and back towards manufacturers, where the materials bay be repaired, refurbished, remanufactured, or recycled. Four primary questions when developing your Reverse-Logistics system: What types of materials are returnable, recoverable or recyclable? How are responsibilities defined in a reverse logistics supply chain? Which products or materials are reasonable to return, recover or recycle? How The are theirslide following economic and ecological illustrates value the closed loopdetermined? system utilized by Xerox for continually upcycling their end-of-life products back into production.