Sustainable Supply Chains

Policymakers and managers have paid little attention to sustainability in the supply chain, as targets are ambitious, but not progress is yet visible

Addressing supply chain and the procurement that occurs through supply chains, proposes high compatibility and leverage with ongoing sustainability targets

For example also for countries

Two multinational Scandals:

• IKEA: clear cutting native rusian forest

• Tesla: Sourcing of Cobalt - Lithium Ion Battery (from Congo)

The supply chain covers every company involved in the process of making, buying and selling

Definition of a sustainable supply chain sccording to the ISO standard:

• “The process of making purchase decisions that meet an organization’s needs for goods and services in a way that benefit not only the organization but society as a whole, while minimzing its impact on the environment“

Cascading is a practice to regulate supplier relationships to implement sustainability standards

The ides is that the sustainability practices cascade from one large buyer, upstrea through the supply chain

Unfortunately, cascading only workd uder very specific conditions, i.e., when a comany has a lot of power over its suppliers. In this situation, suppliers are being monitored tightly, and the supply chain is very transparent, leaving little room for violating standards

In most cases, the cascading of sustainable supply chains practices fails. Four primary reasons were identified that cause cascading to fail:

1. Conventional purchasing practices: companies place orders that are unrealistic for their suppliers, so suppliers demand overtime or stall investments in environmentally friendy technology

2. Limited resources and monitoring capacity among first-tier suppliers: they do no have the resources to monitor the lower-tier suppliers

3. Fragmentation of contracutal relationships: companies increasingly use outsourcing and have decentralised operations, reducing the direct relationship with lower-tier suppleirs

4. Lack of awareness and attention: companies often do not know their smaller first-tier suppleirs, or second-or third-tier suppliers, which therefore operate in a blind spot and avoid pressure to adopt environmental and social standards

Direct approach: direactly target first-tier suppliers by evaluating their performances on environment, health and safety and labour practices, and work with first-tier suppliers to map the supplier network

Indirect approach: provide education and training to first-tier suppliers to improve procurement practices with lower-tier suppliers, and ensure that first-tier suppliers have the resources to monitor and ensure compliance with ESG standards

Collective approach: collaborate accross the industry to develop and disseminate industry-wide sustainabilty standards, encourage suppliers to take trainings on the standards

Global approach: Collaborate with international organisations like the UN that share their goals