Sustainable supply chain

Supply chain concept is not new, yet today it has taken on fresh relevance. Let’s find out more about why and what regulations apply to it.
A ‘sustainable supply chain’ is defined as an integrated system of economic activities, aimed at producing and distributing goods, carried out so as to reduce its impact on the environment, ensure ethical working conditions and provide a benefit to the communities and economies where it operates.

What supply chain means

“Supply chain” means a series of interconnected activities or processes engaged in the production or supply of goods and services, from source to final consumer. This is to say, representing the entire chain of production and distribution of a product or service, engaging different players and phases throughout the process.In food industry, the supply chain starts, for example, with agriculture and livestock farming, moves on to food processing and manufacturing, passes through distribution and retailing, and eventually leads to purchase and consumption by the end customer. Each step in this process is an integral part of the food supply chain.
Supply chain understanding is also widely used in other industries, such as manufacturing, garments, automotive, and many others, to describe the chain of activities involved in the production and distribution of consumer goods. Effective supply chain management is essential to ensure efficiency, quality, and customer satisfaction throughout the entire process.

Supply chain approach evolution

“Supply chain” dates back to ancient times and stems from the French word “filier,” meaning “row” or “series.” However, the modern concept of supply chain and its application to industrial and business processes actually first arose during the 20th century, with the burgeoning pace of industrialization.
Widespread use of the term gained ground after World War II, as increased focus turned to the management and optimization of production and distribution processes. In the 60s and 70s, as globalization increased and supply chains became more complex, the latter played an ever-increasing role in economic theory and business management.
Currently, the notion of supply chain is broadly used in a range of industries to describe the chain of production, distribution, and consumption of goods and services. It is critical for process optimization and quality enforcement and efficiency throughout the entire production path.

The new drivers: digital and sustainability

The digital and modern technologies play a crucial role in the transformation of supply chains in different ways. Here are some of the main impacts of the digital and technologies in supply chain management:

• Process Automation: Digital technologies such as the Internet of Things (IoT), sensors, and industrial automation support the automation of many stages of the supply chain. Not only does this improve efficiency, it reduces human error and increases production as well.
  
• Big Data and Analytics: Data analysis is essential for optimizing processes throughout the supply chain. Large amounts of data can be collected from a number of sources such as sensors, IoT devices, and business transactions. Analyzing such data can lead to a better understanding of consumption patterns, market demand, and production timing, enabling companies to take well-informed decisions.
  
• Traceability and Supply Chain Management: Technologies such as blockchain offer an accurate traceability of products throughout the supply chain. Nowhere is this more important than in the food and pharmaceutical industries, where keeping track of the origin of products is vital for safety.
  
• E-commerce and Online Markets: E-commerce has transformed the way products reach consumers. Many supply chains now include online sales channels, giving companies the means to reach consumers directly with no need for physical intermediaries.
  
• 3D printing: As part of the manufacturing industry, 3D printing is changing the way products are designed and produced. This technology facilitates more efficient production of customized or complex workpieces as opposed to traditional mass production models.
  
• Artificial Intelligence and Machine Learning: AI can be used to optimize production planning, improve demand forecasting, and optimize logistics processes, thereby working to reduce waste and improve efficiency.
  
• Global Interconnection: Digital technologies ease communication and collaboration among several sections of the supply chain that may be scattered worldwide. This global interconnection is essential for an efficient supply chain responsive to global market dynamics.
  

In a nutshell, digital and modern technologies are reshaping supply chains for greater efficiency, transparency, and flexibility, better adapting companies to ever-changing market needs, and improving the overall experience for consumers.

The sustainable supply chain

Sustainability of supply chains (the United Nations has been dealing with this for a long) refers to the extent a supply chain can perform to be financially, socially, and environmentally sustainable in the long run. Accordingly, activities within the supply chain must be designed and managed to minimize environmental impacts, improve the social standing and ensure economic viability in the long run. Sustainability of supply chains has increased in importance due to heightened concerns about climate change, depletion of natural resources, and social issues related to occupational rights and economic imbalances.
Here are some of the main insights relevant to the sustainability of supply chains:

• Environmental Sustainability: Sustainable supply chains seek to reduce the environment impact such as reducing greenhouse gas emissions, minimizing waste, using renewable energy sources, and adopting sustainable agricultural methods.
• Social Responsibility: As part of sustainable supply chains, companies are sensitive to occupational rights and safety, gender equality, and fair working conditions. This also includes social responsibility to the local communities involved, promoting the well-being and development thereof.
• Transparency and Traceability: Sustainable supply chains are transparent about their processes and the sources of their materials. Traceability throughout the supply chain is fundamental to ensuring sustainable ethical standards.
• Innovation: Sustainable supply chains foster innovation so as to find new ways to reduce environmental impact and improve the efficiency of processes.
• Stakeholder Engagement: Getting stakeholders “on board”, including consumers, nongovernmental organizations, governments, and other businesses, is imperative to effectively crafting sustainable supply chains. Such engagement can lead to greater pressure for positive changes and the creation of more stringent regulations.
• Education and Awareness: Educating consumers and companies about sustainability is paramount. Increased awareness can lead to demand for sustainable products and services, prompting companies to implement more responsible practices.

Sustainable supply chains are critical to preserving our planet’s resources and ensuring that future generations can meet their needs. Companies engaging in sustainable practices not only contribute positively to the environment and communities, yet are often granted a better corporate reputation and greater consumer loyalty.

Sustainable supply chains and CSRD

The new Corporate Sustainability Reporting Directive (CSRD), namely the European Union’s Corporate Sustainability Reporting Directive, will raise sustainability reporting to a further level and new standards. It will expand the number of companies required to report on their ESG activities, i.e., their sustainability, from the current 11,000 to more than 50,000 in Europe.
Companies targeted by the new CSRD are basically large corporations and listed SMEs; this directive may also be further joined by the Corportate Sustainability Due Diligence Directive (CSDD), which entails additional responsibilities for companies with regard to their supply chain.
Broadly speaking, the mandatory reporting for specific companies would result in other companies in the same supply chain moving toward voluntary reporting of their ESG features, failing which they may lose competitiveness.