Supply chain innovation and ESG (environmental, social, and governance) considerations are becoming increasingly intertwined as businesses seek to improve their sustainable supply chains, sustainability and social responsibility practices while also optimising their supply chain operations. We will explore the relationship between supply chain innovation and ESG, and how businesses can leverage both to achieve their business goals and ambitions, while also contributing to a better world.
Supply Chain Innovation Considerations
Supply chain innovation refers to the adoption of pragmatic and fit-for-purpose behaviours, ways-of-working, processes, technologies, and business models to improve the efficiency, effectiveness, and resilience of supply chain operations. In recent years, there has been a growing focus on supply chain innovation as businesses seek to address challenges such as changing customer demands, geopolitical uncertainty, natural disasters, pandemics, and digital disruption.
One of the key drivers of supply chain innovation is the need for greater simplicity, visibility and transparency across the supply chain. This has led to the introduction of collaborative supply chain models, supported by leading technologies such as blockchain and the Internet of Things (IoT) that enable (near) real-time tracking and monitoring of goods as they move through the supply chain. These technologies are able to assist supply chain partners to identify inefficiencies and risks in their supply chain, and take proactive measures to address them.
Another area of supply chain innovation is to introduce forward-looking and AI-enabled warehouse automation and robotics to improve efficiency, remove unnecessary process steps, and simultaneously educe costs, increase inventory control across the warehouse operations. This has been recently extended to the use of autonomous vehicles - for last mile deliveries - and drones for consumer delivery.
ESG refers to the environmental, social, and governance factors that businesses should take into account when making business decisions. These factors include issues such as climate change, human rights, labor standards, and (board) diversity.
There is growing government, investor, and consumer pressure on businesses to incorporate ESG considerations into their business strategies and operations. This is driven by a range of factors, including changing customer expectations, increased regulatory scrutiny, and the growing recognition that sustainability and social responsibility are key drivers of long-term business success.
ESG is particularly relevant to supply chain operations, given the significant environmental and social impacts of these activities. For example, supply chain operations are responsible for a significant proportion (60-70%) of global greenhouse gas emissions, and can also have significant impacts on local communities and workers.
Supply Chain Innovation and ESG
The relationship between supply chain innovation and ESG is complex and multifaceted. On the one hand, supply chain innovation can help companies address many of the ESG challenges they face. For example, technologies such as blockchain and the IoT can help companies improve supply chain transparency and traceability, which can help identify and address environmental and social risks.
Similarly, creating new supply chain model, e.g. eliminating non-value-add process, using circular environment initiatives in the supply chain, often assist businesses in identifying and reducing their environmental footprint by optimising transportation and logistics operations (mode of transport, optimal routes, etc.), while also improving working conditions for employees.
On the other hand, ESG considerations can also drive supply chain innovation by creating new opportunities for businesses to differentiate themselves in the markets. In the last years, we have seen how businesses that prioritise sustainability and social responsibility in their supply chain operations attract environmentally conscious staff members, customers and investors, which reduces the risk of reputational damage from negative ESG impacts.
In conclusion, we see that supply chain innovation and ESG are becoming increasingly intertwined as businesses seek to improve their sustainability and social responsibility practices while also optimising their supply chain operations and financials. By leveraging supply chain innovation to address ESG challenges, and using ESG considerations to drive supply chain innovation, we have assisted numerous businesses to achieve their supply chain, operational and financial ambitions and goals while also contributing to a better world.