Written by Laura N.
1. Introduction
Modern supply chains allow companies to source the required raw materials and components at the cheapest possible price (MacCarthy et al., 2016). Organisations such as Apple now source raw materials from one country and produce components using them in other parts of the world to make their top of the line products. One of the main reasons why Apple and other multinational corporations have thrived over the past two decades is their highly efficient supply chain that could not be imitated by competitors easily. However, given the scope of operations, supply chains have a greater impact on the environment than before. When not handled properly by the companies benefiting from global supply chains, they can also result in the exploitation of human resources, higher emissions, and increased waste production. Sustainable supply chain management (SCM) aims to address these issues by proper management of all the components of the supply chain (Dubey et al., 2017). The main aim of this essay is to explore in detail how sustainable SCM is different from its non-sustainable alternative.
2. Difference between Sustainable and Non-Sustainable Supply Chain Management
2.1. Ethical Sourcing of Raw Materials and Components
Companies that manufacture electronic products need to source different kinds of raw materials including rare earth metals to make components used in smartphones, laptops, and smart televisions (More and Vu, 2017). Sustainable SCM ensures that suppliers of raw materials and component manufacturers follow sustainable business and management practices (Chin et al., 2015). Firms adopting such practices put in place various conditions on their suppliers regarding a wide range of issues (e.g. the way raw materials are extracted, employee safety and health, the use of child labour in the production process, legality of mines from which raw materials are extracted, and the impact of mining/production processes on the populations living in the surroundings) (Mani et al., 2018). By contrast, the non-sustainable supply chain management alternative either ignores the way in which suppliers operate or even try to cover up the irregularities committed by them. For example, in non-sustainable supply chains, raw materials are procured illegally using bonded labourers or those who are not compensated fairly for their work (Kelly, 2016).
Unlike sustainable supply chains, child labourers are also deployed routinely in mining and manufacturing operations of non-sustainable supply chains. Companies that practice non-sustainable SCM practices usually face criticism from activists and consumers (Maccarthy, 2017). Some consumers even punish companies that do not follow sustainable SCM practices by moving to other brands or service providers that they consider more environmentally and socially sustainable (Holbrook, 2018). Despite the efforts of firms to follow ethical sourcing practices, analysts have argued that there is a lack of transparency in their dealings with suppliers. This necessitated companies to increase their transparency in supplier relationships so that they could know what is happening in their supply chains (Bateman and Bonanni, 2019).
One of the best examples of companies that ensure the ethical sourcing of raw materials and components is Apple. The firm’s suppliers source a number of rare earth metals from the war-torn countries of Africa such as Congo. After facing criticism that its SCM practices are supporting oppressive regimes in Africa, Apple has put in place a number of conditions for its suppliers (Webb, 2017). Every year, Apple conducts supplier assessments to decide whether they continue in the supply chain or not. Surprise audits of suppliers are also conducted by the agencies appointed by Apple. For the year 2018, Apple conducted 1,049 supplier assessments in 45 countries at the different points of its supply chain such as mining, refining, component manufacturing, and final assembly (Apple, 2019). As a means of improving supplier relationships and adding to the level of supply chain transparency, Apple also offers free training to its suppliers on a regular basis.
2.2. Decreasing Consumption of Fossil Fuels
All the operations that are required to keep the supply chain functioning smoothly consume a lot of fossil fuels that release harmful gases into the atmosphere when they are burned indiscriminately (Bazan et al., 2015). Sustainable supply chains make efforts to reduce the consumption of fossil fuels by exploring cleaner sources of energy, including solar, wind, and biomass energy. Some supply chains also try to use fossil fuels that emit very low emissions (e.g. natural gas). A set of energy-related metrics such as energy use, energy consumption, and energy efficiency are often employed to deploy sustainable supply chains and track the use of energy (Ahi et al., 2016). Unsustainable supply chains, on the other hand, do not monitor the use of fossil fuels. Companies with non-sustainable supply chains indiscriminately use harmful fossil fuels that cause maximum damage to the environment. Moreover, unsustainable supply chains fail to monitor the activities of sub-suppliers where most of the sustainability-related issues occur (Wilhelm et al., 2016).
Sustainable supply chains follow practices such as optimising delivery routes through the use of modern technologies including artificial intelligence (AI) to minimise their use of fossil fuels (Dadhich et al., 2015). In spite of the attempts made by many organizations to make their supply chains sustainable, they are still criticised for having done little to entirely eliminate the use of harmful fossil fuel derivatives such as ‘bunker fuel’ (i.e. used in international shipping), which has 3,500 times more sulphur content than the petrol and diesel used in cars and lorries (Prudy, 2018).
Cargill, the largest privately held corporation in the USA, is steadfastly committed to keep its supply chain sustainable and reduce the consumption of fossils fuels (Cargill, 2019). The company regularly maps the carbon output through its supply chain operations. Both its upstream and downstream supply chain partners need to adhere to the norms set by the company (Morgan, 2019). Any deviations by supply chain partners from the standards prescribed will be dealt with strictly through penalties and the total ban on partner activities in relation to Cargill. It has set itself a goal to lower emissions by 10% by the year 2025 (Morgan, 2019). Due to its steadfast commitment to reducing fossil fuels, it can be stated that Cargill’s supply chain is highly sustainable.
2.3. Reducing Waste
Supply chains produce enormous amounts of waste in their operations, which can range from the surplus materials generated in the mining for rare earth metals to raw materials wasted in product designing and manufacturing (Murray, 2018). Companies with sustainable supply chains are focused on the reduction of the waste generated by their processes and operations. Product improvements and new technologies to conduct business operations could reduce waste generated in a supply chain (Mahajan and Vakharia, 2016). In cases where the generation of waste materials could not be reduced by a certain level, efforts will be made to properly dispose of the waste generated so that the damage to the environment and local communities could be minimised. On the contrary, non-sustainable supply chains put no conscious effort to reduce the waste in their operations. They use materials made of plastic that can take hundreds of years to degrade. Starbucks is often criticised for the use of plastic straws since they are harmful to marine life and the environment in general (Peters, 2018). Companies with non-sustainable supply chains also neglect any standards on their supply chain members regarding the waste material generated in the manufacturing process. Hence, the operations of such organisations cannot be considered as environmentally and/or socially sustainable.
Zara, the world’s leading fast-fashion brand, is a fine example of a brand committed to sustainable SCM by devoting itself to reducing waste (Inditex, 2019). It has taken a number of initiatives to reduce waste in its supply chain. The company uses an innovative cutting process for its apparel that reduces the clothing that gets wasted in the cutting and stitching process (Inditex, 2018). Sophisticated production techniques reduce the waste water generated in the production of its paper carry bags by 30% (Inditex, 2019).
3. Conclusion
Managing supply chains is a key to sustainable and efficient business development. Companies put a lot of emphasis on reducing the costs of their supply chains as they have a direct impact on their bottom line (Murray, 2018). However, very little attention was paid to keep their supply chains sustainable. Over the past decade, pressure from activists has made companies to seriously consider the impact their supply chain operations are having on the environment and society (Franck, 2018). The initiatives taken by some organisations to improve the sustainability of their supply chain have made them some of the most sustainable organisations in the world and improved their image in the eyes of customers (Webb, 2017). The additional costs that companies incur to make their supply chains sustainable can be recouped by stronger brand loyalty. Non-sustainable supply chains will prove to be ineffective in the long run due to regulatory and activist scrutiny. The inability of such supply chains to comply with regulations will threaten the very survival of companies. Embracing modern technology and supporting supply chain partners can significantly improve the effectiveness and sustainability of supply chains (Mani et al., 2018).
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