Your supply chain is the backbone of your company, so it’s crucial to keep it as efficient and cost-effective as possible. However, as the global population is becoming more considerate of what can be done to alleviate the effects of the ongoing climate crisis, many entrepreneurs are taking stock of the impact that their business’s actions have on the planet.
A New Supply Chain Model Could Curb the Consequences of Deforestation
One of the most common and devastating effects of the modern supply chain is deforestation. This issue received widespread public attention courtesy of Iceland’s controversial Christmas advert from 2018. The banned commercial outlined how businesses that used palm oil in their products were contributing to the destruction of the rainforests, and the lives of the orangutans that live there. As well as palm oil, ingredients like soy, sugar, cocoa, and even beef and leather all contribute to deforestation in some way.
Shockingly, as of February 2020, only half of the world’s biggest companies have committed to ending deforestation within their supply chains, with hold-outs including the likes of Amazon, SPAR, and Capri Holdings, the parent firm of Versace, Michael Kors and Jimmy Choo. Luckily, many organisations have overhauled their supply chains for the better, like Nestlé, who announced at the start of 2019 that they had achieved 77% of their zero-deforestation target. Though the company admitted it will fall short of its 2020 goals, they still forecast “over 90 percent of [their] key agricultural commodities” will be deforestation-free by the year’s end.
Considering that deforestation contributes to soil erosion, flooding and increased emissions of greenhouse gases into the atmosphere, eliminating it from your supply chain will bring significant environmental benefits. Though many business owners assume making sweeping changes to their supply chains will be both expensive and time-consuming, the positive outcomes are well worth the effort.
As leadership advisory firm Egon Zehnder notes: “Successful organizations are ones that [connect every aspect of an enterprise] in daring and innovative ways — and this invariably comes down to rethinking both their supply chain and operations processes.”
If your company is inspired to mirror Nestlé’s exceptional efforts, take these tips into account to begin banishing deforestation from your supply chain.
Map your supply chain
Positive change is only possible when all the details of a supply chain are known, yet almost 60% of businesses don’t fully understand the components of theirs. Without this insight, you’ll struggle to identify which parts of your supply chain may be having a detrimental impact on the environment. As such, mapping out every single stage, supplier and material will make it clear what exactly needs adapting.
This process requires a lot of time, research and collaboration. Though it’s simple enough to note down your first-tier suppliers, you’ll also have to contact them and find out who their suppliers are. Remember that you need to trace the supply chain for every single product you offer, and find out exactly where each component involved comes from. Once you have all this information, draw your map on a piece of paper. Having researched every source and location on your map, you can highlight any points linked to deforestation, so you know which parts of the supply chain will need to be changed for the better.
With so many segments to oversee, managing your supply chain can often feel overwhelming, especially when agriculture is involved. “The complexity of agricultural supply chains — which contain a labyrinth of intermediaries between farm and final product — makes achieving [deforestation] exceedingly difficult,” Luiz Amaral and Jane Lloyd wrote for the World Resources Institute. However, there is technology out there which can make the job much easier.
For example, Global Forest Watch (GFW) Pro is able to detect deforestation within your supply chain when you securely upload the numerous data points representing your supply. The program can then reveal details related to any recent and historic deforestation in their supply area, and ascertain which company operations are most threatening to forests. “No other monitoring tools have ever accomplished these feats with such openness and global scale,” add Amaral and Lloyd, noting that GFW Pro could mean that there is “now no excuse” for companies not to monitor their impact on the world’s forests.
Warn suppliers over non-compliance
Once you know where changes need to be made, you need to ensure that your suppliers comply with your demands. Some companies have gone to great lengths to deal with those who don’t. Kelloggs, for example, have pledged to “take corrective actions” with any suppliers who do not meet their standards on this front: “If concerns are not adequately addressed, or action and improvement are not forthcoming, we take action to have these entities removed from our supply chain.”
Consistent auditing is one way of keeping suppliers in line. According to Sedex, which works to improve working conditions in global supply chains, “companies that undergo regular audits are more likely to decrease their incidents of non-compliance, and therefore make positive improvements in their working conditions”. The organisation points out that, over 20 years ago, child labour in China was found in 2-5% of the audits of companies who often conducted them. By 2018, child labour in China was found in less than 0.5% of those companies. “This suggests that regular audits prompt companies to make change for the positive as it encourages suppliers to improve their business operations and management systems.”
If your suppliers aren’t complying, you must contact them directly, and pressure them to change their ways. Following a template for a letter over non-compliance can ensure that you include all the necessary information, and put across a tone that suits the exchange.
Consider the Environmental Benefits of Your New Supply Chain
A new supply chain could have incredible benefits for the environment. You should consider the benefits listed above to address some of your most pressing concerns about the planet and slow the progression of climate change.