Do you know your supply chain?
Most people don’t. Most people never think of themselves as consumers, producers, and service providers who use companies and businesses to accomplish their goals. But we are all active members of almost innumerable supply chains, and this has enormous ramifications for the environment.
Most supply chains have little regard for conservation and regeneration—and this is as true for big companies as it is for individuals. Non-renewable extraction of our natural resources, non-replenishment of our ecosystem services, generation of massive waste, labor abuses, under compensation, and our misguided consumption models, are all devastating results—and all par for the course—of unsustainable supply chains.
By contrast, a focus on making supply chains sustainable is a crucial step towards a sustainable global economy. According to the Global Footprint Network, we currently are using 1.3 times the amount of resources available in the planet. This means that supply chains need to be optimized to bring us under ’1 Earth’ worth of consumption with margin to accommodate population growth. The more we know about our personal and professional supply chains, the more sustainable we can make them.
How do we begin to change our supply chains for sustainability?
We start with an underlying assumption and framework that businesses are in no way separate from society and nature. Even the triple bottom line model of three connected components misses the point of the systemic nature of life in our planet. Businesses are contained within the inner works of society and this in turn is a component of nature.
Using the Natural Step Framework, we next see what constitutes the fabric of supply chains: raw materials, ecosystem services, products and waste, and social well being. These four systems interplay in every aspect of supply chains. A key business challenge is that only two are included in Profit and Loss statements. The raw materials system is the first holding a prominent place in any P&L. Since most companies do not directly deal with true raw materials like steel and wood, there is minimal to no attention paid to replenishing these materials. ‘Products and Waste’ is the second system present in P&Ls. Product costs are properly represented in any company’s financials. On the other hand, waste is typically buried in other costs. Only leaders in sustainability have identified their direct waste and related costs, and are working to improve them. Packaging is a good place to start on reducing cross-supply chain waste.
Companies do not factor into their P&Ls the impact to ecosystem services and social wellbeing systems. Some companies have started to adopt reporting standards from the Global Reporting Initiative (GRI). This touches upon some of the elements of the four systems. This is an important first step but unless P&Ls are meaningfully affected, these two systems will not be meaningfully improved.
All designs for a global sustainable supply chain should include the four natural systems built on the concepts of regeneration and preservation. As we consume natural resources, we must develop a consciousness of regeneration in all actions we undertake. An awareness of preservation ought to be built into our interplay with the ecosystem services with the realization that we are borrowing these resources and they must be returned. Companies need to develop the consciousness that from inception their products and their resulting waste must factor in the impact on the global supply chain. It should no longer be enough to establish environmental requirements from our suppliers. We also need to partner with them in our designs, and they in turn partner with their own suppliers, all the way to the material sources.
All members of society are part of the supply chain and play a role in its evolution. As such, no less than a holistic approach is needed to address the current situation. This requires interconnected supply chains from raw material sources to their return to the planet founded on the four natural systems. We then would achieve a less than “1 Earth” worth of consumption needed for our global sustainability.
NOTE: This post was originally published by the blog Triple Pundit on June 28th, 2010.