Sustainability is becoming an integral part of organizations' business strategy and therefore Supply Chain strategy.
A sustainable Supply Chain refers to function-adapting practices having either positive or neutral, not negative, impact on the society, the environment, and the economy.
Environment-friendly practices would include reusing waste, conserving and optimizing natural resources, avoiding the use of hazardous materials, reducing pollution and carbon emissions, and so on. First P. The PLANET.
Social friendly practices may include adherence to labor practices like minimum wages, number of working hours, healthy and safe work environment, following basic humanitarian principles, etc. Second P. The PEOPLE.
Economically sustainable practices would include continuous improvement in quality and process, adopting technology, driving innovation, ensuring circular economy, and digital transformation. Third P. The PROFIT.
So what comes first - the Planet, the People, or the Profit? While many would naturally say in the same order, we must see it from business cycle parlance. All of them are important but not necessarily in the same order always. It would depend upon the stage we are in as a business and eventually as a Supply Chain function. Be considerate that adopting socially and environmentally friendly practices involves investment, it is not free of cost. In addition to continuous cost optimization, Supply Chain teams are more under pressure to be compliant. What should be prioritized first?
Businesses do exist to make a profit, and so do Supply Chain functions. Whether a Supply Chain is a cost or a profit center would vary from industry to industry. To exist long-term, the Supply Chain function needs to be economically sustainable first. So does that mean we can follow any practice to become economically sustainable and impact the social system and environment? The answer is NO. We can take leeway and at least ensure that business practices while becoming economically sustainable do not cause any harm to the social fabric and the environment. Once function becomes economically sustainable and growth is visible, it can start adapting socially and environmentally friendly practices, even if those are at cost. Once we become very mature businesses and Supply Chains, more emphasis should be given to environmental and socially sustainable Supply Chains as economic sustainability is already taken care of.
Businesses and Supply Chain leaders need to identify the stage at which they are and set priorities accordingly.
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