Reexamining top priorities in supply chain sustainability

When we launched this department nearly four years ago, our primary objective was to ensure that supply chain and operations management professionals understand what sustainability is and how they can apply its principles to improving operations. I believe that we have achieved the established objectives—and that APICS magazine readers have a good grasp on what sustainability entails—as evidenced by the dramatic evolution in knowledge about sustainability, much of which is reflected in the feedback we receive.

Now, I think APICS members want to know more about how to effectively impart that knowledge throughout their supply chains and how to best apply principles in their day-to-day activities. So let’s begin by reaffirming our working definition of sustainability, which was first expressed in a 1987 report from the Bruntland Commission, an international body whose mission is to unite countries in the pursuit of sustainable development. The commission defined sustainability as “meeting the needs of the present without compromising the ability of future generations to meet their own needs.” It’s a definition that evokes the human, environmental, and financial balance that sustainability requires. For an enterprise to be sustainable, this triple bottom line has to be in harmony. Each component is inextricably linked to the other two.

Current thinking on sustainability focuses on the so-called “integrated bottom line,” which equates to the sum of enhanced top-line growth and reduced operational costs. It is a formula that recognizes the importance of increasing brand value, improving relationships with customers, and retaining top talent—all while reducing consumption and the costs associated with compliance, health, labor, and liability exposures. It is about purging waste everywhere it exists.

Last year, the global consultancy McKinsey & Company published the results of a survey of more than 3,200 business executives, which asked them to rank their reasons for addressing sustainability. Topping the list was the desire to improve operational efficiencies and lower costs (33 percent); maintaining their company’s reputation finished second (32 percent).

In short, more and more business leaders have come to the conclusion that sustainability makes good business sense and have made sustainability a strategic objective. To be sure, the private sector has replaced the public sector as the vanguard in the war on waste. That’s particularly encouraging when we consider that, of the world’s 100 largest economic entities, nearly two-thirds are corporations, not countries.

So, identifying and eliminating waste are the most powerful sustainability tools for supply chains. And the opportunities are huge. Every day, the world generates more than 22 billion pounds of waste—not even including agriculture or construction. The average American produces 1,500 pounds of waste per year, the average European’s annual total is 1,300 pounds, and the average African’s is 400 pounds.

The consequences are likewise extraordinary. According to the World Wildlife Fund’s “Living Planet” report, we’re turning resources into waste faster than we can turn waste back into resources. The net result is that the amount of waste we’re producing is 150 percent of what the earth can sustain. We are depleting the resources on which human life and biodiversity depend. For that reason, we simply must find new models to fuel growth, and the rich—whether they be corporations or countries—have to lead the way.

In this context, it’s important to remember that carbon emissions are waste, which accounts for the increasing focus on clean energy. China, with its growing population and emerging middle class, is the 800-pound gorilla in this discussion. While the country has passed the United States as the leading emitter of greenhouse gasses, it also continues to increase its investment in clean energy and already ranks as the leading producer of wind turbines and solar panels. China also accounts for more than 20 percent of the $243 billion that has been invested globally in low-carbon technologies over the past two years, according to Bloomberg New Energy Finance.

While the war on waste continues, there are signs of progress. Clearly, supply chains have a critically important role to play. The battle won’t be won without us.

Antonio Galvao, CSCP, is vice president value chain Europe at Diversey, now part of Sealed Air. He may be contacted at antonio.galvao@diversey.com.