Despite growing regulatory and public pressure to decarbonise global supply chains, many companies’ efforts appear to have stalled. Despite widespread pledges to become carbon neutral, climate positive, and reach net zero, often by 2030, the last year and a half have seen many companies walk back or go silent on their sustainability commitments. Whether that’s due to a rise in the environmental impact of technologies like AI, geopolitical tensions, fossil fuel industry lobbying, increasingly undeniable ties between the electronics components industry and slavery in the Congo and other mineral rich nations, or any number of other factors, the end result is that the global push to clean up supply chains has lost steam.
Green messaging may have been a staple of corporate public relations for close to a decade now, but missed targets, greenwashing, and backpedalling have increased consumer cynicism and risk normalising this kind of failure, letting companies off the hook for falling short of their climate goals.
We sat down with Tim Mawhood, Executive Director at GHD Advisory, to dig a little deeper into the pain points preventing sustainability reform in the supply chain, and what GHD’s new research says about how organisations can address them.
What are some of the most prevalent pain points preventing companies from making their supply chains more sustainable?
Surveying 500 global industry leaders to examine the state of corporate sustainability, our research, the Sustainability Monitor 2024, has shown there’s a growing realisation that true integration of sustainability into overall strategies demands a greater level of stakeholder engagement and change management than exists today.
One major pain point is the complexity of engaging all stakeholders across the supply chain. Modern supply chains often involve numerous tiers of suppliers, making it challenging to track emissions and evaluate the sustainability performance of each supplier. This complexity makes it difficult to pinpoint high-emitting suppliers and implement consistent sustainability practices across the entire chain.
Another significant issue is the difficulty in integrating sustainability into the mindset and culture of an organisation. For sustainability to be truly effective, it must be at the forefront, rather than as an afterthought or “bolt-on” addition.
This shift requires better communication and a cultural change that helps everyone involved – from top executives to frontline employees – understand how sustainability impacts their day-to-day roles.
How can organisations overcome those pain points? Are you seeing any unintended consequences or unexpected as a result of organisations tackling sustainability?
Addressing these pain points involves a multi-faceted approach. This involves creating a well-established and proven framework that helps to educate and incentivise a sustainability mindset across external stakeholders that promotes participation and accountability, including tier two, three, and four suppliers. Establishing a solid strategy, risk identification and mitigation planning for the supply chain is critical. Supply chain-related ESG activities should cover material indicators and disclosure practices, with reliable baseline data and updated metrics to inform ongoing measurable performance targets. Organisations must address the integrity of their supply chain sustainability practices upfront ahead of any detrimental hits to their brand or bottom line.
For organisation who do drive sustainability into their supply chain there can be consequences similar to any change, increased complexity, increased costs at least initially, reputation risks if an organisations sustainable claims are not met. Generally these can be overcome through green procurement practices, deeper collaboration and a move to action to achieve targets.
On the flip side, there are often unexpected benefits to driving supply chain sustainability, firstly making a material difference to our environment, more engaged staff and clients, attracting new business, brand building and alike. These benefits are material and lasting.
What kind of role can technologies like AI, big data analytics, IoT, and digital twins play in meeting these challenges?
Supply chain by their nature are complex and require organisations to forecast demand accurately to maximise commercial outcomes and optimise delivery, the predictive analysis that AI can bring to this is very powerful. AI can also drive enhanced automation outcomes and much improved materials usage for manufacturing which can result in significant commercial gain.
Big Data is a fact of life now – the quality of that data, it’s integration and the power of analytical tools is very important. We are working with clients to really get actional tactical and strategic insight from their data, once again helping with optimisation, supply chain visibility and better sustainable outcomes through accurate and timely decision making.
Real time monitoring through IoT devices can really improve sustainable outcomes, issues can be detected and tackled early, assets can be maintained effectively to minimise emissions footprints for example and the data from these devices is game changing for decision making (with good analytics).
In particular, digital twin stands out as a transformative tool, GHD’s Digital Twin Offering (DTO) is a perfect example of this innovative solution. In a nutshell, our tool leverages advanced technology to replicate virtual models of physical assets, thereby enabling real-time monitoring, analysis, and simulation of performance. By providing detailed insights into asset performance and operational efficiency, digital twins could potentially help organisations identify opportunities to reduce energy consumption and lower their environmental impact. For example, by optimising equipment and infrastructure, companies can decrease energy use and minimise waste, contributing to their sustainability goals.
Obviously, there’s some debate as to whether the recent revelations of forced child labour in Shein’s supply chain resulted from wilful negligence or a lack of transparency. If the latter is true, how can organisations gain the necessary transparency to keep forced labour, polluters, and other unsustainable practices out of their value chain? If the former is true, how do we create an industry where we incentivise ethical behaviour more strongly than child slavery in service of cost containment?
While the debate surrounding Shein’s supply chain has reignited the debate, critical questions about transparency and ethical behaviour in global supply chains have remained constant. An investigation this year by the Swiss-based nonprofit group Public Eye highlighted various issues with its supply chain, suggesting that the company’s low-cost production model might involve unethical practices. Incentivising ethical behaviour and encouraging transparency are essential to eradicating bad practices.
Steps organisations can take to gain necessary transparency includes the implementation of comprehensive supply chain audits. These audits should be conducted regularly and should cover all tiers of suppliers to identify and address issues related to forced labour, pollution, and other unsustainable practices. Further to this, there is a need for accountability from suppliers at all tiers of the supply chain – refreshed or new contracting methods including green or sustainable principles are required – these can hold consequences for non-compliant organisations.. Whilst this is more stick than carrot, it is necessary to start bringing a change in behaviours. On the “carrot side”, training, awareness and where required practical hands-on support for suppliers should be provided. Just pointing at the issue doesn’t change it, everyone needs to be accountable and move to action.
Organisations should also establish clear standards and codes of conduct that outline expectations for ethical behaviour and sustainability. These codes should be communicated to all suppliers and integrated into contractual agreements, with regular reviews to ensure compliance. Additionally, engaging suppliers in training and building their capacity to adhere to these standards is vital. It requires an ongoing commitment to weed out poor performers and promote awareness and understanding of labour rights and environmental practices.
Would you agree that unsustainable practice in the supply chain (whether that’s irresponsible treatment of the environment or mistreatment of workers) only worsens the conditions within the supply chain, exacerbating pain points in the future? How do we make long term sustainability more appealing than short term profit-seeking?
Certainly, I would agree that unsustainable practices are not tolerable, but we need to be realistic that they exist. Where these issues surface, the accountability to act positively to mitigate the risks is critical. Major brands are feeling this now and it will drive much-needed change.
Whilst bad practices may provide short-term gains, they will result in long-term pain leading to disruptions in the supply chain, such as resource depletion, reputational damage, regulatory penalties, and increased operational risks. The negative impacts tend to accumulate, resulting in a cycle where the supply chain becomes increasingly fragile and less resilient, ultimately threatening the very profitability that short-term profit-seeking aims to secure.
To make long-term sustainability more appealing than short-term profit-seeking, a shift in perspective and incentives is essential. Our Sustainability Monitor 2024 research has revealed that that people increasingly view commercial value through the lens of relationships – with customers, suppliers, employees, investors, and the broader community. This suggests that action on sustainability is not just a moral or environmental imperative; it is also becoming a critical differentiator in a highly competitive marketplace.
What do the next few years look like to you with regard to evolving discussions and practice around supply chain sustainability?
The next few years are likely to bring significant advancements in both the discussions and practices surrounding supply chain sustainability. The momentum we’re currently witnessing in the adoption of sustainable practices across supply chains suggests a promising future, with several key trends expected to shape the landscape.
Firstly, there will be an increased focus on sustainability, particularly in how procurement can drive organisations towards achieving their ESG goals. As companies recognise the critical role that procurement plays in shaping supply chains, there will be a greater emphasis on integrating sustainable practices at every level. This means that procurement functions will not only need to source responsibly but also ensure that their suppliers adhere to stringent sustainability standards.
In addition to sustainability, the use of predictive and prescriptive analytics in procurement will continue to grow. These advanced analytics tools will enable better forecasting, allowing companies to anticipate and respond to supply chain disruptions more effectively. This shift towards data-driven decision-making will help organisations optimise their supply chains, reduce waste, and minimise environmental impact, all while improving efficiency.
We can also expect a broader adoption of digital transformation within procurement functions. Organisations will increasingly hire tech-savvy procurement teams and build internal stakeholder groups that are capable of integrating e-procurement systems into their ecosystems. This digital transformation will be crucial for enhancing the transparency and efficiency of supply chains, making it easier to monitor and manage sustainability initiatives.
