Sustainable supply chain management – An overview for SMEs
The Environmental Information Department of the Bavarian State Office for the Environment has published what we consider to be a very good article summarizing the implications of legally required and image-related sustainable supply chain management for small and medium-sized enterprises (SMEs).
We present this article below:
What is meant by sustainable supply chain and what benefits does it bring to my business?
With advancing globalization, burdens on people and the environment no longer arise only at the company’s production site, but along a complex supply chain. Several production steps are outsourced to other countries and regions. There, they are often linked to unacceptable environmental and working conditions and are difficult to monitor and influence. In turn, more and more clients and investors are demanding transparency and sustainability regarding environmental and social factors in the supply chain. This demand and several other good reasons speak in favor of introducing so-called sustainable supply chain management as a company – even in small and medium-sized enterprises.
Sustainable supply chain management
Sustainable supply chain management looks at all stages of the value chain for goods and services from an economic, social and environmental perspective. The aim is to eliminate or at least minimize negative impacts and promote responsible corporate governance. To achieve this, the entire life cycle of a product must be considered: from the extraction of raw and starting materials, through production and sale, to use and disposal.
To be able to positively change the supply chain and minimize risks, all stakeholders along the supply chain must be involved. Relevant stakeholders must be motivated to create a responsible, social environment and a conscious use of resources. In addition, they must commit to complying with appropriate framework conditions as well as national and international standards.
Implementation in small and medium-sized enterprises
For small and medium-sized companies, it is often more difficult to provide the necessary resources for detailed observation and evaluation. Nevertheless, the implementation is possible and makes sense and is important for people and the environment as well as for the company itself. […]
Benefits of sustainable supply chain management
The opportunities of responsible supply chain management are many and go well beyond legal compliance:
- Image: Suppliers who do not comply with environmental standards, labor rights and human rights have a negative impact on your company’s image. Customers and business partners increasingly expect the implementation of a sustainable supply chain. Accordingly, evidence and data relating to the CSR activities of suppliers are already required during the tendering process. By communicating your commitment and making your activities along the supply chain transparent, you gain the trust and sympathy of your stakeholders.
- Increased efficiency: Good exchange relationships with your suppliers can reduce raw material, energy and transport costs. This brings both ecological and economic benefits for your company.
- Discover opportunities, minimize risks: A supply chain analysis gives you new impetus to rethink processes and products, develop innovations and improve your risk management. You can more easily identify risks in your supply chain and mitigate or, at best, prevent negative impacts. Most recently, the Corona pandemic highlighted how challenging complex supply chains can be. If risk hotspots are addressed early, your company’s supply chain becomes more resilient.
- Ensure compliance: With the CSR Directive 2014/95/EU, the EU has required certain large companies to be more transparent in non-financial matters since 2017. Indirectly, this also affects suppliers. Further regulatory requirements exist because of Germany’s efforts to significantly reduce greenhouse gas emissions by 2050. From 2023, the new Supply Chain Act will also bring further regulations for companies with more than 3,000 employees.
The legal framework
At the national level, the German government presented a law for the implementation of the Corporate Social Responsibility Directive (CSR Directive) at the beginning of 2017. This introduces reporting requirements under commercial law for non-financial information, particularly for capital market-oriented companies with more than 500 employees: this means there is an obligation to provide information on environmental, employee and social issues, as well as respect for human rights and the fight against corruption. Indirectly, this also affects SMEs. In recent years, there has been repeated criticism, mainly because only a few companies are affected by the duty. At the end of April 2021, the EU Commission will therefore announce proposals to revise the directive. On March 3, 2021, the German cabinet also approved the first draft of the Act on Corporate Due Diligence in Supply Chains. The responsibility of German companies for respecting human rights in global supply chains will thus become binding for the first time from 2023, albeit only for large companies at first.
To provide global companies with guidance on the implementation of sustainable supply chain management, international organizations have developed guidelines to ensure that social and environmental criteria are considered. The OECD Guidelines for Multinational Enterprises, the Global Reporting Initiative (GRI) and the United Nations Global Compact Initiative with its 10 principles offer support in analyzing the supply chain and disclosing the results. The anchored guidelines and principles contain jointly aspired values of responsible multinational business in the areas of environmental protection, human rights, labor standards, transparency and anti-corruption. Emphasis is placed on consistent and careful auditing and analysis of business activities.
The so-called Dodd-Frank Act (Section 1502) of the USA requires companies with more than 500 employees to provide information in their non-financial reporting on risks and consequences regarding environmental, social and employee-related aspects and to declare respect for human rights.
The full article from the Bavarian State Office for the Environment can be found here: Link.
As a consulting firm, Adconia focuses, among other things, specifically on the strategic and operational influences of sustainability on goals, supply chains and processes in companies. We sensitize our clients to the resulting challenges and opportunities. ADCONIA offers solution approaches that are compatible with medium-sized companies and that successfully and profitably design and implement sustainability programs in companies.
Do you see a need for action in your company? Do not hesitate to contact us, we will be happy to advise you on a sustainability concept suitable for your company.
Consultant. ADCONIA GmbH