Climate change, if not the most pressing issue, is one of the most important challenges of our time. Its impact also has a profound effect on global supply chains. As companies work to lessen their environmental impact, satisfy customer demands for ethical operations, and comply with changing rules, procurement professionals are feeling more and more pressure to adopt sustainable practices. One of the integral components of this change is the idea of a “green supply chain.” It refers to incorporating environmental factors into supply chain management, including sourcing, production, distribution, and end-of-life procedures. However, there’s also a fair share of green supply chain challenges.
Adopting green supply chain practices is not just an option now. Implementing these processes is imperative to meet regulatory requirements, increase resilience, and protect operations in the future. This is where the procurement decision-makers come in. It is their duty to make sure that their supply chains support sustainability objectives while preserving operational resilience and cost-effeciency.
One of the biggest challenges is ensuring all suppliers are in line with sustainability guidelines. Numerous companies regulate their own environmental performance and efficiency through internal standards, policies, and environmental management systems. Should suppliers fail to adhere to the same criteria, the buyer companies may be purchasing and utilizing goods that don’t satisfy their own requirements.
The ever-changing regulatory landscape presents another difficulty. According to The World Economic Forum, different locations, industries, and buyers don’t have standardized metrics, making social and environmental data collection more complicated. Globally, governments are enacting stricter laws to cut carbon emissions and encourage environmental responsibility. However, while these regulations encourage companies and organizations to take positive environmental actions, they also require major changes to internal procedures and procurement methods.
Another ongoing obstacle to the adoption of green supply chains is cost concerns. In an article from Harvard Business Review in 2020, it was discussed that multinational companies frequently put cost savings in procurement first, putting pressure on suppliers to supply goods quickly and cheaply, sometimes at the expense of sustainability. Suppliers would compromise on sustainability to meet product demands since losing the business is a bigger financial risk. Procurement professionals also prioritize cost savings, and sustainability was not usually on their list. Also, lower-tier suppliers often lack the funding to meet sustainability standards.
Considering these challenges, the transition to green supply chains offers plenty of opportunities for creativity and adaptability. For example, global programs like RE100, which urge businesses in Taiwan to commit to 100% renewable electricity, have helped to accelerate the adoption of renewable energy. Businesses can lower emissions, stabilize energy prices, and establish themselves as sustainability leaders in their sectors by adopting such initiatives.
Another powerful tool to address green supply chain challenges is technology. Technology makes it easier to develop new materials and procedures that make supply chains more sustainable. Using artificial intelligence and advanced analytics can also revolutionize green supply chain management.
Issues where suppliers and customers don’t see eye to eye in sustainability can be solved by forming a collaboration across the supply chain networks. In a study by Business for Social Responsibility, many businesses have requested suppliers to address environmental challenges. A number of suppliers said that satisfying these requests has paid off in the form of lower costs, improved operational efficiency, higher customer value, higher sales, favorable press coverage, and favorable evaluations from socially conscious investment groups.