Guide to Sustainable and Green Supply Chain Practices

ESG is the latest thing in large company reporting and a big part of this is the environmental impact of company operations.

But even if you aren’t a large company there are still plenty of good reasons why you should be aware of your environmental footprint and make changes that will benefit your business and the world as a whole.

So in this post, we are looking at the ‘green’ aspect of ESG. What is it, why should you care and what to do about it including;

• What is ESG?
• ESG - Why bother?
• 9-step guide to ‘greening’ your supply chain
• Summary: going green doesn’t need to be a chore

What is ESG?

ESG, stands for Environmental, Social, and Governance and is a framework used by companies to evaluate their sustainability and performance beyond financial returns.

The "E" focuses on environmental factors like climate change impact, energy usage, waste management, and water consumption (the ‘green’ bit).

The "S" encompasses social issues such as human rights, labour practices, diversity, community relations, and consumer protection.

The "G" represents governance factors like management structure, executive compensation, board diversity, and shareholder rights.

In short, ESG evaluates a company's impact on the environment, its treatment of social issues, and its governance practices. Companies are expected to minimise environmental harm, operate responsibly and ethically, and maintain transparent governance.

ESG - Why bother?

So why bother with going green?

After all, you are a busy company and you have plenty to be getting on with apart from checking your environmental footprint.

Well here are six reasons why you might want to think about greening your operations and we promise, none of them are about saving the planet or being morally responsible.

1 - Cost Savings

Implementing green practices can lead to significant cost savings for small and medium-sized enterprises (SMEs).

For example, adopting energy-efficient technologies and practices can reduce energy consumption and lower utility bills and let’s be honest, they are high enough at the moment as it is!

Similarly, reducing waste generation and implementing recycling programs help minimise waste disposal costs.

2 - Enhanced Reputation

Going green really can enhance the reputation and brand image of an SME.

Customers and stakeholders increasingly prefer to support businesses that demonstrate environmental responsibility and sustainability.

By adopting green practices, SMEs can differentiate themselves from competitors and attract environmentally conscious consumers. A positive reputation for sustainability can lead to increased customer loyalty, positive word-of-mouth, and a stronger market position.

Think of it this way; imagine two products are sitting on a shelf. They are equal in price, quality and reputation but one is environmentally friendly and one is not. All things being equal, the green product is going to sell more so why wouldn’t you give yourself that edge?

3 - Regulatory Compliance

Many jurisdictions have implemented environmental regulations and standards to promote sustainable practices.

By going green, SMEs can ensure compliance with these regulations, avoiding potential penalties and legal issues.

If history teaches us anything, it shows that regulatory requirements never get less so getting ahead of the pack now will ensure that any changes affect you less in the future.

4 - Employee Engagement and Retention

There’s good evidence that going green can have a positive impact on employee engagement and retention within an SME.

Employees often feel proud to work for companies that prioritise sustainability and environmental stewardship.

Green initiatives can foster a sense of purpose and shared values among employees, leading to increased job satisfaction and productivity.

Attracting and retaining top talent, particularly among environmentally conscious individuals, becomes easier when an SME demonstrates a commitment to sustainability and the evidence shows that the younger, more educated demographic is much keener on working for businesses that put the environment at the heart of everything they do.

5 - Long-term Resilience and Adaptability

Adopting green practices can contribute to the long-term resilience and adaptability of SMEs.

As environmental concerns and regulations continue to evolve, businesses that proactively address sustainability issues are better positioned to adapt to changing markets.

By integrating green practices into their operations, SMEs can future-proof their businesses and stay ahead of emerging trends, technologies, and customer preferences related to environmental sustainability. This adaptability can lead to increased competitiveness and business longevity.

As a simple example think about the recent issues with gas and fuel prices. Companies that have adopted solar panels or electric delivery vehicles have to a large extent been shielded from the worst of these.

6 - Large customer compliance

If you sell to large customers then it is likely that you have had compliance questionnaires and within them will be a section on ESG. Some companies have an entire department set up just to ensure that their supply chain is as green as can be.

So when you are bidding for work, or when your customer is analysing their spend, you will be better placed if you already have developed ESG practices and you have as small an environmental impact as possible.

Put simply, green policies can actually give you a competitive advantage.

9-step guide to ‘greening’ your supply chain

So as a practical guide, here are our favourite steps to going greener.

1. Conduct a thorough assessment of your supply chain to identify areas of potential environmental impact.
2. Set clear sustainability goals and targets for your supply chain, aligning them with your overall environmental objectives. These goals can include reducing greenhouse gas emissions, minimising waste generation, or sourcing materials from sustainable and renewable sources.
3. Collaborate with suppliers to promote sustainable practices throughout the supply chain. Establish open lines of communication and engage in dialogue to encourage the adoption of green initiatives.
4. Consider implementing green procurement policies that prioritise suppliers who demonstrate a commitment to sustainability.
5. Encourage transparency and traceability within the supply chain. Request information from suppliers regarding their environmental practices, such as their carbon footprint, waste management strategies, and compliance with environmental regulations.
6. Explore opportunities for collaboration and innovation with suppliers to develop more sustainable products and processes. Foster a culture of continuous improvement and incentivise suppliers to offer eco-friendly alternatives or suggest ways to reduce environmental impact.
7. Invest in technology and data systems that enable effective monitoring and measurement of environmental performance within the supply chain. This can include tracking energy consumption, carbon emissions, and waste generation.
8. Educate and train employees and suppliers about the importance of environmental sustainability in the supply chain. Promote awareness and provide resources to encourage the adoption of green practices at every level.
9. Regularly review and audit your supply chain to ensure compliance with environmental regulations and sustainability goals.

Summary: going green doesn’t need to be a chore

As we can see there are some very good business reasons for going green from better customer relations to increased engagement and retention.

But as you can see from our 9-step programme, it doesn’t take an awful lot to make a positive change.

In fact, working through our steps little by little will improve your company measurably and you’ll be doing your bit for the environment.

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Check out our manufacturing industry payments hub or check out some of our other articles below.

• Technology Developments That Are Impacting Green Supply Chain Practices
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• Steps To Protect Your Business From Supply Chain Disruptions

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