Traditionally, most businesses have sought to become more sustainable by making changes within the bounds of their direct operational control—they might switch to renewable energy sources or hybrid vehicles, or reduce paper or electricity use. Today, however, companies increasingly find that the biggest improvements can be made within their extended supply chains. This could entail setting sustainability standards, adopting new technologies to increase accountability or helping suppliers to become more sustainable. The effect of such efforts is not contained within the boundary of one company, but ripples outwards to affect many.
This ripple effect is significant. McKinsey, a consultancy, estimates that more than 90% of companies’ environmental impact comes from their supply chains. Retail firms’ supply chains typically account for 11.5 times each company’s impact. For personal and household goods companies, that figure is 19 times, and for food and beverage companies, it is 24 times.
McKinsey estimates that more than 90% of companies’ environmental impact comes from their supply chains.
Carbon emissions are a case in point. “Typically, the carbon emissions from a company’s value chain are between 65% and 95% of the total emissions triggered by whatever it is a company does,” says Hugh Jones, MD of Business Services at the Carbon Trust, an environmental consultancy. In other words, a typical company triggers emissions levels of up to twenty times higher from its suppliers (and customers) than from within its own organisation. This effect is particularly large in the IT, retail, telecoms, healthcare and finance sectors.
But to what extent are companies pushing suppliers to become more sustainable? And how? To what extent are firms choosing suppliers based on these issues, and prioritising such concerns over others? This paper explores how companies think about sustainability in their supply chains and describes how some of the biggest firms are beginning to work with suppliers to become more sustainable.
