Supply Chain Sustainability 2.0
Most sustainability managers are quite familiar with the story of how Walmart used its influence to drive improvements in the social and environmental performance of its suppliers. But were these improvements really about sustainability performance at all? Not really. Instead, they were mostly about eco-efficiency. Think of this as Supply Chain Sustainability 1.0, and get ready for Supply Chain Sustainability 2.0!
Notwithstanding the name given to Supply Chain Sustainability 1.0 (i.e., which implied that the kinds of initiatives put forward by Walmart and others were about sustainability), it was really about making marginal improvements in the social and environmental impacts of suppliers, but not necessarily in their sustainability performance, per se.
Indeed, to use less energy, water, packaging and other materials in the production of consumer products is not necessarily to improve one’s sustainability performance. Rather, it is to improve one’s eco-efficiency. But even improved levels of eco-efficiency can still be unsustainable. To be sustainable, one’s social and environmental impacts must be consistent with norms, standards or thresholds for what they would have to be in order to be sustainable – such as not using any more than an organization’s proportionate share of available renewable water, no matter how efficient its operations might be.
The idea we’re talking about here is, of course, context-based sustainability, or CBS. And that is what differentiates Supply Chain Sustainability 2.0 from 1.0. Whereas 1.0 was all about marginal social and environmental performance (especially eco-efficiency) and lower costs, 2.0 is about sustainability, per se. That is, 2.0 is about measuring, managing and reporting the impacts of organizations (suppliers) relative to norms, standards or thresholds for what such impacts would have to be in order to be sustainable – truly sustainable.
In a world in which natural resources are becoming increasingly scarce, and social practices increasingly regulated, manufacturers have a vested interest in understanding the true sustainability performance of their suppliers, and not just their marginal impacts. This is why sustainability context must be factored into supply chain sustainability, and why Supply Chain Sustainability 1.0 is no longer sufficient. In order to ensure that a company’s supply chain is as sustainable and devoid of risk as it can be, Supply Chain Sustainability 2.0 must be embraced. Supply side risks simply cannot be known without it!
