How Could Blockchain Technology Drive a More Sustainable Supply Chain?
Blockchain technology has been around for over a decade, and while it was originally developed for use in cryptocurrencies, its applications have since expanded to numerous other fields. One of the most promising areas for blockchain technology is supply chain management. By providing a transparent and immutable record of transactions, blockchain technology can help companies create a more sustainable supply chain.
In this article, we will explore the importance of companies creating sustainable supply chains and touch on why blockchain technology could be an essential tool in their quest to do so.
What is a sustainable supply chain?
A sustainable supply chain is a system of organizations, people, activities, information, and resources involved in moving a product or service from the supplier to the customer in a way that minimizes environmental impact and promotes social responsibility. It involves the integration of sustainable practices into every aspect of the supply chain, from sourcing raw materials to the disposal of the final product.
One example of a sustainable supply chain is the clothing company Patagonia, which has implemented a number of sustainable practices in its supply chain. Patagonia has established a program called the Common Threads Initiative, which encourages customers to reduce consumption by repairing or recycling their old Patagonia products. Patagonia has also implemented a system for tracking the environmental impact of its products, from the sourcing of raw materials to the manufacturing process.
Another example is Nestle, which has implemented a sustainable sourcing program for its cocoa supply chain. Nestle has established partnerships with cocoa farmers and cooperatives in West Africa to improve the livelihoods of farmers, combat child labour risks in the region, and promote sustainable agriculture practices. Through this program, Nestle has been able to improve the quality of its cocoa while also promoting sustainable practices.
Sustainable supply chain practices are crucial for the long-term success and resilience of businesses. According to the Science Based Targets initiative, companies that implement sustainable supply chain practices are better equipped to manage risks associated with climate change, resource scarcity, and social inequalities. In fact, the initiative reports that companies that set science-based targets for their supply chain emissions have seen an average reduction of 25% in greenhouse gas emissions per $1 million of spend. Additionally, companies that have committed to sustainable supply chain practices have seen improved financial performance, increased brand reputation, and enhanced stakeholder engagement. These real-world statistics highlight the importance of sustainable supply chain practices and demonstrate that they are not only good for the planet but also for business.
In a 2018 study, Business Ambition for 1.5°C: Our Only Future, the United Nations Global Compact (UNGC) found that 93% of the world’s 250 largest companies are ‘taking action on climate change within their own operations’, but only 47% are addressing the issue in their value chains—by extension, supply chains. This demonstrates the need for companies to prioritise sustainability in their supply chain management.
Overall, a sustainable supply chain is a system that promotes environmental and social responsibility while also providing financial benefits. By implementing sustainable practices in their supply chain management, companies can reduce their environmental impact, promote ethical labour practices, and improve their bottom line.
Why is a sustainable supply chain important?
A sustainable supply chain is becoming increasingly important due to the growing awareness of environmental and social issues among consumers and investors. Here are some statistics that highlight the importance of sustainability in supply chain management:
Consumer demand for sustainability: According to a survey by Nielsen, an immense number of global consumers (81%) ‘feel strongly that companies should help improve the environment’, and 73% would ‘change their consumption habits to reduce their environmental impact’.
Investor interest in sustainability: According to the Global Sustainable Investment Alliance, sustainable investments grew by 15% to $35.3 trillion in 2020, with Europe and the US accounting for the majority of sustainable assets.
Environmental impact of supply chains: According to the Carbon Trust, global supply chains are responsible for 5.5 times more greenhouse gas emissions than a company’s direct operations. This highlights the need for companies to address the environmental impact of their supply chains.
Social impact of supply chains: According to the International Labour Organization, there are approximately 27.6 million people in forced labour globally, with many of these individuals working in supply chains. This highlights the need for companies to ensure that their supply chains are free from exploitation and promote ethical labour practices.
Financial impact of sustainability: According to a study by NYU Stern Center for Sustainable Business, companies that invest in sustainability initiatives outperform their peers financially. This highlights the potential financial benefits of adopting sustainable supply chain practices.
These statistics demonstrate the increasing importance of sustainability in supply chain management, both from a social and environmental perspective, as well as from a financial perspective. Companies that prioritise sustainability in their supply chain management are likely to benefit from increased consumer loyalty, investor interest, and financial performance.
How can blockchain technology help create a sustainable supply chain?
Blockchain technology’s true power when it comes to the creation of more sustainable supply chain norms is its ability to provide companies with a transparent and immutable record of transactions. Having an accurate record can assist in the following ways:
Traceability and transparency
Blockchain technology can provide end-to-end visibility into the supply chain, enabling companies to track products from their origin to their final destination. This transparency can help identify inefficiencies in the supply chain and ensure that products are produced and transported in a way that minimises environmental impact.
Reducing waste
By providing real-time visibility into inventory levels, blockchain technology can help companies reduce waste by ensuring that they only produce what they need. This can help minimise overproduction, reduce inventory costs, and lower the environmental impact of the supply chain.
Carbon emissions reduction
Companies can also use blockchain technology to track the carbon footprint of products throughout the supply chain, providing visibility into the environmental impact of each step. This can help them identify areas where they can reduce their carbon emissions, such as by optimising transportation routes or using more environmentally friendly packaging materials.
Social responsibility
Blockchain technology can also be used to ensure social responsibility throughout the supply chain. For example, it can track labour conditions and ensure that workers are being paid fairly. This can help promote ethical labour practices and ensure that companies are not supporting exploitation in their supply chain.
Increased efficiency
By providing real-time visibility into inventory levels and transactions, blockchain technology can help companies increase efficiency throughout the supply chain. This can help reduce costs, improve lead times, and ensure that products are delivered to customers in a timely and cost-effective manner.
By providing a transparent and immutable record of transactions, companies who use blockchain technology can reduce waste, minimise carbon emissions, promote social responsibility, and increase efficiency. The benefits of a sustainable supply chain are numerous, including a competitive advantage, increased customer loyalty, and a better brand reputation. As blockchain technology continues to evolve, it is likely that we will see even more innovative ways in which it can be used to create a more sustainable future for all.
