Benefits of sustainable business operations and supply chain management

The focus of businesses on sustainability has grown a lot in recent years due to several factors. As the benefits of sustainability have grown more highlighted, more and more businesses have started adopting sustainability practices in production as well as supply chain and other areas of operations. Sustainability has both direct and indirect benefits for businesses. However, the growing interest of consumers around the world in businesses that have managed their environmental impact well has also grown the focus of businesses on sustainability. Increasingly consumers are growing attracted to the businesses that have adopted greener practices. While the level of environmental awareness among the consumers has grown, it is not the only reason that the businesses should adopt sustainable practices.

Benefits of sustainability in operations and supply chain.
 by Gerd Altmann from Pixabay 

Sustainability must be made a part of company policies and business strategy apart from operations. Several companies are establishing a culture of sustainability inside their organizations to make it an integral part of its operations. While on the one hand, it helps reduce the environmental impact of the business, on the other, adopting sustainability-based business practices helps reduce the operating expenses. However, supply chain and production are two critical areas where investing in sustainability can generate superior results for a large business.

Advantages of Managing Supply Chain and Business Operations Sustainably

Reduced Environmental Impact:

As companies have rushed to adopt sustainable practices throughout their business operations more and more of them are focusing on having more sustainable supply chains. The main motive of these businesses is to control the overall environmental impact of their business operations. Supply chain and production networks of these companies in various industries including automobiles, electronics, and other major industries are where most of the activities with a severe environmental impact take place. In such a situation, the companies have to be mindful of how much pollution their supplier and production networks are generating and how best to control them. Several of the leading players in the automobile, electronics, and even the shoe industry have adopted sustainability strategies focused on reducing the environmental impact of their supply chain operations.

 Companies like BMW, Samsung, and Nike that have supplier and production operations located globally in various corners of the globe have implemented detailed rules that are commonly included in their Codes of Conduct and which prevent their tier 1 and tier 2 suppliers from engaging in activities that generate significant environmental pollution. Businesses have grown more and more cautious about their environmental impact and how it can affect their image in the market and the society negatively. For most of the large companies their supply chain management strategy is a core pillar of their sustainability strategy and managing their environmental impact down the supply chains helps them considerably reduce their overall carbon footprint.

 A large number of companies have their own production networks where they make their products from the raw materials sourced from suppliers all over the world. Managing a sustainable production network also reduces the carbon footprint of businesses significantly. Apart from eliminating activities that generate the most pollution companies are also adopting practices that reduce their carbon footprint and help them manage their environmental impact better. Several companies have adopted the strategy of buying carbon points to offset their environmental impact and several have switched fully to use the use of renewable energy throughout their business operations including supply chain, production, and office operations.

 Nike has outsourced its production fully to external suppliers and therefore its most focus remains on managing sustainability in its supply chain. As a larger number of businesses are moving to adopt sustainability practices in their supply chains, it will be possible to make the world cleaner and greener. Apart from the use of renewable energy in their business operations, companies have also adopted waste management and recycling to reduce the environmental impact of their supplier operations.

Strengthened brand image:

Another major benefit that a lot of businesses around the world have achieved from adopting sustainability practices businesswide is improved brand image. Research has shown that customers tend to gravitate towards the brands with a low environmental impact. On the one hand, while it helps market a socially responsible image, on the other it also helps them build stronger customer connections. The millennial customers particularly tend to favor the businesses that are more sustainable. The fast growth in the popularity of Tesla motors is an example of how significantly businesses with a greener image gain compared to their competitors. From Tesla to Starbucks, Apple, and Nike, all these businesses promote an image that is consistent with people’s expectations of a greener and safer world. The automobile industry is already seeing a lot of innovation in this area. Not just Tesla, but other automobile brands too are investing heavily in environment-friendly innovation so as to minimize the carbon footprint of their products and the business overall. Marketing a greener image helps businesses establish themselves and socially and environmentally responsible. Since image matters a lot and more than ever in the world of marketing,  businesses have grown their focus on sustainability. In most cases, having a more sustainable image in the eyes of the public has proved highly favorable for international businesses. Sustainable brands are businesses that have successfully integrated environmental, social and economic issues into their business operations. Research also shows that a large number of CEOs believe that sustainability has become fundamental to their business success. While it affects brand image directly, there are several more related benefits also of being a sustainable business. Several technology businesses that already have a very low carbon footprint have further focused on eliminating activities and practices that negatively impact the environment. Take the example of Salesforce which considers the environment a key stakeholder in its business. The company has achieved net-zero greenhouse gas emissions globally in its business operations and delivers its customers a carbon-neutral cloud. Salesforce is among Barron’s most sustainable companies and also a member of Dow Jones Sustainability indices. Salesforce has also achieved a remarkably strong brand image and it is one of the factors supporting its competitive edge in the cloud industry.   

Lower operating expenses:

Businesses have recognized that they can lower their operating expenses by adopting sustainability practices. Taking a long term view in this area has proved profitable for a large number of businesses. While during the initial phase, it may look costly to adopt sustainability best practices, over the longer term it can transform into significant profits for businesses. One of the major costs that are related to being non-sustainable is that of compliance. Being more sustainable helps you avoid all such compliance costs that can otherwise be a considerably large burden. Apart from that, a large number of companies including Puma, Nestle, and Starbucks have already proved that sustainable innovation helps you reduce costs and forge better relationships with stakeholders. Two major steps that have been identified to create a lot of value for businesses include recycling and waste management. Apart from helping businesses create fresh value from used articles, recycling also helps reduce wastage. For large and small businesses, both things are cost savers and can help grow profitability.  Another important area where companies can save a lot on operating expenses and reduce costs is managing their energy use. It is an important area that a large number of businesses are now attending with focus. Energy consumption of businesses is one of the major drivers of operating expenses for them. Managing energy consumption reduces operating expenses and reducing your dependence on nonrenewable energy sources helps you minimize your carbon footprint and make your business more sustainable. Companies that use water as one of the significant raw materials in their operations are also investing in water management to improve their environmental footprint. 

Increased customer loyalty:

Sustainable businesses enjoy higher popularity and customer loyalty. Customers tend to appreciate sustainable businesses more and remain loyal to them for longer. Research has shown that in the hospitality industry, adopting sustainability practices has led to improvement in customer perception of the brand, improved customer experience as well as growth in customer loyalty. Research also showed that hotel companies that use innovative technologies to provide up to date customer experiences and invest in sustainability programs are valued more by customers. Such hotels also attract repeat visitors more compared to their competitors that have not invested in sustainability programs. Sustainability does not just improve a hotel’s brand image, but it also helps the business provide improved customer experience and grow its customer base by marketing itself as a socially responsible brand. Every business wants to win loyal customers. In the hospitality industry especially, greener experiences are highly valued by visitors. Marriott, one of the leading hospitality brands, has set ambitious sustainability goals for the future. As a part of its sustainability 2025 goals, the company plans to reduce its environmental footprint by around 50% by 2025. It also plans to achieve at least 30% renewable electricity usage by the year 2025 while also lowering its water consumption throughout the business. It is also focusing on sustainable sourcing and including only the suppliers that qualify on the basis of its sustainability criteria. 

Growth in operational efficiency:

Research has shown that adopting sustainability practices can improve the operational efficiency of businesses. A properly implemented sustainable operations strategy can help to improve operational efficiency while also reducing operating expenses for retail businesses. While not in all situations, still in many cases operational sustainability has been linked with increased operational efficiency. Sustainability driven innovation has several important benefits, one of which is increased operational efficiency. However, not just increased efficiency and better workflow in supply chain and operations, but sustainability has also been linked with higher profitability and better customer service and in many cases also with staff motivation.

While sustainability can be a driver of organizational performance and productivity, it can also help businesses improve their profitability as well as strengthen their competitive advantage. However, prior to adopting sustainability practices businesses must adopt a culture that reinforces sustainability and drives sustainable innovation throughout the business. The role of leaders is very important in this regard. They must not just implement strategies that drive sustainability but also motivate their staff and encourage them to participate in implementing sustainable strategies. Businesses can gain a lot from adopting sustainability in their business operations including the supply chain. However, they should take a long term view to realize the full benefits of sustainability. Apart from improved brand image and higher customer loyalty, they can also gain higher operational efficiency and increased profitability.

Abhijeet Pratap

Abhijeet has been blogging on educational topics and business research since 2016. He graduated with a Hons. in English literature from BRABU and an MBA from the Asia-Pacific Institute of Management, New Delhi. He likes to blog and share his knowledge and research in business management, marketing, literature and other areas with his readers.