Achieving Sustainability in Supply Chain - A Strategic Imperative

The current generation of customers – comprising of Millennials, GenZ and Gen Alpha – are increasingly preferring eco-conscious brands, which is significantly driving businesses to embed sustainability into their operations. While the push has risen, owing to the growing pressure from regulations, customers, and environmental realities, embracing sustainable practices also has key business impact as it enhances resilience, efficiency, and long-term profitability. Having said that, imbibing sustainability in day-to-day operations is no mean feat… it mandates building a sound sustainability strategy in corporates’ supply chain. Moreover, as governments worldwide impose stricter environmental laws, companies that adopt sustainable practices will have a better chance of being compliant. In lieu to all these imperatives, today sustainability is no longer optional—it’s essential for growth, reputation, and risk management. Our maiden conference on Sustainability emphasized this very tenet and explored the transformation of supply chains into sustainable models that reduce environmental impact and promote social welfare. Through this Cover Story, subject matter experts discuss innovative strategies for incorporating renewable energy, reducing waste, enhancing transparency, and ensuring ethical labor practices. It also puts spotlight on practical steps companies can take to assess, monitor, and improve the sustainability of their supply chains.

Key elements of supply chain sustainability…

Two key elements of a sustainable supply chain are reducing environmental impact through eco-friendly practices and ensuring ethical sourcing with fair labor standards.

Jaswinder Saini, VP - Procurement, Tata Play Ltd.: Sustainability serves as a key factor in attracting customers to an organization. Today’s customers are informed and savvy about a company’s operations. They can readily access information on whether a company sources its raw materials ethically or delivers goods sustainably. Customers tend to favor organizations that adhere to sustainability over those that do not. We, too, are consumers, both individually and corporately. Would you consider endorsing organizations that engage in unsustainable practices? I believe the unanimous response would be negative. At an individual level, we must all be cognizant of ESG principles to progress on this path.

From my experience in the manufacturing sector, implementing ESG is more challenging in manufacturing than in services due to the significant role of technology. Without technological support, contributing to ESG can be difficult, regardless of the resources committed. In contrast, the service industry, with the correct measures, can implement ESG initiatives with greater probability and ease.

Veeshwass Kulkarni, General Manager, Legrand India: Supply chain sustainability is the management of a product’s environmental, social, and economic implications over its entire lifecycle, from raw material procurement to end-of-life disposal or recycling. It means being certain that the processes, materials, and alliances used in the development and distribution of goods and services are not hampering the capacity of future generations to meet their requirements. Two key elements are:

Environmental Responsibility: This includes minimizing the environmental impact of supply chain operations. It involves actions like reducing waste, conserving water, increasing the use of renewable energy sources, and decreasing carbon emissions. Companies are increasingly adopting circular economy principles, which involve reusing, recycling, or disposing of items and resources sustainably rather than adhering to a linear consumption model.

Social responsibility and Ethical Sourcing: It is vital to ensure that suppliers follow fair labor practices, respect human rights, and provide safe working conditions. This includes working with partners who are committed to environmental and social governance (ESG) principles, such as eliminating child labor and fostering workforce diversity and inclusion.

Organizations that focus on these factors can build resilient and responsible supply chains that correspond with their overall sustainability goals.

Vishal Bhavsar, Head – ESG, Multiples Alternate Asset Management: Supply chain sustainability is the management of environmental and social impacts within and across networks consisting of suppliers, manufacturers, distributors, and customers in line with the UN Sustainable Development Goals. This spans every phase of the supply chain, from raw material sourcing and extraction to product use and end of product life.

Two key elements of a sustainable supply chain are reducing environmental impact through eco-friendly practices and ensuring ethical sourcing with fair labor standards.

Sandeep Chatterjee, Supply Chain and Sustainability Leader, IBM: Roughly 60-70% of the greenhouse gas emissions come from supply chain. That’s one of the biggest reasons why supply chains are under a lot of pressure. Lot of people think that sustainability is just about climate. To support one earth, we consume 1.8 Earth. In the UK alone, there are enough clothes for six generations.

While it’s good to have many women at the workforce, but can we say that our workplace is safe enough for women to work without any inhibitions? Do we have access to clean water? Those are the critical aspects from a sustainability standpoint. The third aspect is profit.

While a lot of people might debate on sustainability vs profit, we must realize that our matric is still a year-on-year profit. Unless the matrix change, people will not take it seriously. The fourth aspect we have to reflect upon is the Purpose of the organization. Tata Group is a classic example of having sustainability in their ethos. All these elements have to cohesively gel together to create a meaningful world for us. I started my career with Tata Motors in 1998. We launched Indica car, then priced at 2.5 Lakh. We spoke to Nissan Australia, imported the second-hand assembly line of Nissan Australia and that’s how Indica was rolled out. It changed the whole automotive ecosystem then. Another example is of Cement companies. We talk about green cement, but fly ash and waste was already part of the cement. They use less limestone and have better binding properties. Cement companies today are most of the profitable companies in the country. Use less material, that makes you more profitable. We will have to find different ways of looking at striking the right balance between profitability and sustainability.

Positive impact that sustainable supply chains have on corporate reputation and consumer trust

By embracing sustainability in their supply chain, companies build trust with consumers who want to align their buying decisions with their personal values.

Jaswinder Saini: Sustainability plays a pivotal role in shaping brand reputation. Within the supply chain, sustainable practices contribute significantly to building trust between organizations and their customers. While positive impacts may take time to materialize, even a minor negative incident can quickly escalate, tarnishing an organization’s reputation and goodwill.

Allow me to share our own experience: When we embarked on our ESG (Environmental, Social, and Governance) journey, we recognized our substantial energy consumption. Determined to make a difference, we optimized our set-top boxes to consume less energy compared to our competitors. Despite the higher costs involved, we prioritized sustainability. As a result, our reputation as a top DTH services provider was built through such deliberate steps. Going forward, a transformative shift will occur when end customers become more aware and willing to support sustainable practices. While this awareness is still nascent at least in India, but it holds immense potential in our country.

Vishal Bhavsar: Sustainable supply chains enhance corporate reputation and consumer trust by demonstrating a commitment to ethical practices, including human rights and traceability. Initiatives like the Better Cotton Initiative promote sustainable cotton production while supporting farmers’ rights, appealing to eco conscious consumers. Addressing issues like conflict minerals also ensures responsible sourcing, fostering trust.

Corporates can leverage this impact by promoting their sustainability initiatives through marketing and social media, sharing success stories such as Trustea, which focuses on sustainable tea sourcing. Transparency in reporting sustainability metrics builds consumer confidence, while third-party certifications enhance credibility. By positioning sustainability as a core value, companies can differentiate themselves in the market and attract a growing base of socially and environmentally conscious customers and investors focused on ESG criteria.

Sandeep Chatterjee: Today’s consumers are more aware and understand the implications of climate change and bad corporate practices. While consumers may not pay a lot of money for sustainable products currently, but it affects the mind of the consumer positively. Corporates need to communicate and communicate authentically as any greenwashing is likely to be discovered and you will not be able to recover from them.

Sanjay Desai, VP – Asia, Supply Technologies: Sustainable supply chains significantly enhance corporates’ reputation and build consumer trust, creating multiple opportunities for companies to leverage these benefits. Here’s are some of the major impacts…

Brand Building: A sustainable supply chain reflects a company’s commitment to ethical practices such as fair labor conditions, environmental conservation, and responsible sourcing. This alignment helps to increase the company’s reputation as a socially responsible organization.

Scaling organizational capabilities: Corporates who embrace sustainability principles position themselves as leaders in their industries. They are able to differentiate themselves from competitors and create a positive brand image which aligns with customers, investors, and stakeholders.

Incremental trust and loyalty with customers: By embracing sustainability in their supply chain, companies build trust with consumers who want to align their buying decisions with their personal values. This trust will positively impress customers’ buying preferences and habits.

Pricing advantage over competition: It is proven that the current young generation of customers are more willing to pay a premium for products from brands that prioritize sustainability. This provides an opportunity for companies to increase profitability while aligning their product offerings with consumer values.

Leveraged ESG reporting: Publishing sustainability reports consistently over a period of years, providing stakeholders, investors, and promoters with data backed view of sustainable practices and results, helps Corp to gain easy access to capital needs, Govt subsidies and plethora of other benefits.

Builds a sustainability culture within the organization: Working with organizations that focus on sustainability can enhance credibility and create mutually beneficial partnerships. These collaborations can help corporates address environmental challenges by engaging their employees directly on the job, building an internal culture of responsibility towards social /environmental causes.

Balancing the cost v/s benefit analysis of attaining sustainability over a longer-term horizon

To balance cost and benefit analysis in building a sustainable supply chain, companies should adopt a staggered investment approach.

Veeshwass Kulkarni: Weighing the costs and benefits of sustainability activities, particularly in terms of reducing Scope 3 emissions, needs a strategic approach that takes into account both current trade-offs and long-term gains. While sustainability activities are typically seen as costly, they can yield significant long term benefits, ranging from financial savings, risk management, and increased brand value to regulatory compliance and customer loyalty. Here’s how companies might approach this balancing act:

View sustainability as an investment, not an expense

• Long-term value development: Instead of considering sustainability as a direct expense, businesses should present it as a venture that can produce lasting profits. This involves ensuring the business is prepared for the future, adapting to changing regulatory requirements, and remaining competitive in a market where sustainable practices are demanded by consumers and stakeholders.
• Opportunities to decrease expenses: Ecofriendly methods like power conservation, waste minimization, and streamlined transportation can reduce operational costs. For instance, implementing energy-saving manufacturing methods and utilizing sustainable energy sources can decrease energy expenses in the long run, while minimizing packaging or transportation can lower transportation costs.
• Risk reduction: Allocating resources to sustainability initiatives assists in reducing risks such as supply chain interruptions caused by climate change, penalties imposed by regulations, and harm to reputation stemming from unsustainable operations. These hazards, if left unattended, can result in substantial monetary setbacks.
• Phased execution: Companies are not required to execute sustainability measures simultaneously. A gradual method permits them to distribute the expenses over a period, giving priority to areas where immediate economic or ecological advantages can be achieved. This aids in controlling the flow of money while continuing to make progress towards sustainability objectives.

Improved brand image

Efforts towards sustainability tend to draw in environmentally aware customers who are willing to spend extra for products that match their beliefs. Businesses have the opportunity to use sustainability as a unique selling point, which may lead to higher prices or a larger share of the market in specific customer groups. A robust dedication to eco-friendliness improves brand standing and promotes customer allegiance. Studies indicate that consumers, particularly the younger demographic, are more inclined to endorse brands that exhibit a firm dedication to environmental responsibility. This brand reputation can result in increased customer loyalty and long-term worth.

Adherence to future mandates and entry to sustainable funding

Future regulatory compliance: Authorities globally are increasing restrictions on emissions, waste management, and sustainable operations. By taking proactive steps to address sustainability now, businesses can prevent incurring future expenses or fines related to more stringent regulations. At times, early implementation may make companies eligible for tax deductions or perks.

Numerous investors are currently prioritizing Environmental, Social, and Governance (ESG) standards when determining investment choices. By enhancing sustainability measures, businesses can gain access to eco-friendly bonds or advantageous loan conditions linked to ESG achievements, decreasing their long-term capital expenses.

Vishal Bhavsar: To balance cost and benefit analysis in building a sustainable supply chain, companies should adopt a staggered investment approach:

1. Staggered investment approach: Phase 1 (Quick Wins): Allocate less than 15% of your sustainability budget to no-cost initiatives, such as developing a supplier code of conduct, establishing criteria for supplier assessments, and modifying assessment templates to include sustainability metrics. These steps can yield immediate benefits with minimal investment.
2. Phase 2 (Medium-Term Investments): Set aside 40% for moderate projects, such as technology upgrades that enhance supply chain transparency (e.g., using EcoVadis ratings).
3. Phase 3 (Long-Term Projects): Reserve 45% for larger investments in renewable energy or significant supply chain changes, guided by frameworks like the Carbon Disclosure Project (CDP).

This structured approach allows companies to effectively manage costs while progressively enhancing sustainability efforts.

Sandeep Chatterjee: Yes, it is true that this comes at a cost, but companies have to think about innovative solutions around how to use less material, how to recycle more, how to minimize waste. For example, the technology to recycle lithium will be expensive but certain savings can be done when we use less material, use remanufactured machines. For the poultry industry where margins are very small and any increase in mortality is a serious issue, the waste in terms of internal organs, feathers are powdered and are fed as food to chicken and fishes in fisheries. The consumer will not pay a lot of money for this. Organic food is expensive because the base is small. As more and more agriculturists start adopting, prices will come down.

Practically, there has to be an incentive mechanism in the supply chain as somebody needs to be compensated for the risk premium. Co-creating of solutions, sharing data based on trust are key points. Further, data needs to be used for improvement and not to penalize somebody. In terms of challenges since the supply chains are dispersed and broken, collecting data at a reasonable cost is key. Second is the willingness to share data as this is a tricky issue. Third is it will need some investment and hence the question around who pays for it will be prime.

Sanjay Desai: In the corporate world, there is a Four-letter word, (RONA) which haunts all managers their entire life!! RONA stands for Return On Net Asset deployed. Balancing cost v/s profit in the sustainability initiative is a challenge like any other upfront investment in other projects, more so as benefits of sustainability are not realized immediately. These benefits start to be realized in long term horizon. Let us understand how companies can balance sustainability investments.

• Identify long-term horizon and benefits: Companies need to identify the long term horizon and the benefits that will be realized in the future period for investments made today. Example, installing solar panels may cost high upfront but will reduce energy bills in the long run.
• Phased investment over big-bang approach: Instead of launching comprehensive sustainability execution initiatives all in one go, we can adopt a phased approach. Implementing smaller, more manageable initiatives first and then scaling them to bigger initiatives. Example - Savings in electricity / energy consumption.
• Partner with Government: Indian Government offers many benefits for green energy, carbon reduction, water harvesting, etc. Companies should explore these opportunities to offset upfront costs and make sustainability initiatives more financially viable.
• Hire specialist services: Corporates need to collaborate with NGOs, industry associations, or sustainability experts to implement cost-effective sustainability solutions. Such partnerships can provide technical expertise and resources that companies might lack internally. It may offer Capex options or partnership with government banks for low interest rates borrowings.
• Measure/ monitor & communicate: Clear and transparent communication with investors and shareholders about the long term financial benefits of sustainability, supported by data and milestones, helps manage expectations and secure ongoing investments in sustainability projects.

The critical role of technology in mainstreaming sustainability as part of supplychain process

Technology plays a pivotal role in helping supply chains achieve sustainability by enabling greater efficiency, reducing waste, and promoting transparency.

Vishal Bhavsar: Yes, technology plays a crucial role in mainstreaming sustainability in supply chain processes. Advanced data analytics tools allow companies to track sustainability metrics, facilitating informed decision making and improvement identification. Technologies like blockchain enhance supply chain visibility, ensuring real-time tracking and ethical sourcing.

Automation and artificial intelligence optimize logistics and inventory management, reducing waste and energy consumption. Digital platforms simplify sustainable sourcing, connecting companies with eco-friendly materials and suppliers. Lifecycle assessment tools evaluate the environmental impact of products, guiding sustainable design choices.

Additionally, technology fosters collaboration between companies and suppliers, enabling the sharing of best practices. Digital tools streamline tracking and reporting of sustainability metrics, aiding compliance and enhancing communication with stakeholders. By integrating these technologies, companies can strengthen their sustainability efforts and build more resilient supply chains.

Sandeep Chatterjee: Today’s supply chains are driven by data, speed and efficiency. Here technology will play a huge role in automated data collection and generating insights from tons of data. Technology will help speed up the whole process.

Sanjay Desai: Technology plays a pivotal role in helping supply chains achieve sustainability by enabling greater efficiency, reducing waste, and promoting transparency. Here are several ways technology contributes to sustainable supply chain management.

• Supply Chain Transparency and Traceability: Blockchain and other tracking technologies ensure transparency across the supply chain, verifying ethical sourcing, reducing environmental impact, and promoting social responsibility
• Real-Time Data and Analytics: Technologies like IoT and AI-driven analytics provide real-time visibility into supply chain operations, allowing for more informed decision-making, optimization of resources, and identification of inefficiencies that reduce waste and carbon emissions.
• Green Logistics and Route Optimization: Technologies like AI and machine learning can optimize transportation routes, leading to reduced fuel consumption and lower emissions, while solutions like electric vehicles and eco-friendly packaging contribute to greener logistics
• Predictive and preventive analytics: Predictive analytics, digital twins, and AI allow companies to forecast demand, optimize inventory, and prevent disruptions, reducing overproduction, excess inventory, and unnecessary resource use.
• Circular economy enablement: Technology facilitates the adoption of circular economy principles by tracking products and materials throughout their lifecycle, supporting recycling, reuse, and refurbishment, which extends product life and reduces waste
• Enabler to full ESG compliance:Sustainability is no longer limited to carbon footprint reduction. Technology enables companies to measure and report their performance on a broader scale which includes labour practices, human rights, biodiversity conservation, and the ethical sourcing of materials.

Regulatory framework to guide businesses in building sustainable supply chains

Sandeep Chatterjee: Regulators devise a framework after consulting various stakeholders and hence incorporate some of the best practices. Growth is good but not at the cost of society. Regulators will be able to ensure this. Right now, there are just too many frameworks, and this creates a lot of confusion. A good starting point is to look at the continent/country specific regulations. Anyone doing business in India need to be aware of BRSR, while someone in Europe needs to look at ESRS and CSRD.

Reporting sustainability initiatives to stakeholders and consumers

Vishal Bhavsar: Companies can measure and report on the sustainability of their supply chains through practical approaches such as:

• Regular Sustainability Metrics Tracking: Implement a dashboard to monitor key metrics like carbon footprint, water usage, and waste generation, providing real-time data to stakeholders.
• Supplier Sustainability Assessments: Use standardized questionnaires or assessment tools for suppliers to report on their sustainability practices, ensuring consistency and transparency across the supply chain.
• Annual Sustainability Reports: Create comprehensive reports that summarize sustainability efforts, challenges, and achievements, including case studies and specific examples to illustrate impact.
• Sustainability Disclosures: Engage with various frameworks and platforms such as the CDP Supply Chain program, UN Global Compact (UNGC), and EcoVadis assessments to disclose sustainability performance and receive ratings that enhance transparency and credibility.

Key factors to consider when designing a sustainable supply chain strategy

Establish processes, and policies to ensure consistency of good practice that is set. Measure, record, and report progress aligned tothe guidelines available.

Jaswinder Saini: Each organization faces its unique set of challenges and opportunities related to ESG. The strategy must align with the specific goals, objectives, opportunities, and challenges of that organization or that specific industry. One common mistake that leaders make is to copy what others have done without mapping the differences with that organization. Next step is to set achievable targets and KPIs considering the prevailing circumstances. Leverage available technology to meet and achieve those targets. Establish processes, and policies to ensure consistency of good practice that is set. Finally, measure, record, and report progress aligned to the guidelines available.

Veeshwass Kulkarni: When we talk about considering different aspects of designing a sustainable supply chain, depending on different organizations’ mission, vision, goal, and the KPIs. At an organizational level, we must introspect what we want to accomplish and where do we stand today to achieve that goalpost.

Second important focus area is supplier or service providers as they play a major role. The way you deal with them, be it communicating with them, setting the right expectations, will actually impact your performance matrix. You must also set the right criteria of supplier selection. These suppliers must be able to comply with the vision & mission of your organization and then only it will fructify. When you already have a certain set of suppliers onboarded, how are you going to develop them will define the future course of action. Every supplier will have a different knowledge base and different understanding of aspects that you are looking for.

Another critical aspect is collaboration which will set you apart in this race. I would like to share with you an example of our company Legrand where we had launched a program for all the suppliers to inform them about our vision, the key parameters on the basis they will be assessed to be onboarded. We also organize training programs to bring them to a common ground where they are able to clearly understand our requirements and deliver as desired.

Based on the requirements, resources get allocated to suppliers. One of the key factors in our KPIs is reducing our packaging weight. We are working on developing a material which has recycled contents which will help us in not only optimizing cost but reduce overall carbon footprint by replacing single use plastic. We are in touch with top-notch academic institutes to develop the same alongside getting help from suppliers. Such is the power of collaboration that I would like to highlight.

Vishal Bhavsar: To frame an effective supply chain sustainability strategy, consider these key factors:

• Stakeholder Collaboration: Engage all stakeholders, including suppliers and customers, to align sustainability goals and drive collective action.
• Risk and Impact Assessment: Identify environmental, social, and governance risks in the supply chain and develop strategies to mitigate them.
• Clear Sustainability Metrics: Set measurable goals like carbon reduction, waste minimization, and ethical sourcing, with ongoing tracking and reporting.
• Innovation and Technology: Leverage technology, such as AI and blockchain, to enhance transparency, optimize processes, and ensure continuous improvement in sustainability efforts.

Sanjay Desai: Achieving sustainability in the supply chain is critical due to increasing environmental pollution, increasing deforestation, increasing greenhouse gas emissions, and rising consumer expectations in current times. Then we have regulatory pressures, and other social challenges. An organization’s brand image gets huge recognition if the organization is seriously practicing principles of ESG (Environmentally Sustainable Governance) with an objective and purpose to be compliant. Achieving a sustainable supply chain will not only reduce environmental pressures but also ensures resilience, cost savings potentials, and builds a competitive advantage in the marketplace. Let us look at a few factors to consider when designing a sustainable supply chain.

• Reduce environmental impact: Reducing the carbon footprint and minimizing waste are essential factors in mitigating climate change and help to lower emissions and pollution.
• Risk mitigation approach: Managing risks like climate disruption, natural disasters, single v/s dual source supply strategy, regulatory changes, geopolitical developments. It helps your supply chain to be compliant, robust and resilient.
• Circular product life cycle: Implementing circular product life cycle principles offer numerous advantages, particularly in contrast to traditional linear models where products are designed, used, and discarded. A circular approach emphasizes reusing, repairing, refurbishing, and recycling materials to minimize waste and resource consumption (energy, human & financial capital).
• Collaborate with Key Supplier: Motivate your major suppliers to be your partners in your sustainable goals through joint programs & trainings. This will increase shared value and commitment from your partners from an “Outside-In” perspective.
• Meet compliance: Stay fully compliant with local regulations especially to ESG (Scope 1, 2 and 3 emissions). Adherence to these compliances will enhance your brand image and strengthen goodwill in marketplace.
• Use of simple technologies: Use simple technology which are available at optimum price defining your goals. Use Technology to help increase visibility, traceability, and data transparency in the end-to-end supply chain.

Steps corporates need to take to reduce Scope 3 emissions

Veeshwass Kulkarni: Reducing Scope 3 emissions—those indirectly produced by a company’s value chain, including suppliers, transportation, and product usage – necessitates practical measures, creativity, and cooperation throughout the supply chain. These discharges generally make up the largest segment of a company’s carbon footprint, making them difficult to tackle. Tangible Actions to Minimize Scope 3 Greenhouse Gas Emissions:

Chart and evaluate the value stream

• Mapping of supply chain: Determine all origins of Scope 3 emissions across the supply chain, from extraction of raw materials to end-of-life of the product. This frequently entails a thorough examination of suppliers’ activities.
• Collecting and reporting of data: Collaborate with suppliers and collaborators to acquire precise information regarding emissions. Utilize established approaches, such as the GHG Protocol, to measure Scope 3 emissions throughout the supply chain.
• Establish clear goals: Establish reduction targets for Scope 3 emissions based on scientific evidence, in line with overall corporate climate objectives, such as attaining net-zero or decreasing absolute emissions by a specific proportion.

Involve suppliers in sustainable practices

• Vendor cooperation: Involve vendors in your sustainability goals by communicating expectations, providing instruction, and creating collaborative sustainability projects. Incorporate sustainability provisions into contracts to compel suppliers to adhere to goals for reducing emissions.
• Ethical purchasing policies: Give preference to sourcing from vendors with robust environmental strategies, such as utilizing sustainable energy or eco-friendly manufacturing practices. Think about transitioning to vendors nearer to your manufacturing sites to minimize emissions associated with transportation.
• Supplier audits and rewards: Perform routine sustainability assessments to verify suppliers are adhering to emission regulations. Offer rewards to vendors demonstrating leadership in decreasing their emissions.

Improve transportation and distribution

• Sustainable logistics: Integrate eco-friendly transportation alternatives, such as electric or hybrid delivery vehicles, prioritize rail transport over airfreight, and enhance route planning to minimize fuel usage.
• Combine shipments: Lower emissions by maximizing load capacity and combining shipments to decrease the number of trips needed to transport goods.
• Technology: Employ digital tools such as artificial intelligence and proactive data analysis to enhance logistics functions and diminish inefficiencies in both transportation and warehousing.

Product development and lifecycle factors

• Sustainable design: Integrate environmentally friendly materials and methods into product design, decreasing the environmental impact during production, usage, and disposal stages.
• Circular economy strategies: Enforce tactics that encourage recycling, product reclaim, or reutilization programs to prolong the lifespan of products and diminish end-of-life discharges.
• Energy efficiency in usage: Create energy efficient items that consume less energy during their operational phase, as this frequently makes up a significant part of Scope 3 emissions, particularly in consumer goods such as electronics or appliances.

Allocate funds towards carbon credits and sustainable power sources

• Promotion of renewable energy: Promote the shift of suppliers towards renewable energy sources for their manufacturing processes, such as wind, solar, or hydropower.
• Carbon offsetting: Although not a permanent answer, businesses have the option to buy top-notch carbon credits to neutralize unavoidable emissions in the immediate future. Offsets should be validated by credible certifications, such as the Gold Standard or Verified Carbon Standard (VCS).

Improve product lifecycle management

• Extended producer responsibility (EPR): Accept accountability for the ecological footprint of a product during all stages of its existence. Promote customers to return items for recycling or provide repair services to prolong product lifespan, decreasing waste and connected emissions.
• Client involvement: Inform customers about the significance of sustainability and motivate them to make eco-friendly decisions, like choosing energy-saving items or joining recycling initiatives.

Challenges businesses will encounter in decreasing scope 3 emissions

• Insufficient View and Management of the Supply Chain
• Complicated supply networks: Companies frequently have limited oversight or awareness of their suppliers’ procedures, particularly when working with numerous international suppliers. It becomes challenging to precisely gauge or impact emissions.
• Information discrepancies: Numerous vendors, especially small or mid-sized businesses, may lack the capacity or funds to gauge and disclose their carbon footprints precisely. The absence of openness presents difficulties in establishing and monitoring Scope 3 reduction targets.

Supplier opposition and preparedness

• Reluctance to change: Suppliers may be hesitant to embrace new sustainability practices because of financial worries, lack of know-how, or competing business objectives. Without proper motivations or demands, suppliers may not recognize the necessity to implement substantial alterations.
• Willingness to invest: Shifting towards more environmentally friendly practices often entails substantial investment in new technologies, procedures, or sustainable energy sources, which numerous suppliers may struggle to fund.

Expensive nature of environmentally friendly options

• Sourcing expenses: Environmentally friendly materials and methods may come with a higher price tag compared to conventional choices, resulting in increased expenses for companies.
• The transition may also necessitate investment in fresh technologies, which can put pressure on finances, particularly in the immediate future.
• Expenditure on implementation: Introducing carbon monitoring systems, performing examinations, and shifting logistics operations to more eco-friendly choices can be expensive, necessitating both time and funding.

Difficulty in assessing and communicating

• Inconsistent data standards: Various vendors may employ different approaches for determining and documenting emissions, posing challenges for companies in obtaining a uniform and precise assessment of their Scope 3 emissions.
• Challenges in establishing limits: Scope 3 emissions encompass a broad array of indirect operations, creating difficulties in deciding which operations to incorporate or how to distribute emissions among numerous companies within a supply chain.

Finding an equilibrium between immediate expenses and future advantages

• Pressure for immediate profitability: Companies frequently encounter pressure from investors and stakeholders to prioritize immediate profitability. Investments in environmentally friendly supply chains, although advantageous in the extended period, may not produce instant economic profits, which complicates the justification of these expenses in the immediate future.
• Ambiguity in future regulations: As sustainability regulations continue to grow, the absence of worldwide uniformity and transparency in regulatory structures may lead to ambiguity for businesses, posing challenges in devising and executing long-term strategies.

Vishal Bhavsar: To reduce Scope 3 emissions, corporates can implement the following practical steps:

• Local Procurement: Source materials and products locally to minimize transportation emissions and support regional economies.
• Switch to Green Logistics: Utilize sustainable transportation options, such as electric vehicles or rail, to reduce emissions in logistics and distribution.
• Select Low-Embodied Carbon Materials: Choose materials with low embodied carbon, like recycled or sustainably sourced options, to minimize emissions throughout the product lifecycle.
• Collaborate with Suppliers: Work closely with suppliers to encourage and support their emissions reduction efforts, fostering a culture of sustainability.
• Promote Circular Economy Practices: Implement initiatives that encourage recycling, reusing, and refurbishing materials to reduce waste and emissions.

Challenges corporates may face include difficulties in obtaining accurate emissions data from suppliers, resistance to change among suppliers, a lack of standardization in measuring emissions, and initial costs associated with sustainable practices.

Sanjay Desai: According to my analysis, some of the major challenges corporates will face or are facing already. 

• Determine the categories of emissions: Probably the biggest challenge is to establish the overarching boundaries for scope 3 data – and which categories to report.
• Build standard calculating methodologies for emissions: When calculating emissions, organizations will look to provide as accurate emissions data as possible. More often this granularity of data is not available for Scope 3 emissions. It takes a good number of resources and excellent process cadence to build this structure. Building a data repository Data required for scope 3 emissions accounting is determined by the quality of calculation methodology. In case the data is insufficient or not available, the GHG Protocol’s Scope 3 guidance recommends using proxy data.
• Resistance in the value chain: Many suppliers, particularly small and medium enterprises (SMEs), may not have the resources, expertise, or technology needed to work on emissions. You will find a lot of resistance here to scale your operations.
• Limited control over customer habits: Corporates have little control over how customers use and dispose-off their products. Convincing customers to adopt sustainable behaviors can be difficult, especially if it requires them to change habits or incur additional costs.

Blueprint to run a successful sustainable supply chain program

Maintain flexibility, agility, and be prepared to adapt your program in response to new technologies, rules, and stakeholder expectations.

Veeshwass Kulkarni: Supply chain sustainability manages environmental, social, and economic impacts of a product’s lifecycle, from sourcing to disposal, ensuring resources and partnerships do not compromise future generations’ ability to meet their needs. Below is a blueprint outlining key success factors for building such a program:

• Executive Leadership and Commitment: Senior management must champion sustainability projects and set the tone for the organization’s sustainability objectives. They need to clearly define sustainability goals, such as lowering carbon emissions, enhancing working conditions, or reaching zero waste. These should be consistent with broader business ESG strategies and ensure Financial investment, skill, and technology are required to propel sustainable supply chain efforts.
• Supplier Collaboration and Partnership: Actively involve suppliers in sustainability goals, ensuring that they understand and agree to ESG principles. Put in place supplier codes of conduct and offer training on the best practices for sustainability. Foster strong, trusting relationships with suppliers that encourage openness and collaboration for continual development. Work with suppliers to investigate innovations such as green technologies, waste reduction approaches, and circular economy models that enhance sustainability.
• Evaluation and Transparency: Establish clear, measurable KPIs for sustainability (for example, carbon reduction, energy consumption, waste minimization, and fair labor standards). Use modern analytics and technology, such as blockchain or IoT, to track and analyze sustainability KPIs throughout the supply chain. This data can be used to continually improve processes.
• Regularly publish reports progress on sustainability through dashboards and reports. This Transparency fosters confidence among stakeholders and enables for external verification of your sustainability claims. Inform consumers about your supply chain’s sustainability efforts and encourage them to contribute through their purchase decisions.
• Compliance and Risk Management: Conduct risk evaluations throughout the supply chain to detect environmental and social hazards, including regulatory non-compliance, unethical labor practices, and climate change effects. Align with international standards and frameworks such as the United Nations Sustainable Development Goals (SDGs), the Global Reporting Initiative (GRI), and ISO standards to ensure across the globe compliance.
• Ensure new suppliers fulfill your organization’s sustainability requirements by conducting thorough due diligence processes throughout onboarding. To remain ahead of legislative changes and connect with larger sustainability networks, interact with external stakeholders like as NGOs, governments, and industry peers.
• Cross-functional Collaboration: Integrate sustainability goals across departments, including procurement, logistics, operations, marketing, and product design, to develop a common approach.
• Engage employees in sustainability projects through education and participation. This develops a culture of sustainability and guarantees that everyone is working toward the goal
• Continuous Improvement: Sustainability is a continuous process of improvement rather than a one-time endeavor. Audit and review the efficacy of your supply chain sustainability activities on a regular basis, looking for opportunities to improve. Promote an innovative environment inside the company where suppliers and employees are welcomed to offer new perspectives on sustainability and advancements.

The supply chain environment is constantly evolving. Maintain flexibility, agility, and be prepared to adapt your program in response to new technologies, rules, and stakeholder expectations. By combining these factors, organizations can develop a strong, long-term supply chain program that not only fulfills current regulatory and market requirements but also prepares the company for long-term success and resilience.

Vishal Bhavsar: For making any sustainable supply chain program successful, stakeholders’ willingness to get onboard is going to be the key factor. In my current role, I work with a lot of portfolio companies and one of these companies is consumer facing company. One good example is Licious – D2C meat supplier. Nowadays there are consumers who are willing to pay more or at least want products & services delivered at a price parity to ensure minimal impact on both social and environmental matrix.

The company was quite forthcoming in adopting suggested ESG centric practices. For instance, we discussed some improvement areas in their packaging. Initially this company used plastics as part of their product delivery. As a starting point, they started investing in identifying suppliers who can come up with innovative packaging materials. For transportation, they explored alternatives to move towards 100% EVs.

All this while, they parallelly gathered feedback from their customers. To make such change management possible, people responsible for running these programs shouldn’t think that these are two distinct programs – running a supply chain program vis-à-vis running an integrated ESG supply chain program. If we are able to bring every stakeholder united on this thought, we will be able to win this battle and make rapid inroads into sustainability integration into supply chain process.

As a part of technology, it is one of the key enabler to make this transition. Every company has several suppliers to eal with and the level of complexities in supply chains, adoption of technology becomes a critical element. There are various aspects like supplier code, supplier risk assessment, audits, targeting setting and to mainstream this entire process, technology plays an important role. For those further along and beginning to scale the transformation, it is recommended to develop a data-driven supply chain ecosystem. Supply chains are complex, and the optimal ecosystem should feature extensive collaboration among internal and external stakeholders. The development of digital channels within the supply chain will greatly support that collaboration; these channels should also create 360º visibility into all aspects of the value chain by aggregating data from across the ecosystem.

Sandeep Chatterjee: First and foremost is the belief that it is an ongoing process and not a quick fix solution. Secondly, onboard partners who are trustworthy and are willing to walk the journey together. Thirdly, we need to believe in this. For this right from the top to the bottom, there has to be a buy in. Fourth, communicate with transparency and celebrate small victories to keep up the morale. Fifth, do not try to do everything at one go. Have a phased approach with demonstrable results.

Sanjay Desai: Let us first define how the success looks like as an outcome of a good sustainable supply chain program.

The outcomes are - Undisturbed or seamless flow of goods, Consistency in cost reduction, controlled environmental impact and Full adherence to compliance, lastly a supply chain which is flexible, scalable and robust to deal with various challenges consistently. Now let us look at some of the key success factors, which need to be considered while building a sustainable strategy…

• Keep the customer at the centre: Define your sustainable supply chain strategies keeping your customer in the centre - to understand their expectations, their needs & preferences. Note that today’s customers have great choices, huge data repository available, and social media to get educated. Hence it is critical to know your customer first.
• Risk management and compliance: Carry out a risk assessment seriously over a longer horizon ahead (as long as you can) Identify dependencies (supplier reliability, geo-political tensions, dependence on your supply networks, major customers’ movements, etc.). Address these elements in your strategy with a back-up plan.
• Long term Logistics and ecosystem planning: Define mid-to-long-term goals that align with developing a business ecosystem of Plants / Warehousing and Logistical networks, which will work in sync to deliver a quality product to customers.
• Technology integration: Invest in simple technologies, which are integrated and work seamlessly across your networks and various functions like procurement, manufacturing, logistics & distribution, warehousing.
• Performance monitoring & continuous improvement: Develop a culture to track key performance indicators such as order fulfilment rate, inventory turnover, supplier lead times, and logistics costs and many more. Employ Lean and Six Sigma methodologies to continuously identify areas for process improvements.
• Leadership development: Develop leaders who will develop a dedicated team capable of driving a sustainable supply chain strategy and adapting to changes at quick speed. Creating sustainable development programs for staff on the latest supply chain trends, technology, and methodologies are very important.