Chain reaction – the importance of a sustainable supply chain

Implementing sustainable operations is an issue that continues to climb the wider business agenda in the UK. The retail sector, and its supply chain, is no different. Driven by a shift in consumer attitudes and expectations, as well as ever-tightening government legislation, the need for businesses to re-evaluate the economic, environmental and social impact their supply chain has, and the risks and opportunities that these bring, is more important than ever.

With consumers becoming increasingly concerned with where and how the goods they buy are manufactured, transported and sold, the urgency for established, household names to rethink their supply chain strategies continues to build. Today, brands must ensure their business operations are transparent as well as socially and environmentally responsible, from start to finish. For example, businesses are now reconsidering and significantly readjusting how they source, package and deliver their products. As recently trialled in Waitrose and other major grocers, the introduction of packaging-free groceries hopes to encourage shoppers to provide their own containers, in a bid to reduce food product packaging and cut waste.

Retailers are also subject to mounting pressure from increasingly stringent government regulations and carbon emissions targets. The UK government recently announced an ambitious net-zero carbon emission target for 2050 and, as such, businesses will be required to adapt all areas of their operations.

A lack of consideration towards the wider sustainability agenda can come at significant financial cost for retailers. One important consideration for retailers is whether their supply chain and associated real estate portfolio considers and complements their environmental objectives, economic performance and evolving social responsibility.

The physical infrastructure of warehouses and distribution centres has a huge role to play in the implementation of an environmentally-friendly strategy. Increasingly, consumers are choosing products and services delivered via environmentally-conscious operations. Fully sustainable supply chains require investment – a concern for industrial real estate leaders given the high initial costs of such strategies. The return on investment can be difficult to quantify in the traditional sense, making it challenging for real estate leaders to justify implementing the required changes – particularly for businesses with large infrastructure portfolios. However, calculating the precise value of such strategies is becoming increasingly simplified and mainstreamed.

Additionally, the good news is that as technology continues to mature, these solutions are becoming less expensive and easier to implement – both for small and large businesses. Regardless, all retailers should be adapting their supply chains and wider operations to be more environmentally-conscious.

Last-mile logistics, in particular, has been brought into focus as a key area for businesses to address – not only to reduce emissions, but to also mitigate rising congestion charges within inner cities. Increasingly, retailers are turning to electric and hydrogen-fuelled vehicles as the solution. However, retailers need to align their warehouse and distribution centre infrastructure to facilitate sustainable vehicles, both in terms of location and specification. Converting an entire vehicle fleet to electric vehicles means the associated infrastructure – charging and refuelling points for example – needs to be adapted to support this new technology.

In retail, the circular economy is helping to reduce environmental and financial costs throughout the supply chain. By closing the supply chain loop and ensuring waste products are recycled or repurposed, retailers can achieve financial advantages by reducing their resource consumption, generating revenue from their ‘waste’, or by avoiding any financial and environmental costs of the removal process. The challenge for retailers is to assess how best they might incorporate a closed loop supply chain strategy and put waste to practical uses in the future.

Third-party logistics operators and retailers often work in partnership to close the supply chain loop, by removing and recycling waste packaging as part of the delivery process and repurposing elsewhere in the supply chain. For example, by using food waste to generate power.

With growing pressures from consumers, retailers are also recognising the social impact that conventional supply chain operations can have. The growth in consumer focus on ethical consumption and transparency is driving retailers to pay closer attention to sustainably-sourced materials and labour – ensuring their business is more human-centric. For example, The Fairtrade Foundation campaigns to improve working and environmental standards for those at the start of the supply chain, with some of the world’s biggest brands already having committed to only using sustainably sourced materials.

Further along the supply chain, human-centric workplace design is also more important than ever in manufacturing and distribution. The WELL v2 Buildings Standards, for example, promote implementing initiatives such as encouraging community access, healthy food environments and indoor air quality improvements. Safeguarding employee health and wellbeing throughout the supply chain has proven benefits, including boosting employee productivity, attracting and retaining high-level talent and driving efficiency – all having the potential to generate significant economic value and tackle the escalating challenge of labour availability.

Whilst it will undoubtedly take time for businesses and consumers to change their behaviours, sustainability will remain a priority for retail and wider UK business alike. However, the benefits are significant for retailers who look to close the supply chain loop and adopt the circular economy, develop the right physical infrastructure to support green energy-use, and consider the wellness of its employees. As the UK embarks on becoming carbon neutral by 2050, retailers are now tasked with identifying the solutions that best fit their existing supply chain operations and re-evaluating their sustainability strategies.