To be sustainable or resilient or both? A guide for supply chain professionals

The geopolitical, regulatory, and social pressures of recent years have undoubtedly constituted paradigm-shifting challenges for supply chain professionals. However, while it is widely accepted that both supply chain resilience and sustainability have become “must-haves,” most organizations are at very early stages of their journey toward engaging with the concepts deliberately and in tandem. The pace of change is simply too slow to facilitate the degree of impact that many companies are committing to, and that stakeholders are looking for.

In practice, there is an opportunity to embed sustainability into the supply chain while also considering the wider impact it might have on resilience and vice versa. Taking advantage of the synergies between these two goals offers immense potential for long-term optimization. Considering increasingly complex and unpredictable global challenges, ignoring this opportunity is becoming too costly, jeopardizing long-term survivability of organizations across sectors and geographies.

In this article, we explore three key recommendations to enable simultaneous and seamless integration of sustainability and resilience into supply chain operations:

1. Use strategic, long-term, and multi-dimensional thinking that looks beyond immediate trends to avoid implementing reactive and costly tactics.
2. Adopt an integrated approach to supply chain sustainability and resilience, with a focus on leveraging synergies and mitigating trade-offs.
3. Invest in and improve existing digital technology and data capabilities, particularly around transparency, traceability, and trackability.

Recommendation 1: Look beyond the immediate and obvious trends 

The pace of change in today’s world demands that organizations respond to an overwhelming number of developments at once. While it is sensible to react to events and adjust to trends, organizations tend to swing dramatically between efforts to optimize supply chain sustainability and supply chain resilience. To use a simple example, the pressure to reduce Scope 3 emissions is superseded by resorting to air freight to gain a competitive advantage. 

As a result of such pressures, organizations find themselves stuck in an endless game of “whack-a-mole,” scrambling to strike down whatever demand pops up first and forgetting about it as soon as a new one emerges. Organizations often backtrack on commitments, ditch initiatives, and brush aside long-term strategy to address the latest challenge. This approach, however, is reactive and counterproductive; while addressing the immediate issue at stake, these tactics can also take organizations two steps back in their pursuit of longer-term strategic objectives.

Let’s consider a real-life example. In the current climate of economic uncertainty, some organizations are choosing to disengage with sustainability commitments in favor of slashing costs. Deloitte’s How Consumers are Embracing Sustainability report found that optimized organizations, though, are likely to recognize that consumers actually adopt more sustainable purchasing habits during economic downturns, like buying more durable or reusable products. Recognizing this reality enables organizations to be more intentional and proportionate with their investments — adapting to the needs of consumers without neglecting sustainability through targeted funding of “design for durability” initiatives and product repair and maintenance schemes.

This echoes Deloitte’s Global Resilience report’s finding that true organizational resilience must be built across capitals other than operational, including financial, reputational, social, and natural. Organizations may think they are being resilient by letting sustainability take the backseat in a challenging economic climate, but to consumers, such inconsistency signals a shallow commitment to sustainability and “green washing,” which damages brand reputation and credibility. Using long-term, multi-dimensional, and strategic thinking protects against reactionary activities that have minimal or negative effects on supply chain sustainability and resilience. 

To be truly ahead of the curve, organizations should also look beyond the immediate trends to their longer-term implications. For instance, while the current shift to “near-shoring” manufacturing bases is a proactive response to various disruptions, it also constitutes a pressure by influencing business conduct and legislation, carrying potential long-term implications for open trade and protectionist attitudes. While it is impossible to foresee every outcome, organizations should make long-term thinking the heart of their supply chain strategy.

Recommendation 2: Integrating sustainability and resilience

Supply chain optimization is becoming contingent on a deep understanding of the relationship between resilience and sustainability. This relationship has previously been ambiguous because there is no absolute consensus on its dynamics. Some consider resilience to be a byproduct of sustainability, while others are convinced the inverse is true. The How do supply chain managers perceive the relationship between resilience and sustainability practices study by Maastricht University identified that some practitioners see supply chain sustainability and resilience as separate concepts, with one interviewee saying, “I do not see a relationship. It is unusual for me to think in those terms.” Lastly, in some instances, sustainability and resilience considerations and solutions may be in conflict, necessitating trade-offs. For example, the choice to keep the supply chains lean may come at the price of reduced resilience, making the organization more susceptible to sudden shocks. 

Sustainability and resilience can exist as equally important attributes in a partnership. Like any good partnership, the relationship should be based on mutual commitment, transparent communication, and tolerance to change. As such, prioritization and implementation of sustainability improvements should be guided by resilience considerations. What’s more, organizations should feed sustainability priorities into resilience strategy selection, factoring in the impact the chosen solutions will have on environmental and social goals. When done correctly, organizations can make this relationship the heart of their business structure. For example, a luxury goods enterprise that committed to becoming a zero-waste company by 2040 could identify environmentally friendly waste disposal (a byproduct of the garment production process) as one of its critical services. This embeds sustainability-related goals while simultaneously strengthening the manufacturer’s resilience.

Compatible partners should bring out the best in each other, and supply chain sustainability and resilience often do. Resilinc’s Spotlight on Factory Fires report  identified factory fires as the biggest cause of supply chain disruptions in 2022. Considering non-compliance with Health and Safety standards and shortage of skilled labor are the main culprits behind factory fires, sustainable business practices can effectively protect organizations from such operational and reputational disasters, thus improving resilience. 

A key step toward making sustainability and resilience work together is to dismantle organizational siloes between the various teams involved in supply chain activities. The Deloitte 2022 Third Party Risk Management (TPRM) survey identified structural separation as an obstacle to efficient third-party management, constituting only one of the numerous components underpinning supply chain operations. This finding indicates the need for a holistic reassessment of how various functions interact with each other. Through integrating processes, pooling data into master systems, and encouraging regular communication between the teams and governance channels, organizations can promote strategic alignment and avoid disjointed efforts. 

Nevertheless, even internally optimized organizations face instances that necessitate trade-offs between supply chain sustainability and resilience; every union is tested by circumstances in which it is impossible to cater to numerous considerations with the same level of rigor. In the face of conflicting priorities, it is crucial to work towards reaching a satisfactory compromise, including between supply chain resilience and sustainability. The acceptance of trade-offs, in such cases, should be intentional and underpinned by thorough impact analyses and compensating mitigation actions to offset any negative impact on either attribute.

More importantly though, the need for trade-offs, both planned but especially sudden, should facilitate a deeper look into the root cause of the misalignment to identify any possible transformative opportunities for improvement. For instance, if an automotive organization is forced to resort to air freight to deliver essential components to the factories, despite making the commitment to minimize its carbon footprint, it needs to assess the limitations imposed on the response selection and ensure that future disruptions are less likely to necessitate a strategically subpar solution from a sustainability perspective.

The most mature organizations are those that perceive the need for trade-offs not as a manifestation of a fundamental conflict between resilience and sustainability, but as an opportunity for a radical optimization of their union.

Recommendation 3: The Three Ts - transparency, traceability, and trackability

While there is no silver bullet that can deliver sustainability and resilience to supply chain operations, optimized visibility underpinned by reliable and comprehensive data is as close as it gets to one. In the absence of a mapped-out network — or, in other words, of transparency — organizations do not have enough information to make sense of the existing relationships and the corresponding risks, concentrations, or improvement opportunities related to sustainability or resilience. Illumination of the interdependencies is an essential starting point for all further activities. Yet, although foundational for visualization, a static mapping of the network is not sufficient for ensuring supply chain sustainability or resilience in today’s fast-changing world. Complexity demands real-time and accurate data and insights on product location, touchpoints, and transformations provided by traceability and trackability technologies that keep tabs on the provenance and geographic production path of a product.

Getting “the Three Ts” (transparency, traceability, and trackability) right should be an absolute priority for organizations — not just because comprehensive, reliable, and real-time visibility is essential for informed decision-making and targeted response, but also because visibility constitutes a key complementary value that underpins the relationship between supply chain sustainability and resilience. A transparent network enables organizations to simultaneously identify suppliers that present a social risk due to the historic human rights abuses in their jurisdictions, as well as geographic concentrations that constitute supply chain vulnerabilities. Similarly, a trackability solution can warn supply chain managers of a likely disruption to the standard delivery route and account for possible spoilage and waste associated with the shipment. In most cases, the two lenses can inform each other, making the insights more impactful. 

Organizations can derive tremendous value from this synergy point. The catch is that despite the unequivocal importance of visibility, achieving it in practice is a complex task. Of the respondents to Deloitte’s Procurement and Supply Chain Resilience in the Face of Global Disruption survey, only 13 percent stated that they had a fully mapped supply chain network, while 72 percent had limited visibility beyond Tier 2. While there is no shortage of emerging technology that can accelerate the transformation, such as blockchain and artificial intelligence (AI), organizations cannot fully reap the benefits if they don’t get the basics right first. Without a complete overview of the network and trusted sources of reliable, good quality, and real-time data, they will only generate fragmented and inaccurate information. Organizations have to make a strategic investment in time and money to achieve positive results and should avoid piecemeal solutions.  

The knowledge of existing touchpoints in the production journey is fundamental, not just for safeguarding commodities against counterfeiting and communities against socio-environmental harm, but also for identifying inefficiencies and enabling more accurate scenario planning and more agile responses. Analyzed from this perspective, investing in real-time visibility is less of an operational, financial, and technological burden, and more of a potent opportunity for improving the overall health of supply chains. 

The best of both worlds

Improving supply chain resilience and sustainability in the current climate of unpredictability, disruption, and social and regulatory pressure should be a strategic priority. Although navigating the ambiguous relationship between the two may be difficult, by using long-term strategic vision as the “North Star,” organizations can overcome competing priorities and, more importantly, recognize and exploit the powerful synergies that exist between sustainability and resilience to get the best of both worlds. Organizations don’t have to choose between being sustainable and being resilient — you can be both.