The Business Benefits of Sustainability in Supply Chain and Logistics

Sustainability in supply chain refers to the initiatives of enterprises in relation to the environmental, social governance, and human impact of their products’ journey through the entire supply chain – from sourcing and producing materials, warehousing and storage, to delivery. In the last decade, business enterprises have been facing the challenge and pressure of finding a healthy balance between hitting business and revenue targets while minimizing their environmental impacts.

In Vietnam, sustainability has become a top priority in government development policies. In the recently concluded COP26, Vietnam Prime Minister Pham Minh Chinh said that the country is on track in making great efforts to reach its net-zero carbon emission target by 2050. Enterprises in Vietnam recognize this and are becoming more aware of the importance of applying sustainable practices in their supply chain. According to a survey done by HSBC, 96% of those in manufacturing businesses said that implementing sustainability and ethical changes is key to improving profitability and business performance; while only a small fraction of the surveyed enterprises (9%) said that the sustainability of the supply chain is not a focus of their business.

However, this may not necessarily apply to all industries – especially for those who do not yet understand how they can benefit from becoming more sustainable. For large enterprises, like fast moving consumer goods, retail, and manufacturing, it can still be a debate between cost-efficiency or simply being “seen” as a sustainable company.

“Supply chain strategies should incorporate sustainability as a crucial pillar. Businesses must design solutions that are not only practical and profitable but are also adaptable to meet environmental goals and targets that are in line with customer, shareholder, and community values and expectations,” said Andrew Maher – Head of TMX Vietnam. “Previously, companies may have used simple green initiatives in the base building design of their industrial facilities as an opportunity to align with corporate policy from afar and to be awarded with a green star rating to support corporate agendas. Fortunately, the increase in awareness is now driving businesses to realize concrete business benefits that these green practices bring. However, incorporating these initiatives need to be factored into as early as developing the initial design, building structure, choice of materials and other elements of the building for best results in terms of sustainability and cost reductions.

The state of supply chain and logistics sustainability in Vietnam

In general, sustainable development to reduce environmental impacts as a result of business operations is considered important by enterprises in Vietnam. Many enterprises recognize the need to move towards a circular economy which include recycling, using greener and non-toxic materials, designing better products, reducing waste, and investing in more environment-friendly and renewable energy-powered infrastructure.

However, awareness and actions on sustainable development in the Vietnamese business community are still limited. Vietnam has over 800,000 operating enterprises, but barely 2,000 are members of the sustainable business community, and only just 15% of businesses have access to sustainable development information.

To help educate enterprises in Vietnam and encourage them to apply sustainable practices in their supply chain and logistics process, TMX shares tangible benefits that businesses can reap in the long run. TMX is a leading business transformation consultancy that works with multi-national and Vietnamese enterprises in creating highly tailored and sustainable digital and supply chain solutions, to optimize their value chain – from top-of-the-funnel demand generation right through to final fulfilment.

Generate Operational Savings

In the past few years, electricity costs have risen significantly, which is a huge burden on industrial property occupiers’ operations, especially as manufacturing and distribution centres become more automated and high-tech. Investing on environment-friendly initiatives on industrial properties proves not only crucial in generating operational savings, but also reducing environmental impact. These practices can include using solar panels and other renewable energy sources in warehouses, which offsets electricity consumption for automated warehouses, utilizing water recycling systems, and using electric vehicles for carbon intensive last-mile deliveries. Reducing waste by using eco-friendly packaging materials is also an effective solution to control costs and appeal to more sustainably conscious consumers.

A sustainability strategy can reduce costs substantially and can affect operating profits, so it is safe to say that these practices are not only friendly to the planet, but also generates operational savings in the long run. In addition, being sustainable can also improve relations with the government and the local community, and sometimes provides companies with tax incentives and subsidies.

Add Brand Value and Competitive Advantage

A sustainable supply chain also directly impact brand reputation. Brands can increase their value tremendously and attract more customers by becoming more sustainable. In fact, one study from Nielsen Vietnam found that consumers are willing to pay more for “green” and “clean” brands. The survey also found out that clean brands committed to clean and green practices enjoy profits four times higher versus their competitors.

However, for sustainable initiatives to be genuine, companies must ensure that this translates internally by providing workers equitable working conditions and fair compensation. Not only will this benefit existing workers, but it will also attract quality and genuine talent. In fact, nearly 40% of millennials have taken a job because of a company’s philosophy and practices in sustainability. Being sustainable can also lead to employees being more motivated to work and increase their productivity because they are treated fairly, and they see value in what the company is doing.

Increase Partners’ Trust and Confidence

Lastly, a business with a sustainable supply chain can also drive trust and confidence among potential partners and investors. In an increasingly sustainably conscious world, investors are trying to veer away from supporting companies with bad reputation on sustainability. This is to avoid suffering from reputational risks of unsustainable supply chain operations because companies with an unfavourable report card on sustainability are at a higher risk of experiencing declines in stock prices.

For more information on how TMX can help make your supply chain lifecycle more sustainable, visit https://tmx.global/