The benefits of a sustainable small business supply chain

Steve Oliver, the CEO of musicMagpie, says small businesses are trying hard to demonstrate their ESG (Environmental, Social and Governance) credentials to win competitive advantage and support the UK government’s ambitious climate change targets.

“Three or four years ago, we didn’t have a green recycling emblem if we looked back at one of my investment decks for the business I was doing with my CFO,” he told the host of our small business podcast, Sound Advice.

“Wind the clock forward three-and-a-half years—it’s on page one of the investment deck.”

If, like Steve, you are an e-commerce retailer dropshipping products to customers or have a business with any type of supply chain(s)—the relationship between you and your suppliers to distribute products and services to the final buyer—this is the best place to start in minimising any adverse effects on the environment.

Here’s what we cover in this article:

Your part in building a sustainable supply chain

Make your supply chain sustainable

Benefits of making your supply chain sustainable

How to build a sustainable supply chain

Your part in building a sustainable supply chain

For your small business to make a genuine difference in creating a sustainable supply chain, you need to commit to reducing your carbon emissions.

And you can only do this by understanding what your most significant sources of emissions are.

You will need to calculate your carbon footprint to make meaningful supply chain reduction targets.

A good starting point is the Greenhouse Gas Protocol, which will help you group and measure your indirect and direct emissions under ‘scope one, two or three emission factors’:

• Scope one emissions: All direct emissions from activities under your control, such as gas to heat your home or office and the petrol and diesel you use for transport.
• Scope two emissions: Indirect emissions from the electricity you purchase and use.
• Scope three reporting: Indirect emissions from activities you don’t own or control. These are usually the greatest share of the carbon footprint, covering emissions associated with your business travel, procurement, waste, and water.

Make your supply chain sustainable

For your supply chain to be sustainable, you should aim to minimise waste and the environmental harm that comes from scope three activities beyond your control.

If you’re selling products, your supply chain is likely responsible for the bulk of your environmental impact.

That’s the nature of a supply chain—it involves energy-intensive production and transportation as goods are made and moved around the UK and beyond.

You can turn your traditional supply chain into a green supply chain by integrating sustainable environmental processes. It’s not only about mitigating the harmful effects of your supply chain, it’s about creating value by changing the way it intrinsically operates.

Ways you can do this include:

• Choosing a diverse set of suppliers that match your sustainability standard.
• Choosing and purchasing the correct materials.
• Sustainable product design.
• Sustainable product manufacturing and packaging.
• Sustainable assembling, distribution, and end-of-life management.

Small businesses need to move away from being part of a traditional linear economy where we make, consume and throw away, and move towards a circular economy, keeping products and materials in use as long as possible.

That means make, use, return, recycle, reuse and make.

Benefits of making your supply chain sustainable

By reducing waste and increasing supply chain efficiency, you can reduce operating costs and increase profitability.

Successful sustainable management of your supply chain could also:

• Increase the value of your products and services and offer competitive advantages.
• Attract customers and businesses to work with you because of your positive actions on sustainability.
• Save on bills and reduce your environmental damage by swapping inefficient equipment for more eco-friendly and efficient alternatives.
• Cut back on landfill fees and taxes by recycling your waste.
• Better attract talent who might find sustainability a significant priority.

To build a sustainable supply chain, you could focus on designing or manufacturing products that minimise waste.

For example, Sound Advice podcast guest Rachel Clark started a shampoo brand called Nut and Noggin, which forsakes the usual shampoo in a plastic bottle for a shampoo bar that is vegan and free from sulphates.

In a crowded market, releasing a new beauty brand was always going to be tricky.

Rachel says of her thought process: “How do we make this as simple as possible so that we can get a first product out there and test the marketplace, and also create a sustainable brand that’s not going to add to all this plastic pollution that we’ve got such a massive issue with?

“Luckily, we came across a tiny artisan manufacturer who was just developing some base formulas for shampoo bars that would be a little bit more natural and have no sulphates.”

So, it’s worth thinking about sustainability when developing new products.

But, of course, don’t compromise on their quality.

“My view is that a product can’t be compromised because it happens to be ethical or sustainable,” says fellow Sound Advice podcast guest Arthur Kay, founder of coffee recycling company Bio-bean and urban housing company Skyroom.com.

“You have to have a fantastic product—which is sustainable. That’s the only way to make it mainstream.

“The most famous example of this today is Tesla.

“First and foremost, they’re making fantastic cars, which are better if you compare them to conventional cars. They also happen to be considered a less environmentally impactful car generally.

“But first and foremost, they’re a fantastic product.

“And that’s the approach that we need to consider when we talk about either social or environmental impact. First and foremost, a great product.

“I would give the same advice if you were asking me about as a business, ‘How do I raise money as a socially impactful business versus a conventional business?’

“The answer is to be a great business and have a positive social environment or environmental impact.”

How to build a sustainable supply chain

1. Set out your standards to suppliers

You may want to think about localising your suppliers to decrease transportation costs or switch to those with better environmental credentials.

Inform new and existing suppliers of a baseline level of the ethical standards you expect of them and perhaps create a code of conduct for transparency.

This sets out all the ethical standards expected of your supply chain and is a way to demonstrate their commitment to sustainability—not just environmental, but social sustainability issues such as modern slavery, health and safety, and diversity.

2. Track each step of the supply chain

Look at ways to make your supply chain transparent and track your materials and shipments from beginning to end.

Supply chain management technology has reached a level where businesses can create digital maps of their supply chains, with enough information on suppliers, sites, and products to perform scenario analysis.

You can now track where you can reduce supply chain waste—such as reducing transport carbon emissions by switching to a supplier closer to home.

3. Take advantage of innovation

You could:

• Invest in technology that decreases pollution in transport, such as electric vehicles for replacing diesel-guzzling vans.
• Look at energy-saving alternatives when it comes to powering your office.
• Go paperless and use the cloud. Switch from sending paper payslips to provide self-service payroll systems, for example, or reduce office space by consumption through increased remote working. Small business accounting software and payroll software can help make this switch easier.
• Re-examine your production processes and design new environmentally friendly packaging types or work with suppliers that offer them.