The value of sustainable supply chains
Sustainable supply chains can improve resilience, help logistics, and streamline startup business operations.
28 October 2022 • 5 minute read

Embedding sustainability in your supply chain isn’t just the right thing to do; it’s the right thing for your company. Whether to comply with incoming regulations, win ESG-focused investors, attract new customers, or appeal to purpose-driven employees, for startups, sustainable supply chains are business critical.
“Some businesses trade on sustainability as a brand, while others just need to be compliant,” says Oliver W Bridge, head of operational consulting at Grant Thornton UK. “It depends on their business strategy and how much they can invest into sustainable supply chains, but we’ve found that those with an understanding of sustainability issues within their supply chains have fared better in recent years.”
A sustainable supply chain embeds resilience into businesses – fundamental for any new enterprise. “Robust supply chains are often those that also support environmental, social and governance (ESG) targets,” says Edward Cox, principal at procurement and supply chain consultancy Efficio. “Around 80% of ESG impact sits within the supply chain. To improve ESG, you need to work with, and challenge suppliers – meaning the supply chain is less likely to fail. Suppliers who are progressive on ESG are also likely to be better managed, staffed and funded.”
A broader group of stakeholders are more interested in supply chains
In a long-term value-creation economy, businesses must balance the concerns of all their primary stakeholders. A sustainable supply chain is central to meeting their priorities. “Sustainability has gained significant momentum precisely because multiple stakeholder groups are driving it,” says Edward. “It can improve business performance through better, more motivated employees. It can enable access to more cost-effective funding. And it can lead to product innovation that better meets changing consumer needs.”
For consumer brands, an ESG-driven supply chain will raise your profile among socially and environmentally conscious customers. For startups selling into larger businesses that need suppliers to align with their ESG targets, sustainability in the value chain is even more crucial. “It’s become a prerequisite for some businesses. Without it, you might exclude yourself from some work – particularly if you’re a supplier to the public sector,” points out Oliver. “It’s a question that’s on every procurement tender. You’ve got to demonstrate your ESG policies and how you apply them in your supply chain.”
For many startups without the funds to compensate staff with high salaries and generous benefits, sustainability can help attract talent. Gen-Z, in particular, is seeking purpose-led careers. “Employees want to work in a business conscious of its legacy and footprint,” says Oliver. “If you’re a polluting business, a steel manufacturer, for example, you’ll struggle to attract the same talent as a business with an authentic brand around environmental and social issues.”
Garnering investment for your startup is also easier if sustainability demonstrably runs through your supply chain. “There’s been a huge increase in impact funding. Most investors want to see some level of consideration towards primarily environmental, then social, and then governance issues because those things are being measured by their funders,” reports Oliver. Bank funding is also more accessible for businesses with a measurable ESG profile, with banks offering preferential rates for meeting environmental and social targets.
Regulations are putting a greater focus on sustainability
Beyond stakeholder impetus, legislation is driving sustainability in supply chains. “There’s an increasing regulatory burden, which varies depending on sector, geography and business size,” says Edward. “Some regulations are for guidance and some are mandatory.”
Existing and incoming ESG guidance and regulation includes the ISSB sustainability disclosure requirements including Scope 3 emissions reporting; the Taskforce on Climate-related Financial Disclosures (TCFD) framework; the Modern Slavery Act; gender pay gap reporting; international carbon taxes; and the EU’s Corporate Sustainability Due Diligence Directive (CSDD).
While many regulations exclude SMEs and micro-businesses, they are impacted as part of larger supply chains. “For startups, if you are supplying larger businesses, you need to conform to the same standards as them,” warns Oliver. Startups focused on international sales and founders looking to sell their businesses must also comply with the relevant legislation.
“Businesses can no longer see themselves as islands supplied by independent third parties or devolved of the downstream impact of their products or services,” concludes Edward. “They need to take responsibility for what they buy and sell.”
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