Towards a More Sustainable Supply Chain
The evolution of sustainability has with itself carried a progression of tools for measuring the environmental and social impacts of multiple trade processes. The origins of these tools trace back to the 1960’s where the concern about excess use of raw materials and energy resources grew in discussions among professionals. In the late 1960’s, academic papers analyzing future global trends were published, which highlighted the growing importance of preserving limited nonrenewable resources and raw materials as the world’s population increased along with a demand for resources. In addition, studies on the effects of climate change from the irresponsible use of fossil fuels were conducted and delivered alarming results on the dramatic outcomes of global warming. At that time, it was clear that tools were needed to assess and promote environmental sustainability for the preservation and responsible use of natural resources. This was initially the primary focus of the discussion on sustainability until the Brudntland Report further refined it to include Economic Sustainability and Social Sustainability as well.
A team of young researchers who are interning at the Institute for Development Impact, Leonardo Sprintzin, Caroline Wegner and Ersin Nurkic Kacapor, studied the supply chain sustainability and assessment approaches. Their research centered on the assessment tools that are currently being used by multi-national corporations (MNCs) looking to improve their operations with sustainable solutions. Their research highlights the Life Cycle Assessment (LCA), the Life Cycle Costing Assessment (LCC), and the Social Life Cycle Assessment (S-LCA), and discusses not only their strengths, but their weaknesses and limitations as well. While these tools have been useful for MNCs in improving their carbon footprint, lowering their costs, and assessing the detrimental social aspects of their business processes, they concluded that a more well-rounded approach integrating the five capitals of sustainability would be more beneficial for a long-term approach to supply chain sustainability.
I4DI’s researchers aimed to challenge MNCs to be more sustainable by holistically managing their supply chains and product strategies through the lens of a responsible, 5 capital approach. Presently, many businesses and NGOs integrate only environmental sustainability into their supply chain management schemes, but they purported that for sustainability to be effective it should include a more complete framework that applies to all factors of human well-being. The 5 capitals of sustainability that I4DI research team suggests be included in each approach are: human, social, natural (or environmental), manufactured, and financial capitals. The research team intends to start a conversation about why sustainable methods are important in supply chain management practices and how MNCs can increase the well-being of all stakeholders in their supply chain by implementing these methods.
In their demonstration to I4DI colleagues and clients last week, they illustrated how the utilization of this 5 Capital Approach can increase input and output productivity, decrease the costs of production, lower the inherent business risks, improve the output quality, and to help address and remediate social and environmental concerns.
By modifying current approaches by integrating 5 capitals into the existing tools for assessing sustainability, they described the possibility for a full ecosystem approach toward sustainable solutions companies may even be already equipped to perform. The key is to focus on operationalizing a holistic perspective, and to understand that these capitals are nuanced and highly contextualized.
Lastly, it is important to remember that our world is growing at such a fast pace that our local responsibilities quickly become global ones, and MNCs are looking for ways to address and mitigate increasingly prevalent international externalities. Our research team highlights the new perspective on economics about how sustainability should be a main factor in economic theory, particularly for distribution and development, and how this way of thinking drives overall prosperity.
For more information and to continue the discussion please feel free to contact: Info@i4di.org