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How Can SMEs Manage Supply Chain Pressures to Gain Competitive Advantage?

Supply chain has become a crucial and important part of large corporations’ wider sustainability strategies when it comes to addressing a number of concerns that threaten business operations. As big businesses now thrive and reap the fruits of sustainability efforts, similar expectations have funnelled down to small and medium sized enterprises (SMEs). This is turn, has increased supply chain pressures that include resource depletion and their stakeholders’ growing concern over corporate ethics and policies. In addition, these companies are receiving external pressures from customers who now “demand” to know more about their business, products, services and even corporate social responsibility initiatives.

In 2013, according to Edie Energy , small firms need to implement resource risk strategies or be at the mercy of supply chain pressures that could ultimately put them out of business. This year, a quarter of SMEs said that sustainability will be one of their top three priorities. This may be attributed to how SMEs see sustainability strategies (including those in the supply chain) really work for multinationals and big firms. To note, Zhihong Wang and Joseph Sarkis’ Investigating the Relationship of Sustainable Supply Chain Management with Corporate Financial Performance tracked 411 companies from Newsweek’s green ranking of the top 500 companies. They reported that firms with integrated sustainable supply chain management saw “marked upgrades” in their fiscal returns . However, to see the improvements, companies must patiently wait as the positive effects may take at least two years to take full effect.

Another survey focusing on SMEs - the Maidenhead Advertiser , reports on a survey conducted among SMEs about their sustainability practices. It highlighted that businesses have affirmed the overwhelming benefits of being sustainable. Accordingly, 87% of organizations that have implemented sustainable business practices say there are benefits such as reduced costs, increased profitability or positively affecting the environment.

Sustainable Supply Chain and Sourcing: Sustainability Practices That Go Beyond Traditional “Greening”

However, most businesses prefer to undertake “traditional green activities” that include recycling and energy efficiency . But these initiatives are undoubtedly immediate and short term efforts that yield far less impact when compared to broader sustainability practices.

The recent Lloyds Bank Commercial Banking research has found that SMEs are less likely to “offer a clear business code of conduct (46%), work responsibly within a supply chain (42%) or operate an ethical sourcing policy (25%).” The same report also mentioned that “there are still businesses who do not believe there are any benefits to be gained from implementing such practices. “

According to Lloyds Banking Group's external relations director, Stephen Pegge, sustainability for SMEs also means “interacting with charities, social enterprises and the community in which they operate; working responsibly within their supply chain and engaging with the next generation through for example, apprenticeship schemes.”

To create a sustainable supply chain management, experts within the company, with the help of external consultants, should analyze the supply chain process as a whole - breaking down each step, sub-process within a step process and raw materials needed to create the end product. It also means creating partnerships with suppliers. An analysis of the entire supply chain gamut will open opportunities to improve and impact both the company’s economic and environmental goals.

What characterizes a sustainable supply chain and sourcing process? It starts with a clear business code of conduct. It also means the business has to work responsibly within a supply chain and to operate an ethical sourcing policy. When all these actions are in place, a company’s sustainable supply chain will not only help reduce costs and optimize operations, it will also analyze the environmental impacts of production, procurement and delivery of a product or even a service.

What are the Emerging Trends that will Incorporate Sustainability in Supply Chain Management in 2014?

According to environmental experts Liz Gorman and Lesley Lammers, 2014 promises new trends. These emerging trends on how to incorporate sustainability in supply chain management can be considered and possibly implemented by SMEs.

1. Search for Alternative Materials

As natural resource depletion has become a major concern among businesses, the search for alternative materials has become a major priority as well. Companies must rely more heavily in Research and Development (R&D) and product development to safeguard against the risk of natural resource depletion. This would mean challenging materials science and major thinking out of the box for product developers and sustainability professionals.

This issue has already started some breakthroughs in several organizations, including Nike which collaborated recently with NASA to locate the most innovative textile fabricators it could find. Telecommunications giant Sprint, on the other hand, has turned to biomimicry to rethink its packaging design—it has partnered with the San Diego Zoo's centre for bio-inspiration for this pioneering project.

2. Supply Chain Transparency

Public trust has become a concern as well and gave rise to product transparency most especially in the food sector. More progressive food companies have decided to share more factual information about what's in their product and this is expected to echo widely in the coming months, thus placing greater pressure on conventional food firms to follow suit.

3. Employee Engagement

To strengthen a CSR initiative, it is highly recommended to start with the employee – your employees. Companies admit that to reduce their environmental impacts and retain healthy profit margins, it has to get the nod of its own people who will bring the CSR and their product or service right into their homes and communities.

To creatively engage their employees, some companies have turned to easy, fun and personalized activities such as the use of gamification and micro-volunteerism.

Micro-volunteerism has been popularly used by companies for years but gamification has emerged fairly recently as it engages staff through the use of game design - now a popular human resource tool due to its ability to change employee behaviour in a meaningful way.

For example, SMEs with products containing organic ingredients may run a “create your own recipe promo” among its employees to help promote their featured products. Winning entries can be part of the product’s packaging and shared with customers—thereby encouraging more product usage within the company’s employees and their families and friends.

Let Customers Know Your Supply Chain Sustainability Initiative as a CSR and Make it Work!

As more and more consumers worldwide are likely to switch to brands that are associated with a good or worthy cause, given the same price range and quality, CSR is a powerful differentiator that changes the mindset and behavior of consumers and in total, their perception towards the company or the brand itself. Hence, a company’s supply chain sustainability initiative can be used to increase brand value that will in turn, generate more demand for the product, reduce corporate risks and increase business earnings. How then can companies take advantage of this?

Content is king. So, companies, including SMEs, should make sure their CSR is:

  • Seen and Heard – Define your CSR and say how it impacts the company, its own people, its customers and even the community. All these should be communicated to the target audience (the customers) to begin with.
  • Made Personal – Make your Corporate Social Responsibility your Customer’s Social Responsibility. Your customer’s affinity to your cause generates trust and adds credibility to your brand.
  • Monitored and Shared – Organizations should assess how well a company is doing on its sustainability efforts and report progress and returns back to its customers. The company should be consistent and transparent with results and their next steps. This transparency would show customers of the business organization’s continuous commitment to its cause.

Your media is just as important as your content, so businesses may opt to use any or all of the following communication channels:

  • Use Tri-Media - Traditional channels have remained the most effective means of communicating CSRs to consumers. These include messages in product packaging; releasing interviews and stories in local papers; and advertising on TV, radio and print media.
  • Go Online! - The fourth media channel is the online channel which has given rise to new forms of media, such as corporate websites and social networking sites (SNS). Through these media (most especially the SNS), response to call-to-actions (CTAs) has become both instant and spontaneous. Positive feedbacks can range from generating a following for the company and/or the program by signing up; contributing directly to the projects through pledges, donations and the like; or sharing to friends who can join the “cause” with you.
  • Are you Mobile? - Mobile communications is a fast-emerging way of reaching more and more consumers. With today’s smartphones, your websites and blogs can be readily accessed by people on the move.
  • Go-To-Market Promotions - Let customers know more about the company’s sustainability initiatives through the company’s own offices and/or stores. Tying up with relevant community projects can also help bring the message out to the market.

FCS can Help Improve your Supply Chain Management

FirstCarbon Solutions (FCS) can help organizations maximize their sustainability initiatives throughout the supply chain.

FCS offers lifecycle assessments, supplier scorecards, and carbon accounting to trace emission levels and inefficiencies across supply chains. Aside from cutting costs with FCS supply chain services, companies can also help expand profit margins along with inspiring product and supply chain redesign.

FCS also offers Sustainability Solutions to help companies effectively manage climate performance, carbon emissions, and corporate social responsibility (CSR) reporting through its strong partnership with CDP.

Through these services, FCS will provide SMEs with innovative solutions to track and measure their business inputs and outputs, in addition to the waste that they produce – allowing them to gain a competitive advantage .

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