Should supply chain sustainability be a cornerstone of your company strategy?

Having worked in companies across various industries – aviation, consultancy, education, hospitality, manufacturing, media, and software – I’ve seen how supply chain sustainability (SCS) impacts can vary greatly depending on the industry and business model. For some, it becomes a crucial strategic topic, while for others, it serves as a tool to act responsibly and ensure compliance with regulations.

Companies can approach their supply chain sustainability (SCS) strategy at two levels:

  1. License to operate: Ensuring compliance and meeting regulatory requirements.
  2. Reason to win: Leveraging sustainability as a strategic advantage to drive differentiation and growth.

Let’s take a closer look at what these levels mean and how to choose the right approach for your company.

Level 1: License to operate

Will your business still be viable five years from now?

Every company must take supply chain sustainability (SCS) seriously. This isn’t just the right thing to do for the environment and society, it’s becoming a necessity due to evolving legislation and regulations. Sustainability management is already mandatory for companies meeting specific criteria, and in the coming years, these requirements will expand to include even more organisations.

If your company doesn’t meet sustainability criteria, others won’t, and often can’t do business with you.

At Level 1, the focus is on acting responsibly by meeting all sustainability requirements and complying with regulations ensuring your business remains viable. Deciding whether Level 1 is the right approach requires an analysis of how sustainability themes impact both your business’s financial performance and the environment.

If the analysis shows that sustainability themes have little financial or environmental impact, choosing Level 1 may be sufficient. This is usually the case for companies that:

  • Have a small carbon footprint
  • Don’t manufacture their own products

The License to operate approach is a viable option when the financial and environmental impacts of sustainability themes are minimal.

Level 2: Reason to win

Do sustainability actions feel like a necessary evil, or are they an opportunity to drive growth and innovation?

This can sometimes be the case, but if for example you manufacture your own products or have a big carbon footprint, SCS can become one of your biggest competitive advantages.

While sustainability actions can sometimes feel like a necessary evil, sustainability can become a significant competitive advantage, especially for companies that manufacture their own products or have a large carbon footprint.

Every company must implement Level 1 SCS management. However, if the analysis shows that sustainability issues have a significant impact, whether financial, environmental, or both – this  opens the door to a significant competitive advantage. By making SCS a cornerstone of your company strategy, you can differentiate yourself from competitors.

Today, legislation already requires companies to take action if they have a significant carbon footprint. However, this is just one side of sustainability. In the future, companies that neglect sustainability will face challenges such as:

  • Securing investments
  • Collecting mandatory sustainability data
  • Meeting customer demands

By making sustainability a strategic priority and automating the collection of sustainability data, you are able to differentiate your business and position it for long-term success.

I’ve had the pleasure of working with several companies that have adopted the Level 2 approach. Here are two great examples:

Crimppi made sustainability a cornerstone of their strategy in 2019, achieving carbon neutrality in their Scope 1 and Scope 2 emissions. They are now working with Jakamo to reduce their Scope 3 impacts.

TT Gaskets has identified sustainability as a strategic priority. A significant portion of their supply chain’s CO2 emissions and other sustainability impacts comes from purchased materials and components. They are now leveraging Jakamo to address these challenges.

It’s important to note that neither level is fundamentally better than the other. The right choice depends entirely on your company and the nature of your business. The best approach is to base your decision on an analysis of your business’s financials and environmental impacts. This will help you answer the question: Should supply chain sustainability be a cornerstone of your company strategy?

Jarl Matti Anttila
CEO, Co-founder at Jakamo

PS.

One of the biggest challenges in supply chain sustainability is the primary data collection and how to make it effectively. At Jakamo, we’ve been working hard to implement automated features that help manufacturing companies solve this challenge. If you’d like to learn more, send me a DM, and let’s start the conversation!