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Why sustainable supply chains are important for a responsible tomorrow

A view over several workstations for the ecommerce business in an arvato warehouse
Companies are increasingly incorporating their responsibility towards society and the environment into their daily decisions and the direction of their business models. On the one hand, this is self-driven and, on the other, due to the growing expectations of end customers and legal requirements. This automatically means that 'sustainability in supply chain management' is increasingly taking center stage as an important part of the value chain and needs to be part of the strategy. What does 'sustainable supply chain management' or 'sustainable supply chains' actually mean? Which dimensions need to be considered? And what role do the latest technologies and digitalization play?

Three dimensions of sustainability

Sustainable supply chain management describes the holistic approach of planning, controlling and optimizing company processes that cover the entire supply chain. The approach goes far beyond the traditional consideration of environmental aspects and also takes social and economic dimensions into account in order to ensure an integrated and sustainable supply chain management. The day-to-day activities of companies not only have an impact on the environment, but also on their own employees, society and their own profitability. Consequently, corporate success cannot only be measured in terms of economic performance, but also in terms of social impact on stakeholders and environmental impact. The overall challenge is not only to minimize environmental impacts, but also to ensure that supply chains are fair and economically sustainable. Ensuring a balance between the three pillars is ultimately crucial for the sustainability of a company and the creation of long-term value for its stakeholders.

Benefits of making supply chains sustainable

The impact of Industry 4.0 technology on sustainability in logistics

The implementation of Industry 4.0 technologies (I4.0T) is one approach towards meeting companies' sustainability ambitions. In the warehouse, they offer the advantage of proactively addressing challenges, seizing growth opportunities and achieving positive effects on operational efficiency, sustainability and customer satisfaction. However, it is also important to consider the benefits as well as the possible negative effects:

In terms of economic sustainability, the main benefit of I4.0T is the reduction of total cost of ownership (TCO) over time. The introduction of I4.0T reduces full-time equivalent (FTE) costs, minimizes space requirements and increases efficiency, resulting in lower infrastructure costs such as rent. Optimizing processes and reducing errors contributes to increased economic activity while promoting supply chain resilience in dealing with unforeseen events. However, challenges include higher initial investment, higher operating costs and the need for strategic planning. Despite these considerations, I4.0T remains a critical factor for economic sustainability and long-term business success.

In terms of environmental sustainability, it is difficult to draw clear conclusions. The role of I4.0T in promoting environmental sustainability depends on the technology used and the environmental indicators considered, which can lead to potentially positive or negative effects. Dealing with negative externalities is crucial, e.g. increased consumption of raw materials, increased energy consumption and potential rebound effects on consumer behavior. A comprehensive analysis helps to identify opportunities to reduce environmental impacts while leveraging the benefits of I4.0T, such as improved downstream efficiency, reduced CO2 production, smart use of resources, promotion of the circular economy and improved transparency through product data tracking.

Finally, I4.0T is a powerful instrument to promote social sustainability and offers benefits that can have a positive impact on business and society. The use of innovative technologies creates an attractive workplace, increases transparency for supply chain partners, improves brand image, attracts and retains B2B partners. However, upskilling workers is crucial to ensure that they have the necessary skills to succeed in a rapidly evolving environment and do not feel replaced. In addition, companies must avoid geographically displacing issues, such as upstream raw material sourcing or production.

Industry 4.0 technologies can have a net positive effect on economic and social sustainability, but the impact on environmental sustainability is unpredictable. Only when the overall impact of a new technology is understood the true value of the technologies on the dimensions of sustainability can be recognized.

Whitepaper

Find out more about the impact of Industry 4.0 technologies on sustainability in logistics in the whitepaper by our expert Karoline Kowalik.

Read the full whitepaper here