Supply chain sustainability is growing in visibility and importance as companies with international operations increasingly put environmental and social responsibilities at the centre of their product procurement and distribution strategies. This comes amid changing expectations around sustainability linked issues from investors, customers and regulators.
According to independent group the Carbon Trust, up to 90 per cent of an organisation’s environmental impact is a consequence of their end-to-end supply chain. It is clear a collaborative up- and downstream approach is essential to reduce trade’s environmental and social footprint.
In addition to improving environmental and social outcomes, developing and operating a sustainable supply chain strategy is likely to improve investor and consumer perceptions, manage costs and drive innovation, as well as build a resilient supply chain that leads to long-term financial viability.
Taking a broad approach to the definition of sustainability suggests a range of positive actions throughout the supply chain that encapsulates sustainability: from the natural environment to suppliers, workers and customers in areas of diversity, human and animal rights.
The post-COVID landscape provides a good opportunity for business to reassess their supply chain approach. As well as the location and the structure of supply chains, how participants are financing their activity is also in flux.
Supply chain finance (SCF) provides a range of working capital and risk-mitigation solutions, designed to optimise working capital and liquidity in domestic and international supply chains.
SCF is a relatively recent development in financing on open-account terms, particularly when compared the traditional trade financing instruments such as letters of credit and documentary collections. SCF techniques focus on optimising working capital on the sales leg, typically through receivables purchase, and the purchase leg through payables financing.
It’s well known global trade faces a funding gap of roughly $US1.5 billion, with smaller businesses making up a disproportionate share. Properly structured buyer-led payables finance programs can address a part of this cash flow challenge by providing suppliers prompt access to funds at an affordable price point, without the need to provide security or enter into loan agreements.
But while having a strong and viable supply chain is essential to ensure a reliable source of goods and services, the greater strategic undertaking is ensuring a sustainable supply chain.