What Is a Sustainable Supply Chain Strategy? A Guide
As governments, businesses, and consumers turn towards more ethical environmental, social, and governance or ESG practices, businesses that reflect these goals are becoming more desirable and in demand. More and more consumers want to purchase from companies that reflect positive impacts on their environment and community. Investors are looking toward ESG leading companies as ethical, risk-mitigating, long-term winners. Therefore, businesses are more inclined to focus on ESG goals and work with other businesses that reflect those same values—including their transportation management and logistics partners. In this blog post, we'll explore how to analyze and optimize your ESG goals across environmental, social, and governance dimensions.
Environmental
The environment is a crucial part of developing ESG goals. Many consumers and clients want to know that they are working with or purchasing from a business that is low-impact. More than being low-impact, they want to work with companies that take active steps towards reducing their carbon footprint.
Some American are considering changing their purchasing habits in order to reduce their environmental impact.
Working towards environmental sustainability and stewardship involves focusing on at least three areas:
- Reduced emissions
- Supply chain efficiency
- Sustainable materials
Reduced Emissions
The most effective and practical way shippers, logistics companies, and any company throughout the supply chain can begin updating their environmental goals and putting them into practice is by reducing their emissions. The Environmental Protection Agency (EPA) reported that the transportation industry accounted for the largest amount of greenhouse gas emissions out of every other sector.
How do you begin measuring and reducing your carbon footprint? The first step to reducing emissions is measuring current emissions, starting with Scope 1 (direct) and 2 (indirect from purchased energy), then including Scope 3 (indirect value chain, which is often where 3PLs and carriers fit for shippers). Once measured, you can take steps to reduce.
Creating goals and actively reducing emissions is a great way to attract more clients and customers, cut down on fuel costs, and help to reduce your carbon footprint. Therefore, add to your environmental ESG goals a reasonable and progressive decrease in the emissions your business can reach in the next few years, especially as emissions laws are tightening at the state level. Also, set a goal in the future for becoming carbon-neutral, which can be supported through a combination of reductions and carbon offsetting tactics.
Supply Chain Efficiency
Implementing new technology that helps your supply chain operate more efficiently and effectively is a great way to begin working on your ESG goals. Working towards upgrading and replacing new systems that better optimize freight, track shipment locations, and overall provide control tower visibility is an effective way to reduce empty miles, require fewer trucks on the road, and burn less fuel.
Yes, this will involve an up-front investment, though any logistics partner you work with on evaluating systems to implement should provide you an ROI estimation that will offer net positive gains in the near term. Working smarter, not harder applies both towards environmental and financial ends.
Sustainable Materials
Another way to advance your environmental ESG goals is to adopt green sourcing practices and focus on using more sustainable materials. This starts with supplier selection and ensuring partners have are in good ESG standing. Further steps can be taken by sustainable manufacturing processes, eco-friendly pallets, and more.
If manufacturing more sustainably sourced products is not possible, then consider packaging. Switch to recyclable, reusable, and/or compostable Reusable Transport Packaging in addition to finding innovative ways to use less packing material in general. Even finding small ways to limit packaging will greatly reduce waste in the long run. Especially in B2C, consumers take notice of the packaging used for shipments arriving at their front door.
Social
In addition to environmental goals, social goals are becoming increasingly prominent. Examples of social goals for businesses usually target the following:
- Health and safety
- Community impact
- Diversity, equity and inclusion (DE&I)
It is important to think about these subjects and how your company relates to them. Meeting high standards for these goals will earn your company a good reputation and make clients, customers, and employees more eager to work with you.
Health and Safety
Every organization needs to regularly review, assess, and update policies, protocols, and practices to align with the best safety standards in their respective industry. Be sure to include these guidelines in the Employee Handbook for employees to understand their responsibilities in making the workplace a safe and accessible space.
Community Impact
How can your organization make a meaningful difference in the communities you serve? Organizations should always seek ways to positively impact the communities they are a part of. This can include hosting and contributing to philanthropic events, raising funds for important causes, and rallying behind important community initiatives.
Empowering employees to get involved individually is another way businesses can give back, whether by incentivizing volunteer time or giving greater exposure to charitable opportunities.
Diversity, Equity & Inclusion (DE&I)
Foster an inclusive workforce. This should include updating hiring practices to reflect an emphasis on diversity of thought and experience, in part through greater diversity of gender and ethnicity.
Then with existing employees, continue to find ways to promote a diverse culture throughout the workplace, including programs that promote a sense of inclusion and wellbeing, and ongoing training.
Governance
Governance is the third piece of the ESG framework. While many organizations have already developed standards in this area, new best practices continue to emerge, whether in matters of executive compensation, anti-corruption protections, or strong IT security measures.
A few areas of emphasis you may want to analyze and optimize include:
- Corporate governance
- Tax transparency
- Risk management
Corporate Governance
Creating a strong organizational structure and executive governing committees helps to ensure regulatory compliance, ethical practices, and both internal and external accountability.
Companies should make sure the purpose of their organization is clearly laid out, as well as the makeup of boards of directors and executive leadership, with financial oversight and compensation being key issues.
Tax Transparency
It's no longer just a question of compliance. As a carbon footprint shows the state of emissions, a tax footprint can show the state of a company's priorities. Tax transparency can become a key way to showcase and validate a multi-national businesses ethical behavior.
By looking at a company's taxes you can see who they're paying taxes to and that they're paying their fair share. Disclosing more than the required tax reporting to the public is a great way to build trust in your brand and optimize your ESG goals.
Risk Management
At the end of the day, a well-run business with strong governance and accountability will face less risk than a company with vague policies, inconsistent practices, and no clear path to improve.
In today's world this spans across anti-bribery practices, anti-harassment policies, foreign corruption practices, and significantly in the technology era is strong cybersecurity measures. Stakeholders deserve to know whether they can trust a company they work for, work with or are impacted by.
Final Thoughts
When you're evaluating your supply chain partners, how do you ensure your own ESG efforts measure up? While it's important to assess your , it's even more important to look in the mirror and analyze your own ESG efforts. Use the tips above to optimize your ESG goals and strengthen your plan, and if you're interested in working with Redwood, feel free to take a closer look at Redwood's corporate governance and sustainability objectives.
FAQs
What are ESG goals in supply chain management?
ESG goals in supply chain management are objectives that improve environmental, social, and governance performance across operations and partners. In logistics, that usually means reducing emissions, improving worker safety and community impact, and strengthening governance through compliance, transparency, and risk controls. These goals matter because customers, investors, and business partners increasingly expect companies to prove responsible performance.
How do you measure and reduce freight emissions for ESG goals?
The first step is to measure current emissions, starting with Scope 1 and Scope 2, then adding Scope 3, which often includes carriers and third-party logistics providers. After that, shippers can set a realistic 5- to 10-year reduction target, ideally aligned with the Science Based Targets initiative. Carbon-neutral goals can also be supported through reductions and carbon offsetting.
Why does supply chain efficiency matter for ESG performance?
Supply chain efficiency matters because it can reduce empty miles, lower fuel use, and require fewer trucks on the road. The EPA notes that supply chains can account for up to 90 percent of a company's greenhouse gas emissions, so better freight optimization and visibility can have a major environmental impact. It can also create near-term ROI through smarter operations.
What are the best ways to make packaging and sourcing more sustainable?
The best ways include green sourcing, supplier assessments, and using more recyclable, reusable, or compostable packaging. Companies can evaluate partners with tools such as EcoVadis, choose eco-friendly pallets, and reduce packing material overall. In B2C shipping, packaging also affects customer perception, so small reductions in waste can improve both sustainability and brand trust.
What social ESG goals should a company focus on?
A company should focus on health and safety, community impact, and diversity, equity, and inclusion. That means reviewing workplace policies regularly, updating employee handbooks, supporting philanthropy and volunteerism, and strengthening hiring and training practices to build a more inclusive culture. These steps improve reputation and make the business more attractive to employees and customers.
What does governance mean in ESG goals?
Governance in ESG goals refers to how a company is structured, supervised, and held accountable. It includes corporate governance, tax transparency, and risk management, along with practices such as executive oversight, anti-corruption controls, and cybersecurity. Strong governance helps reduce risk and shows stakeholders that the company follows clear, ethical, and compliant business practices.
How can tax transparency and risk management improve ESG goals?
Tax transparency can build trust by showing how a company pays taxes and whether it is contributing fairly, especially for multinational businesses. Risk management improves ESG performance by reducing exposure to problems like bribery, harassment, foreign corruption, and cybersecurity failures. Together, they show that a company is accountable, ethical, and easier for stakeholders to trust.
