Taking a strategic approach to supply chain sustainability regulations

November 22, 2022

Before jumping headlong into complying with sustainability regulations, you should understand their long-term effects.

Compliance with regulatory control over achieving sustainable supply chains should not be automatic and passive. Achieving sustainable supply chains is complex and can be problematic. But that compliance with sustainability regulations can also be advantageous.

Last week, we explored the short-term or tactical level of regulatory control of supply chains. This week, we’ll delve into the long-term or strategic effects of regulation on supply chains.

Without further ado, let’s address how a strategic approach to supply chains can benefit your business.

Why taking a strategic view matters

Risk has become a top-of-mind concern as risks increase in frequency and intensity.

Anytime regulations are imposed, they imply short-term and long-term risks. Here we’ll discuss the long-term risks in a general, but useful way.

We usually think of risk as something negative. That’s understandable. Risk implies danger, peril, uncertainty, and vulnerability. Any regulatory control over supply chains comes with some risk. It doesn't matter whether it's by government, non-governmental, or even market-based entities. Risk is inherent in any type of regulation. What is key is how you manage those risks.

One of sustainability's most prominent challenges is that of environment vs. economics. In the short term, that may not be an overriding factor in how you manage your supply chain. But, in the long-term, risk figures more significantly. It’s the difference between a little “r” and a big “R”.

Since this post is about the long-term effects of sustainability regulation, let’s see why a strategic perspective matters.

A long-term perspective of supply chain sustainability regulations

One key takeaway from the pandemic is that supply chain management is now a strategic endeavor. So, firms must adjust their perspectives and plan accordingly. That applies to how firms view regulatory control of sustainability. A strategic approach entails a long-term and end-to-end view.

To position your business for new regulatory controls, in today’s world, you should take a holistic view. Doing so helps you identify not only risks but also opportunities. As you analyze how regulations affect the connections between and among your supply chain nodes, your holistic analysis will uncover hidden opportunities.

As you discover opportunities, you’ll be able to redesign your supply chain with those options in mind. In doing this, you’ll reinforce your supply chain to cope with risks proactively. That takes reaction out of the calculus.

Another reason a strategic view matters is that it affords you the time to reflect on all effects. That allows you to consider all the options at your disposal. It’s a comprehensive approach that deals with not just the parts but the sum of the parts.

That’s important for several reasons. First, it is now easier for you to see all the effects, allowing you to prioritize which ones to tackle and in what order. You may not have to address all the effects.

An example is to decide to focus on, say, two key areas: 1) economics vs. sustainability and 2) the customer. And that will help you apply your limited resources to balance costs and benefits.

If you fail to consider the long-term impacts of regulation, you’ll react when risk strikes. You'll feel like you're playing whack-a-mole.

Ignoring the long-term aspects of risk increase uncertainty and vulnerability. You’ll suffer strategically regarding your overall competitiveness. Regulation changes market dynamics. And failure to plan for those dynamics will put your business at risk. So, you may face greater risk in doing nothing in anticipation of upcoming regulation.

Next, we’ll examine how to put the customer first. Then we'll address the inherent struggle between economics and sustainability.

Strategic supply chain optimization promotes sustainability and profitability

When viewing your supply chain holistically, you’ll consider your operations from all perspectives. That includes inputs from your staff, your suppliers, and your customers. So, you’ll get both internal and external inputs. No options will go unconsidered. That will enhance sustainability and profitability

This approach will likely reveal options previously not considered that can affect performance. And you can address resilience and other capabilities such as agility, on-shoring, near-shoring, etc. With these insights, you can optimize operations to meet your customer's needs, while complying with new sustainability regulations.

Strategic financial management promotes sustainability and profitability

When planning long-term, no strategic plan is complete without assessing costs and benefits. Here, it is about assessing the costs and benefits of sustainability regulations.

As with the other categories, you'll look for exploiting advantages and diminishing disadvantages. Regulations usually come with taxes and incentives. Whether you’re looking at one or the other, a holistic view can help you to balance costs and benefits.

You’ll also be able to do so in a meaningful way where each member of your supply chain pays their fair share of the costs. Equally important is the sharing of benefits. It promotes financial equity among your stakeholders. And it puts your business on a firm financial footing.

Strategic risk management promotes sustainability and profitability

Supply chain risk management has moved to the head of the class. It is a major component of operating a successful business. Like taking a holistic view of financial impacts, a comprehensive, long-term view of sustainability affords you more options.

In particular, you can identify all your risks, end-to-end, and share those risks with their attendant costs and benefits. That further helps you meet your performance goals and your customers’ needs and demands more effectively and efficiently. And that promotes resilience.

Strategic marketing promotes sustainability and profitability

Lastly, regulatory controls have a strategic marketing aspect to them. Your business can leverage the perceived negative effects of regulation by crafting a green public image. That fosters a cooperative approach that sets you apart from your competitors. Some examples of doing that are by releasing information such as voluntary eco-labeling. That puts you out front ahead of mandatory regulatory requirements.

You can also provide press releases about the status of your green initiatives that exceed any regulatory requirements. Again, that shows goodwill with society and your customers. The setting of voluntary industry standards is another way to boost your image. Many companies do that today. And it helps separate sustainable-friendly businesses from those that are not.

Exxon and Chevron, some of the biggest polluters have some of the most sophisticated green publicity programs. And they seem to work. Strategic marketing can make your company more proactive, enhance its brand, and facilitate goodwill. That’s the value of strategic marketing.

Conclusion of supply chain sustainability regulations

Thinking strategically will position your business for success. You’ll be more proactive, deliberate, team-focused, and customer-centered.

Your supply chain will cease to react when disruptions strike. In deliberately re-designing your supply chain, you will reinforce old capabilities and build new ones that can cope with the demands of the New Normal.

You’ll build resilience into your supply chain and other capabilities, like agility or responsiveness, that benefit you and your stakeholders.

But which capabilities should you develop? Your customers’ demands and the threats you face will inform you of the capabilities needed to survive.

The lines between internal and external operations will blur with open communications. You will value customers’ ideas and inputs as much as those of your staff and partners. It’s a new world, and now is the time to swiftly adapt or risk falling behind.

Now that sustainability has become a strategic issue, you must treat it as one. Gone are the days when you relegate sustainability concerns to a matter of minor import.

Sustainability regulations can make or break a company. They can propel your business to the leading edge or consign it to the dustbin of failed businesses.

Managing regulatory control of sustainability issues is essential but complex.

So how do you redesign your supply chain for sustainability without running afoul of regulations?

At American Global Logistics, we track trends, like those concerning sustainability. Our aim is to stay ahead of trends so we can position our clients for success.

We carefully track sustainability regulations and assess their impact on supply chains. We also recognize and appreciate that sustainability is essential and complex.

Why face this daunting task by yourself? Instead, consider partnering with a trustworthy partner like AGL. We’re strategic-minded, and we know what to look for and how to convert risk into opportunity.

We do it for our customers daily, and we can do the same for you. We can help you gain a competitive edge and position you for success in the New Normal.

Contact us today to find out how we can help you benefit by approaching sustainability from a strategic view.

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