Green FMCG Supply Chains: Challenges and Prospects

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by KnowESG
KnowESG_Green FMCG Supply Chains, Challenges and Prospects
Image courtesy of Maersk

In recent years, a significant transformation in the needs and expectations of FMCG customers has been observed worldwide. Consequently, businesses are confronting the challenge of incorporating sustainability into their supply chains while simultaneously reducing operational costs.

The Economist Impact report delves into the primary drivers of this transformation and elucidates the steps that companies can take to facilitate this evolution.

The influence of customer and employee expectations on decision-making has become paramount. With heightened global customer awareness and expectations, ESG (Environmental, Social, and Governance) considerations have ascended to the forefront of the strategic objectives of FMCG enterprises.

An impressive 44% of supply chain executives now prioritise enhancing ESG, a remarkable shift from its sixth position in 2020. As a result, FMCG companies are actively embracing sustainable practices throughout their supply chains.

They scrutinise supply chain partners based on various criteria, which encompass factors such as carbon emissions, circular economy principles, and improved labour standards.

Notably, in North America, a focal point of sustainability initiatives revolves around talent acquisition and retention, reflecting concerns about labour shortages and the region's resilient job market in the face of economic downturns. For FMCG firms in the region to flourish, they must remain attuned to the needs and expectations of both their customers and employees.

A compelling tension exists in the way sustainability is perceived, as it is regarded both as a cost driver and a cost-saving endeavour. Notably, two out of five FMCG companies acknowledge that potential cost savings are a driving force behind their sustainability agenda.

By creating resilient supply chains and moving away from single-source procurement, businesses have successfully mitigated bottlenecks. However, those with the vision and financial resources to invest in sustainable initiatives will reap long-term cost benefits.

FMCG companies have come to recognise that supplier collaboration is imperative for achieving their sustainability objectives. They are actively forming partnerships to advance sustainable logistics, investing in supply chain technology, and offering tailored training support.

To enhance supply chain transparency, widely adopted metrics such as the GRI, ISO, and SASB frameworks are increasingly standardising measurement and reporting. Initiating efforts to foster idea-sharing and diligently monitoring sustainability metrics will enable companies and their suppliers to transition towards a more streamlined process over time.

For more insights into the evolving landscape of FMCG supply chain management driven by sustainability, one can access the Maersk X Economist Impact Report 2023 here.

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Source: Maersk

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