Sustainability is a strategic necessity for companies and a key factor in complying with quality and legal standards. In it, the value chain plays a fundamental role.  Defined as “the sequence of activities of a firm operating in a specific industry” by economist Michael Porter, the value chain encompasses all the activities involved in the design, production, distribution and delivery of a product or service.  We will now take an in-depth look at its concept, how it can be managed sustainably, its importance in sustainability compliance and the benefits it brings.  

What is the value chain and how can it be managed sustainably?  

From the acquisition of raw materials to the distribution, consumption and recycling of the final product. Each of these stages is part of the value chain and generates a series of impacts on the planet, which can be environmental, social and economic.   Within the value chain there are primary activities, such as operations and logistics, and support activities, which, although not primary, must also be taken into account. In this case, it could be human resources management or technology.   In short, the value chain is a key element in the creation of products and services that influence reputation, competitiveness and regulatory compliance.   When it comes to sustainable management of a value chain, the integration of ESG (environmental, social and governance) criteria at each stage is essential. From the selection of suppliers to the sustainable mobility of transportation and the best working and ethical conditions for employees.   To ensure that the value chain of our products or services generates a positive sustainable impact, it is necessary to carry out an impact assessment. This consists of carrying out work to identify how each of our activities impact, positively or negatively, the environment, communities, etc.  

The importance of sustainability in the value chain  

The main factor of importance of the sustainable value chain is its link to compliance with regulations and legal requirements.   Currently, there are regulations such as the Corporate Sustainability Reporting Directive (CSRD), which require companies to report on their ESG practices, including impacts on their value chain.   This directive poses a new framework in the way companies report on their impact on the environment, society and governance; in addition to how sustainability-related aspects can impact the company financially, both positively and negatively.   On the other hand, dual materiality is also a concept that includes the idea that companies should not only analyze how their activities impact the environment, but also how external factors can affect their activity. The value chain must also be taken into account.  Along the same lines, the Council of the European Union has recently approved a Regulation prohibiting products made with forced labor in the EU market. Thus, the introduction and marketing on the EU market, as well as the export from the EU market, of all those products that have been obtained or produced under conditions of forced labor is prohibited. This is a guarantee of human rights protection throughout the value chain. 

The advantages of a sustainable value chain  

Among the advantages of adopting sustainable practices in our value chain are aspects such as:    

Regulatory compliance  

As mentioned above, regulations such as the prohibition of forced labor and standards such as the Corporate Sustainability Reporting Directive (CSRD) require transparency and disclosure on the environmental and social impact of companies throughout their value chain. That is why collecting and reporting relevant data is key to complying with these legal obligations.  

Increased resilience and adaptation to change  

Having sustainable value chains is a guarantee against possible risks, such as the consequences of climate crises, regulatory changes, etc. It makes it possible to overcome critical situations.  

Competitiveness and market differentiation  

Another important factor of having a sustainable value chain is its competitiveness and differentiation from other competitors. Consumers, investors, shareholders and all other stakeholders are increasingly demanding companies that are committed to sustainability in all their operations. Companies must meet these needs and satisfy the expectations of their stakeholders.  

Operational efficiency and profitability  

Finally, incorporating sustainability in all the actions of your value chain can be especially useful when it comes to optimizing resources and achieving more efficient operational processes. 

At Energía Local we can help you with your value chain.  

As mentioned in the article, managing the value chain in a sustainable way is an essential step when preparing future Sustainability Reports and complying with reporting obligations.   If you are interested in knowing how to manage it in your company, do not hesitate to contact our team. We will advise you personally.