Supply chain sustainability (or supply-chain sustainability) is the management of environmental, social and economic impacts and the encouragement of good governance practices, throughout the lifecycles of goods and services. There is a growing need for integrating sustainable choices into supply chain management. An increasing concern for sustainability is transforming how companies approach business. Whether motivated by their customers, corporate values or business opportunity, traditional priorities such as quality, efficiency and cost regularly compete for attention with concerns such as working conditions and environmental impact. A sustainable supply chain seizes value chain opportunities and offers significant competitive advantages for early adopters and process innovators.

Supply chains are critical links that connect an organization’s inputs to its outputs. Traditional challenges have included lowering costs, ensuring just-in-time delivery, and shrinking transportation times to allow better reaction to business challenges. However, the increasing environmental, social and economic costs of these networks and growing consumer pressure for eco-friendly products has led many organizations to look at supply chain sustainability as a new measure of profitable logistics management. This shift is reflected by an understanding that sustainable supply chains mean profitable supply chains.

Many companies are limited to measuring the sustainability of their own business operations and are unable to extend this evaluation to their suppliers and customers. This makes determining their true environmental and social costs highly challenging. However much progress has been made in defining supply chain sustainability and benchmarking tools are now available that enable sustainability action plans to be developed and implemented. A study conducted in 2017 researched the correlation between supply chain position (how close or far the firm is from the end user in the supply chain) and firm performance. The study findings concluded that suppliers located farther upstream in the supply chain (farther from the end user), had the most to gain financially from sustainable supply chain management.

Climate change poses a new risk to supply chains and a need to increase their resilience. As companies are setting carbon footprint targets, suppliers’ operations are responsible for 65% to 95% of a company’s total emissions. These environmental impacts are evident across industries, for example, food and beverage companies are particularly vulnerable to the impacts of climate change as changing weather patterns can disrupt agricultural production. Measuring supply chain resilience on factors such as natural resource availability, infrastructure, financial resources, and social safety networks among others, can help them respond to challenges and create better supply chains in the process.

Besides sustainability and resilience, an ethical supply chain is imperative to ensure corporate social responsibility and adhere to a supplier code of conduct. The work environment for the workers should be congenial and must not violate the basic human rights. For instance, companies like Nike and Apple, which outsource manufacturing of their products to other countries like China, have been under the scanner for workplace conditions and wages of their workers. Consumers increasingly demand transparency and traceability in supply chains, especially where disturbing social breakdowns occur, such as with forced labour and child labour for globally traded goods.

Forced labor, understood as work that is performed involuntarily or under coercion, occurs in different industries, often upstream in the supply chain with limited visibility to buyers, customers, and end-users.

For example, in the United States, the 2010 Dodd–Frank Wall Street Reform and Consumer Protection Act requires manufacturers to audit their supply chains and report use of conflict minerals to the Securities and Exchange Commission.

Governance practices in global supply chains can pose risks to supply chain sustainability, alongside social and environmental factors. Governance factors include guidelines and procedures for countries and corporations. Buyers screen their supply chains for appropriate governance practices such as a company’s purpose, the role and makeup of boards of directors, shareholder rights and how corporate performance is measured.