How to bring sustainability into your supply chain with Dynamics 365

March 20, 2023

Today’s recipe for business success lies in building a resilient, agile, and sustainable supply chain. Adherence to regulatory compliance in the supply chain and adoption of ethical business practices can cement an organization as a major player in the industry for years to come.  

This is why many executives have sustainability at the forefront of their minds. Moreover, research shows a 23% increase in pressure from investors to improve sustainability in supply chain management.  

Let’s take a deeper look into the role of sustainability in supply chain and how organizations can improve it with the help of Dynamics 365.

What is sustainability in supply chain?

Sustainability in supply chain occurs when companies consciously try to protect the people and environment across the whole chain by upholding environmental and social standards throughout their operations.  

In this way, businesses can consider the impact of their product’s journey throughout the supply chain. This includes all stages from procurement of raw materials, storage, and manufacturing to distribution. The objective is to minimize harm to the ecosystem and generate a positive effect on the people and the environment.

Importance of sustainability in supply chain

The importance of sustainability in supply chain management extends beyond the company’s efforts to reduce its carbon footprint. It is now necessary for most businesses as investors actively look for companies that abide by sustainable practices in supply chain.

By implementing environmental sustainability in supply chain, not only do companies stand to elevate their brand image, but it is also a great way to legitimize company operations. Moreover, statistics show that some consumers will pay 70% more for sustainable products. These numbers reflect the demand for environmental sustainability in supply chain management.

However, as mentioned before, practicing sustainable supply chain operations takes work. Therefore, let’s examine the main challenges businesses face to ensure a sustainable supply chain.

Challenges of sustainable supply chain management

Some of the biggest challenges companies face when attempting to make their supply chain operations more sustainable include the following:

1. Increased expenses

Revaluating supply chains, establishing robust standards, and taking new steps to improve supply chain processes demands an investment of both time and money. However, once the new measures are in place and the supply chain is strengthened, it bears profits by reducing overall costs and enhancing efficiency.

2. Lack of visibility

Supply chain management can be complicated, especially for companies with a diverse portfolio of products. For example, there can be several manufacturers and suppliers for every product. In addition, many elements across the supply chain depend on each other, and a change in one can disturb the entire supply chain process.

As a result, there needs to be end-to-end visibility into the value chain to make it easier for executives to monitor the complex workings of a supply chain and create room to incorporate sustainability practices within the system.  

3. Lack of eco-friendly logistics

Green logistics is a tough goal to achieve. Companies face several challenges when trying to make their logistics more sustainable. For example, limiting the use of fossil fuels during the transportation is hard. Moreover, with increasing customer demand for rapid deliveries, loads cannot be consolidated, leading to more emissions and pollution.  

Keeping these challenges in mind, companies must take proactive measures to eliminate the roadblocks and successfully implement sustainability in supply chain management. A great way to do that is by employing smart software like Microsoft Dynamics 365 ERP.  

How to improve sustainability in supply chain with Dynamics 365?

With Dynamics 365 ERP’s smart capabilities, businesses can build a more connected and sustainable supply chain. Here are a few ways you can use Dynamics 365 to achieve your sustainability targets:

1. Identify sustainable suppliers

Conduct a sustainability audit of your supply chain to identify areas of improvement. This may involve assessing suppliers’ environmental and social impact, energy consumption, carbon footprint, waste management practices, and other sustainability metrics.  

Use Dynamics 365’s supplier management module to identify sustainable suppliers. This tool tracks supplier performance against sustainability criteria and identifies high-performing suppliers.

2. Set sustainability goals

Set sustainability goals for your organization and suppliers. Dynamics 365’s goal management module allows you to set, track, and report on sustainability goals across your supply chain. These goals should align with your organization’s overall sustainability strategy and be reviewed regularly to track progress.

3. Monitor and track performance

Use Dynamics 365’s performance tracking tool (a sub-category of the goal management module) to monitor supplier performance against sustainability goals. This tool allows you to identify areas of improvement and take corrective action where necessary. In addition, Dynamics 365’s reporting tools enable businesses to track and report on sustainability performance. This tool allows you to communicate your sustainability progress to stakeholders and customers.

4. Ensure visibility and transparency

Dynamics 365 provides real-time visibility into supply chain operations, allowing businesses to monitor and track their suppliers’ performance, compliance, and sustainability practices. Companies can identify and address sustainability risks by gaining visibility into suppliers’ operations, such as environmental and social issues.

5. Promote collaboration

Cloud-enabled Dynamics 365 Supply Chain module enables collaboration between businesses and their suppliers, helping to improve communication and build more sustainable relationships. For example, suppliers can use Dynamics 365 to provide updates on their sustainability initiatives and share data on their environmental and social performance.  

6. Leverage robust data analytics

Businesses can leverage data analytics around supply chain operations to identify areas to improve sustainability. For instance, companies can use Dynamics 365 AI-driven insights to identify opportunities to reduce waste, improve energy efficiency, and reduce carbon emissions.

7. Facilitate compliance management

Dynamics 365 can help businesses ensure their supply chain partners comply with sustainability standards and regulations. The platform includes features that enable companies to track and manage compliance requirements, such as sustainability certifications and audits.

8. Ensure sustainable and smart production

Dynamics 365 makes it easier for businesses to develop smart manufacturing processes by increasing shop floor visibility and making it easier to adapt to new business models. Moreover, D365 Supply Chain provides a real-time view of production and stock to enhance transparency and boost quality.  

Moreover, with visibility into product journeys, IoT can always let managers know where the product is and what happens at each manufacturing stage. As a result, theft, damage, and loss can be avoided, which reduces waste and increases sustainability.  

9. Collaborate with suppliers

A supply chain is a complex network of suppliers, manufacturers, and distributors. With communication between the three elements, sustainability across the supply chain can become possible. Dynamics 365 allows partners to collaborate with suppliers by monitoring their suppliers’ environmental performance and actively engaging with them to ensure green practices.  

Through efficient collaboration, companies can provide suppliers with materials and technology that help them develop environmental-friendly products and reach sustainability goals.

10. Make your workforce more effective

Dynamics 365 drives efficiency in the manufacturing supply chain by allowing companies to improve their ERP system, boost supply chain visibility, and drive reverse supply chain management to empower the circular economy.  

As a result, the supply chain workforce is transformed and empowered to perform efficiently and reduce errors. Consequently, an error-free supply chain can be more sustainable.


In a nutshell, a sustainable supply chain is integral to improving a company’s social, environmental, and governance score, eventually enticing more customers and investors. The importance of sustainability in the supply chain can be seen in the demand for sustainable goods in 2023.  

Dynamics 365 Supply Chain can help companies meet sustainability goals through its agile capabilities. Through Dynamics 365, businesses can build a more sustainable supply chain by providing visibility, collaboration, data analytics, compliance management, and smart production tools.  

By leveraging these capabilities, businesses can identify and address sustainability risks, improve their environmental and social performance, and build more sustainable relationships with suppliers.  

You can learn more about the benefits of D365 Supply Chain on our page here. If you want to revamp your supply chain processes, email us at and let our experts guide you toward implementing a sustainable supply chain.