Closing the Gap: Core Dimensions, Challenges, and Opportunities in Sustainable Supply Chains

Closing the Gap: Core Dimensions, Challenges, and Opportunities in Sustainable Supply Chains

Acknowledgements Rachel Calderone (SFS’26), Luke Koslosky (MBA’27), Nicole Rever Tacher (ESM’26) on behalf of the Business of Sustainability Initiative at Georgetown University’s McDonough School of Business The authors acknowledge the contributions of the following M.S. in Environment and Sustainability Management (ESM), MBA, and undergraduate students: Max Camateros-Mann (MBA’27), Khadija Collins (MBA’27), Elaine Huang (MBA’26), Paige Loh (ESM’26), Isa Merritt (ESM’26), Ava Milliken (ESM’26), and Zella O’Malley (B’26), who provided the written documentation of the workshop sessions, which informed the insights presented here. Further, the authors thank Professors Vishal Agrawal and Şafak Yücel for their valuable guidance and editorial feedback.

Closing the Gap: Core Dimensions, Challenges, and Opportunities in Sustainable Supply Chains

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Introduction Supply chain sustainability represents one of the most significant and complex challenges in corporate climate action. Emissions produced across a company’s value chain, also known as Scope 3 emissions, typically represent around 90% of a company’s total emissions (McKinsey & Company, 2024).

Yet, despite this outsized impact, the gap between corporate ambition and action across the value chain remains wide.

Voluntary initiatives frequently run into structural barriers including siloed organizational functions, financing constraints, infrastructure gaps, and data collection and verification limitations. The cost of inaction is significant, estimated at over US$162 billion in potential financial costs tied to supply chain climate-related risks (CDP, 2024). Closing the gap requires embedding sustainability into the core decisions of procurement, operations, and design, supported by credible data, empowering policies, and access to capital.

To facilitate candid conversations and identify actionable insights and strategic priorities from multi-stakeholder perspectives, Georgetown University’s McDonough School of Business convened a workshop in November 2025. This event created a shared space for leaders from across the industry to explore encountered barriers and solutions across four dimensions that are central to supply chain sustainability (see Appendix A for the agenda of the workshop).

The 2025 workshop builds on the success of two prior convenings hosted by the Business of Sustainability Initiative, which examined voluntary carbon markets in 2023 and the global energy transition in 2024. Lessons and insights from both informed the design of this year’s workshop, while shifting focus to another issue critical to decarbonization and growth: the evolving landscape of sustainable supply chains. The 2025 convening explored strategies to strengthen supplier relationships, integrate circular economy principles, and drive meaningful, measurable change across supply chains.

The resulting papers from previous years are available for reference: Challenges and Opportunities for the Voluntary Carbon Markets (2023) and Navigating the Energy Transition: Core Dimensions, Challenges, and Opportunities (2024).

Insights presented in this white paper reflect a cross-sectoral analysis of constraints that hinder progress and the high-impact opportunities needed to decarbonize across the supply chain. Rather than a single solution, this paper offers a set of strategic lenses for investors, regulators, and developers to act with clear intent and efficiency to facilitate sustainable supply chain strategies.

The findings in this report were produced following a workshop in fall 2025 and are not direct proposals or policy recommendations from the Business of Sustainability Initiative at Georgetown University’s McDonough School of Business.

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The Workshop To address the multifaceted challenges of building sustainable supply chains across industries, geographies, and functions, the Business of Sustainability Initiative at Georgetown University’s McDonough School of Business convened a Leadership and Innovation Workshop in November 2025, gathering diverse stakeholders to identify shared barriers and opportunities.

The workshop was organized around four panel discussions: Solutions for Supply Chain Sustainability, Setting Standards and Reporting for Supply Chain Sustainability, Engaging Suppliers for Sustainability, and Advancing Social Sustainability, as outlined and described in the agenda (Appendix A).

Participants represented a diverse crosssection of stakeholders, including industry practitioners, financiers, policymakers, and NGOs, bringing together perspectives from across the systems that shape sustainable supply chains.

While many of the challenges and opportunities identified across panels are interconnected, this report examines each of the four areas in turn to allow for a more focused analysis and to support the development of targeted strategies. The goal is not only to capture the landscape as discussed by participants, but to provide a foundation for driving meaningful interventions across the system as a whole.

This report provides an overview of the discussion among practitioners and policymakers during the workshop. As per the Chatham House Rule, we do not attribute a comment to a specific participant; instead, we discuss the general nature of these points raised by participants.

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Core Dimensions of Supply Chain Sustainability 06

Sustainable Design and Operations

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Supply Chain Governance and Reporting

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Supplier Engagement and Relationship Systems

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Social Responsibility in Supply Chains

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Conclusion

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References

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Appendix A: Workshop Agenda

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Appendix B: Acronyms

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1. Sustainable Design and Operations Embedding sustainability into product design and day-to-day operations has become one of the most concrete levers a company has for creating business value, yet realizing that value remains difficult in practice. Firms face persistent challenges, including siloed sustainability functions disconnected from finance and procurement, high upfront costs with long payback horizons, and a shifting regulatory environment that makes long-term planning difficult. At the same time, companies that integrate sustainable design into their operations have identified significant value in cost reduction, revenue growth, and harder-to-quantify benefits in brand reputation and talent retention while avoiding regulatory fees.

Challenges Sustainability Silos

Feasibility Constraints

Many firms keep sustainability functions in small, isolated teams disconnected from procurement, finance, and operations. This separation prevents executives from seeing direct financial returns and reinforces the misconception that sustainability is a cost rather than a strategic investment.

Even when companies commit to circular and sustainable product redesign, progress is frequently constrained by infrastructure gaps, misaligned incentives, and underdeveloped end-oflife systems. An example is the transition from natural gas to low-carbon electricity for processes like furnaces — theoretically straightforward, but limited by the commercial availability and grid viability of electrification at scale.

Upfront Investment and Payback Horizons

Value Quantification

Sustainable design and transitioning infrastructure require significant upfront capital before financial benefits are realized — a persistent barrier for firms that view sustainability as a year-overyear cost. Mechanisms like Extended Producer Responsibility (EPR) add nearterm pressure even as they incentivize redesign over time. This is especially acute for SMEs and firms in emerging markets facing limited access to affordable capital.

Closing the Gap: Core Dimensions, Challenges, and Opportunities in Sustainable Supply Chains

A compelling business case for sustainability requires capturing both hard value — cost savings, revenue growth, avoided regulatory fees — and softer value such as brand reputation and talent retention. Environmental factors can be translated into concrete numbers, but social benefits are harder to quantify and increasingly sidelined under political pressure.

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Opportunities Core Value Creation A clear opportunity in sustainable operations is redesigning products and packaging to eliminate waste and reduce cost through circularity. Frameworks like Design to Sustainable Value (DtSV) combine material substitution with recycled inputs and design reviews that optimize cost, regulation, and sustainability.

Leveraging AI for Operational Efficiency AI lets firms prioritize high-impact changes without the time and cost of traditional redesigns. AI-driven prototyping and synthetic focus groups speed testing, while AIoptimized logistics improve the bottom line and reduce emissions.

Leadership Buy-in Securing leadership commitment is a key enabler of transformation. A proven approach builds the business case incrementally, starting with initiatives that deliver clear, near-term wins to gain support for longer-horizon investments.

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2. Supply Chain Governance and Reporting Supply chain governance and reporting is the foundation for making sustainability expectations legible, consistent, and enforceable across complex value chains. It covers how firms set supplier requirements, define metrics, collect and validate information, and disclose progress in ways that withstand evolving standards. When strong, this foundation helps companies meet compliance obligations, substantiate claims, and target effort toward the highest-impact risks.

Challenges The “Policy Wall”

Political Uncertainty

Voluntary commitments can advance sustainability only so far before hitting a “policy wall,” where further progress needs policy support — especially when solutions depend on shared infrastructure no single firm can build alone. Oregon’s packaging EPR law, funding statewide recycling upgrades, shows how legislation can coordinate change individual firms cannot achieve alone.

Political uncertainty can slow or distort governance and reporting even when firms have clear internal commitments, especially as disclosure expectations vary across jurisdictions and shift with elections. Some companies adopt a “wait and see” posture; others continue work internally but reduce external communication, increasing the risk of greenhushing.

Data Gaps and Quality

Audit Fatigue

Data gaps and inconsistent quality remain a central constraint, especially for Scope 3, where firms rely on supplier-provided data that varies widely in completeness and assumptions. Inconsistent definitions — what counts as recycled content, how emissions factors are applied — undermine comparability. As reporting grows more audit-focused, these inconsistencies create a bottleneck, with teams spending effort reconciling data rather than acting on it.

Audit fatigue is a persistent challenge for suppliers serving multiple large customers pulled into overlapping reporting and assurance processes.

Suppliers are often asked for similar information through slightly different questionnaires and audit protocols, creating administrative burden without improving data quality. Over time this fragmentation reduces responsiveness and diverts limited capacity toward documentation rather than implementation.

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Opportunities Standardization and Harmonization

Pre-competitive Collaboration

Aligning shared protocols, definitions, and templates reduces friction and improves comparability. Fewer duplicative questionnaires improve data quality over time and shift reporting toward a decision-useful system with cleaner benchmarking.

Coordinating on shared audits and supplier engagement practices across buyers improves efficiency, even though aligning competitors is difficult. When it works, suppliers face fewer duplicative assessments and focus more on corrective action.

Automation and AI

Strategic Continuity

AI can reduce the cost of governance and reporting by aggregating data, standardizing formats, and flagging inconsistencies, while supporting faster quality checks and traceability — especially valuable for uneven Scope 3 supplier data.

Treating governance and reporting as a durable capability — not a program tied to the political cycle — improves compliance readiness and decision quality regardless of the external environment, without slowing implementation.

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3. Supplier Engagement and Relationship Systems Supplier engagement and relationship systems are essential to turning high-level sustainability commitments into tangible operational change. Because most environmental and operational risks lie upstream, companies must work with suppliers to achieve their goals. Effective engagement can reduce emissions, decrease disruption risk, and strengthen long-term resilience, but it requires procurement systems that make standards actionable across a diverse supplier base.

Challenges Uneven Leverage Not all companies can influence supplier behavior equally. Large public buyers can use purchasing power to shift entire markets, while others must rely on relationship-building to set expectations.

A company‘s influence depends on its position in the value chain, its spend with a given supplier, and whether that supplier is a strategic partner or a smaller firm with limited capacity.

Capability Constraints and Visibility into Tiers Many smaller suppliers, especially MSMEs, lack the resources to meet complex sustainability requirements, which demand dedicated staff and data systems that are burdensome on thin margins. Visibility compounds this: companies understand direct (Tier 1) suppliers well, but conditions become harder to monitor further upstream, creating transparency gaps.

Opportunities Strategic Supplier Selection and Co-Investment

Procurement Power and Financing Enablers

Diversifying the supplier base by size and location reduces disruption risk and creates flexibility as conditions change, while matching sustainability expectations to supplier capacity.

Pairing requirements with financial support — shared-benefit contracts, longer-term offtake commitments, technical assistance — helps smaller suppliers afford upgrades like energy efficiency improvements.

Large buyers can use purchasing agreements to influence standards beyond their own operations — for example, requiring LEED certification elevates market-wide building practices.

Risk-sharing tools such as credit guarantees and blended capital structures can lower borrowing costs for MSMEs, turning necessary but hard-tofund upgrades into financeable projects.

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4. Social Responsibility in Supply Chains Social sustainability reminds businesses that what they do is as equally important as how they do it. Because supply chains are among the most labor-intensive parts of a company‘s operations, social responsibility is particularly important. Firms face growing pressure to understand labor conditions, worker protections, human rights risks, and community impacts — issues that resist easy quantification and require qualitative judgment across fragmented global supply chains.

Challenges Social Data Reliability

Fragmented Contexts

Social conditions are subjective and hard to measure. Overreliance on simple metrics, like suppliers signing codes of conduct, can create false confidence in worker treatment.

Companies work with suppliers across countries with varying labor laws and norms, making one clear standard difficult to apply throughout the supply chain.

Deep-tier Visibility

Business Risk of Failure

Social risks become harder to detect beyond Tier 1 and Tier 2 suppliers, since companies have far less insight into subcontractors and informal labor arrangements further upstream.

Failures in social responsibility carry severe risks, including diminished stakeholder trust and disruptions — firms that invest instead strengthen resilience and legitimacy.

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Opportunities Trust and Talent

Resilience and Partnership

Trust and talent attraction are clear benefits when social responsibility is embedded in a firm‘s culture rather than treated as a separate initiative. This means creating shared value around moral responsibility — acknowledging that products would not exist without those who make them.

Building resilience means diversifying suppliers, adding worker-centered tools like grievance mechanisms, and aligning procurement, operations, and sustainability teams internally and with industry peers externally.

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Conclusion Across sustainable design, governance and reporting, supplier engagement, and social responsibility, a consistent pattern emerges: the gap between corporate ambition and action in supply chains is rarely a gap in intent — it is a gap in infrastructure, data, financing, and coordination. Firms that make progress embed sustainability into core procurement, operations, and finance decisions, rather than treating it as a separate function competing for budget.

No single actor can close this gap alone. Progress depends on shared standards, financing that makes upgrades affordable for smaller firms, and policy support for infrastructure.

Closing the Gap: Core Dimensions, Challenges, and Opportunities in Sustainable Supply Chains

Emerging tools offer real leverage.

Artificial intelligence can accelerate product redesign, streamline data-heavy reporting, and help firms target highimpact interventions across sprawling, multi-tier supply chains. But technology alone cannot substitute for leadership commitment and durable supplier relationships built on shared incentives.

The strategic lenses here are not a single solution but a starting point for investors and developers to act with greater intention. Closing the gap will require sustained collaboration, grounded in credible data, empowering policy, and access to capital.

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References CDP. (2024). Strengthening the Chain: Industry insights to accelerate sustainable supply chain transformation (p. 27). https://www.cdp.net/en/insights/strengthening-the-chain McKinsey & Company. (2024, September 17). What are Scope 1, 2, and 3 emissions? https://www.mckinsey.com/featured-insights/mckinsey-explainers/what-are-scope-1-2-and-3-emissions

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Appendices Appendix A Agenda for the Supply Chain Sustainability Workshop at Georgetown University‘s Rafik B. Hariri Building, Nov. 6, 2025 SESSION 1: SOLUTIONS FOR SUPPLY CHAIN SUSTAINABILITY In the first session of the day, attendees explored various solutions to enhance supply chain sustainability. They focused on circular economy, environmentally-friendly shipping and packaging, and managing inbound and outbound logistics.

SESSION 2: SETTING STANDARDS AND REPORTING FOR SUPPLY CHAIN SUSTAINABILITY In the second session, attendees discussed how firms can measure and report their progress to ensure supply chain sustainability. They explored various standards and certification programs to identify best practices in understanding, benchmarking, reporting, and tracking sustainability metrics across various dimensions, including greenhouse gas emissions, water, and land use.

SESSION 3: ENGAGING SUPPLIERS FOR SUSTAINABILITY In the third session of the day, the focus shifted to upstream firms in a supply chain to identify best practices in engaging them to advance sustainability goals. How can large firms leverage their relationships with suppliers to achieve decarbonization through sustainable procurement strategies beyond their Scope 1 emissions? Attendees explored strategies for achieving energy efficiency in global supply chains.

SESSION 4: ADVANCING SOCIAL RESPONSIBILITY In the final session of the day, attendees focused on the business case for social sustainability. How can firms engage with their local communities and small businesses while ensuring the well-being of their employees? What are the challenges and opportunities in diversifying a firm‘s supplier base? How can these strategies lead to increased profitability?

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Appendices Appendix B Acronyms

AI

Artificial Intelligence

DtSV

Design to Sustainable Value

EPR

Extended Producer Responsibility

LEED

Leadership in Energy and Environmental Design

ESM

M.S. in Environment and Sustainability Management

MSMEs

Micro, Small, and Medium Enterprises

NGO

Non-governmental Organizations

PPA

Power Purchase Agreement

SMEs

Small and Medium Enterprises

businessofsustainability.georgetown.edu bizofsustainability@georgetown.edu Georgetown University McDonough School of Business Rafik B. Hariri Building 37th and O Streets, NW Washington, DC 20057

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