1 What Is a “Sustainable Supply Chain”?

Modern businesses have undergone significant transformation due to specialization and technological advancement. It’s virtually impossible for a single company to handle every aspect of production from start to finish. Take Amorepacific, for instance: we work with approximately 100 primary suppliers, which grows significantly when including tier 2-4 suppliers. From another perspective, to large retailers like Sephora, Amorepacific is also a supplier of finished products.

This entire process, from raw material sourcing to disposal, is known as the “supply chain.” Recently, close partnerships with suppliers have become increasingly crucial for companies providing products and services, both for profitability and quality improvement. Governments, investment institutions, and civil society organizations also emphasize corresponding ESG responsibilities. As a result, companies face pressure to establish responsible and transparent relationships with all suppliers involved in their product manufacturing. This is commonly referred to as a “sustainable supply chain.”

2 Why “Sustainable Supply Chains” Have Become Critical

The Science Based Targets initiative (SBTi) is a framework that recognizes companies that set greenhouse gas reduction targets based on clear scientific evidence. Companies declaring carbon neutrality, such as Google and Apple, are participating in this initiative. Greenhouse gas emissions are categorized into three scopes—Scope 1, 2, and 3—with Scope 3 emissions encompassing other emissions occurring throughout the company’s value chain, including the supply chain.

* For more details, refer to

“Who Made the Earth Hot? (It’s Me, Greenhouse Gas)”

Under SBTi guidelines, when Scope 3 emissions account for more than 40% of total Scope 1, 2, and 3 emissions, setting Scope 3 targets becomes mandatory. This applies to most companies, with over 90% of SBTi-verified targets now including Scope 3 emissions. In Amorepacific’s case, Scope 3 emissions constitute approximately 88% of total emissions. This means companies must not only track their direct emissions but also understand and work to reduce emissions across their entire value chain.

The global movement toward carbon neutrality is quickly gaining momentum. For instance, global tech giants like Google and Apple require their supply chain partners, including Samsung Electronics and SK Hynix, to transition to 100% renewable energy (RE100) by 2029. These suppliers’ carbon emissions fall under Apple’s Scope 3 emissions. As a result, over 320 Apple suppliers have already committed to RE100 goals and are working toward the transition. Companies are voluntarily disclosing these greenhouse gas reduction efforts through their sustainability reports.

I personally enjoy the TV show “I Live Alone,” particularly the episode featuring the “Palm Oil” gathering with Jun Hyun-moo, Park Na-rae, and Lee Jang-woo. The group’s name, “Palm Oil,” refers to a commodity that accounts for over 60% of the global vegetable oil trade, making it “the world’s most consumed and traded vegetable oil.” But have you ever seen an actual palm fruit? Probably not. Palm oil is widely used to manufacture chocolate, snacks, ice cream, and cosmetics. Most palm oil is produced in Southeast Asian countries, particularly Indonesia, often in rural areas far from cities. This has led to significant environmental destruction through indiscriminate land clearing and slash-and-burn practices, as well as human rights issues, including indigenous land appropriation and child labor. Consequently, companies using palm oil are considered partially responsible for these issues. They must be conscious of the environmental destruction and human rights violations occurring at the end of their supply chains.

In July 2024, the EU implemented this directive related to the abovementioned issues. It requires companies of a specific size to conduct ESG due diligence on their operations, supply chains, and significant business relationships (chain of activities). Companies violating this obligation may face fines of up to 5% of their revenue. It’s important to note that ‘Due Diligence’ means fulfilling corporate responsibilities to prevent and correct negative impacts, not auditing and identifying suppliers’ wrongdoings.

3 Building Sustainable Supply Chains

So, how can companies effectively build sustainable supply chains? While it’s undoubtedly challenging, there are several approaches worth considering.

Since facing child labor issues in Pakistan during the 1990s, Nike has been committed to sustainable supply chain management. In 2021, they established a supply chain policy based on five principles, providing guidelines to their partners and regularly monitoring and improving compliance. This approach has helped reduce incidents and enhance productivity in their business operations.

Global food company Nestlé operates three initiatives under their “Cocoa Plan” in cocoa-farming countries. While it might appear to be a simple CSR activity at first glance, the program effectively improves cocoa quality while reducing child labor and environmental impact, strengthening Nestlé’s supply chain management. Since its launch in 2009, the plan has benefited 150,000 households.

Improving existing supply chains and raw materials requires substantial effort and investment. Sometimes, innovative technologies and approaches beyond conventional methods are necessary. This is where open innovation comes in—companies must share their challenges externally and collaborate with partners and universities with relevant technologies and solutions. Since 2022, Amorepacific has been running the ‘A MORE Beautiful Challenge’ to drive innovation in “Less Plastic” and “Net Zero” initiatives. This program discovers social ventures with impact potential and growth prospects, providing open innovation connections and investment opportunities. To date, Amorepacific has engaged in open innovation with ten companies and invested in seven of them.