Consumers are more aware of sustainability in the supply chain and it presents an opportunity for companies to gain a competitive advantage.
When the subject of sustainability or CSR comes up, many executives still shrug their shoulders today. They have tried to some extent or the other, or so they say, but creating a responsible supply chain has proven to be a major challenge for most organisations. It starts – and you will recognise this if you have ever been involved in sustainability activity – with building a business case, as the return on investment is often not quantifiable, at least not in the short term. And for companies that are cost-focused, that would be a problem in itself.
But perhaps the biggest challenge yet is getting to grips with the complex topic. In order to become more responsible, we first need to understand and measure the behaviours within the extended supply chain, and then the impact they have on the environment and people across the globe. But how and where do we start this journey? Not knowing the answer to these questions is possibly what may have led to prematurely pulling out of the challenge. Or, perhaps even worse, some companies claim to have undertaken sustainability or CSR efforts, when in reality all they have done is create a nice little PR story to make them look good in public eye.
But consumer pressure, fuelled by social media, is driving organisations to do more than pay lip service to the global socio-environmental impact of their supply chains. Just imagine the ‘power’ a single consumer has in that sense nowadays. One criticism or accusation on Twitter can rocket on all sorts of social media platforms within hours, and then get a brand name into negative press overnight.
A recent Procurement Leaders study entitled Consumer Views of the Global Supply Chain and Businesshighlights that 80% consumers think it is wrong when companies do not take responsibility for the unethical behaviour of their suppliers. But there is another dimension to it: consumers are not aware of just how complex supply chains are, or how many suppliers a company may have, so whenever a CSR or sustainability scandal comes to surface, they will likely blame the ultimate brand, not the tier-two or three supplier who is the source of the problem.
But consumers are not only becoming more sensitive towards sustainability; they also show an increasing willingness to pay a premium for more sustainable products and services, and particularly younger consumers. So here, sustainability clearly offers a seemingly lucrative business opportunity. How many of us have spotted this before, or allowed themselves to embrace that idea?
A new study Beyond Supply Chains – Empowering Value Chain, jointly published by The World Economic Forum and management consulting firm Accenture, revealed that some of the world’s largest companies, including SABMiller, Nestlé and UPS, are enjoying increased revenues, reduced supply chain costs, lower carbon footprint, and reduced operational risk as a result of implementing a number of more sustainable practices within their supply chains.
The analysis identified a total of 31 practices that can help companies achieve the so-called ‘triple supply chain advantage’ of increased revenue, reduction in supply chain cost and added brand value. These practices span product design, sourcing, production and distribution, through to the end of the product life cycle.
Companies included in the analysis improved their competitiveness through increases in revenue of 5-20%, a reduction in supply chain costs of between 6-16% and a boost in brand value by between 15-30%. These are results that would delight senior management, and yet the success stories are far and few between (especially if we look at the company names involved).
If we continue looking at sustainability from a pure risk mitigation perspective, we will never get anywhere. What is required is a major shift in thinking. It starts with the willingness to make investments (both in people and infrastructure/technology) and then finding ways of being able to measure results in non-traditional ways. But most importantly, we need to finally embrace sustainability as a business opportunity. It will help companies gain and maintain competitive advantage going forward, and that’s the way to look at it.
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