Sustainability is one of the many challenges facing chief supply chain officers (CSCOs), alongside day-to-day supply chain disruptions and pervasive technology growing pains. However, when companies address sustainability within both supply chain and procurement processes, it can serve as a source of innovation, business growth and savings. According to IBM Institute for Business Value research, 62% of sustainability trailblazer companies outperform their competition in profitability.
As explored in our recent thought leadership paper, Building intelligent, resilient and sustainable supply chains, supply chains hold the potential for sustainable, circular and measurable change. CSCOs have both the opportunity and responsibility to prioritize strategic sustainability initiatives that rethink business models and sourcing networks. They can optimize for net zero, green operations and asset management. They must also consider the impact that their upstream and downstream value chain may have on human rights. Most importantly, for CSCOs to successfully drive responsible and equitable outcomes, sustainability must be operationalized, embedded in the corporate strategy and integrated across business and technology goals.
Misconceptions and reality around sustainability initiatives
How big is the corporate commitment to sustainability? In the US alone, Fortune 500 companies are willing to invest USD 22 billion per year in sustainability initiatives. But many are still struggling to make progress on their enterprise sustainability goals because of these commonly held misconceptions by some decision makers who feel sustainability initiatives:
- Are expensive and the ROI is difficult to quantify
- Require technology and business processes to be replaced
- Override existing business imperatives
- Are easily preempted by changing economic and geopolitical factors
All these misconceptions cause hesitancy, but can be alleviated when we consider:
- The real and demonstrated ability to build a business case around sustainable investments.
- Business decisions at every level—by stakeholders, customers, employees, shareholders and beyond—are increasingly informed and made with sustainability as a key factor.
- Sustainability initiatives across the enterprise—and most importantly within the supply chain—do not need to replace all that exists today. Leveraging, optimizing and upcycling what exists today must be a key design principle.
The supply chain is where net zero roadmaps and corporate social responsibility (CSR) goals can be operationalized and change with material impact for the respective industry can truly happen. Historically, supply chains have focused on low-cost delivery, with little attention to environmental and social impacts. Today’s technologies allow us to do better. There is now a quantifiable business case and clear ROI for investing in sustainable supply chains across all industries. Smarter supply chains can improve visibility, reduce waste and enable new ways of working, all of which are necessary for transformative and innovative sustainability initiatives that improve environmental, social and governance (ESG) impact. Better supply chains simultaneously address business priorities, consumer demands, employee engagement and regulatory and compliance requirements.
But how do you ensure these next-generation supply chains can support sustainable operations? Establishing a solid data foundation is a critical first step and there are several other things you need to get right:
- Leverage data, reporting and technology to provide visibility.
There’s a revolution in supply chain visibility underway. The combination of integrated data and smart technology enables real-time understanding of how your supply chain impacts the environment as well as real-time identification of human and land rights risks. Data and AI can enable supply chain professionals to make informed decisions and optimized decision orchestration can incorporate ESG impact as a key lever. This visibility is the crucial foundation in building transparency, and then trust, across your supply chain.
- Align culture and organization to help prioritize initiatives around the quadruple bottom line: people, planet, profit and purpose.
Fifty-three percent of CSCOs say their digital supply chain transformation initiatives will be the most significant area of competitive advantage during the next three years. But these initiatives only deliver value if culture and organizational processes are aligned with the high-level strategy. The 13% of companies identified as “Transformation Trailblazers”—those that get that alignment right—achieve 20% higher revenue growth than their peers.
- Look for incremental gains, too.
Sustainability initiatives should also be sustainably designed, leveraging what you have today across your people, processes and technology. Transformation does not mean rip-and-replace, it can be implemented via concurrent efforts that capture incremental, immediate improvement while building toward longer-term radical impact.
Ultimately, successful sustainability initiatives should treat sustainability as the ultimate ecosystem of interconnectedness between people, processes and technology. Therefore, sustainability solutions cannot be an afterthought nor the responsibility of a siloed team. They must be a shared responsibility across the enterprise with specific accountability for ESG performance measurements.