Going Green Part I: Corporate Sustainability
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“Supply chain sustainability” is the management of environmental, social and economic impacts and the encouragement of good governance practices, throughout the life cycles of goods and services.
Supply Chain Sustainability (definition)
United Nations Global Compact
The first corporate social responsibility statement was published by Dow Chemical in 1996. Since then, how have supply chain leaders and corporate sustainability leaders defined supply chain initiatives? What are their priorities? Where are the commonalities? Are they aligned? How has the focus on carbon reduction, water usage minimization, zero waste, conflict minerals, and labor practices changed supply chain? What has it meant to supplier development? We wanted to know, so we worked in concert with GreenBiz to get answers from 64 supply chain leaders and corporate sustainability officers.
Within an organization, such efforts can be known by many names: the green supply chain; the good citizenship report; Corporate Social Responsibility (CSR) policy; or fair trade. While programs can have different names, their goals are focused on creating a better balance between the corporation’s efforts to sustainably manage profits, people and the planet. For many, this can be a stark contrast to the traditional supply chain goals of the right product at the right place at the right time.
To meet the stated corporate sustainability goals, it is critical for supply chain and corporate sustainability teams to work well together. The success of one depends on the success of the other. Over the last ten years, corporate sustainability goals have transformed supply chain objectives causing companies to rethink their definitions of supply chain excellence. Much is in flux.
While the importance of these programs has grown over that period, in recent research we find two disconnects. The first is the ability of the company to meet stated goals based on the scope of its activities. As shown in figure 1, 92% of companies surveyed have made a public statement or declaration of goals and policies for corporate sustainability. It has also grown in importance to the definition of the brand promise. In fact, today, 74% of manufacturers connect their success in sustainability to their brand statements. For many, the goal is to use sustainability as a brand advantage.
But many companies’ sustainability programs are vulnerable. The greatest impact on corporate sustainability (often 60% to 65% of resources consumed) is outside the company’s four walls; yet, as shown in figure 1, only 20% of companies are focused on the entire value network (from the customer’s customer to the supplier’s supplier). While the most common focus is on the enterprise, the greatest corporate risk lies outside the four walls of the enterprise, and companies are staking both their corporate and brand reputations on their abilities to deliver.
The second disconnect is in decision making. Many of the decisions are ad hoc. As a result, when given a choice between supporting supply chain or corporate sustainability policies, as shown in figure 2, over 50% of companies will choose the supply chain priorities. The primary drivers of the decisions are profitability and customer service.
In virtually any endeavor, progress is easy at first. Traditional supply chain and sustainability objectives align closely in the beginning. As companies adopt CSR programs, initial results reduce costs and improve waste, and all is well between the two groups.
However, as the programs become more systemic, especially in the area of supplier development, pressures on program alignment increase. For example, the most sustainable decision on a supplier may be higher cost. Companies are currently struggling with the right mechanisms to get balance and alignment between the two programs.
Ironically enough, a challenge many organizations face seems to reside in how to sustain sustainability programs.
What do you think?
© 2013 Supply Chain Insights LLC. All rights reserved. Supply Chain Insights LLC is focused on delivering independent, actionable and objective advice for supply chain leaders. A company dedicated to research, turn to us when you want the latest insights on supply chain trends, technologies to know and metrics that matter. Contact Lora Cecere with questions on this post.