Long gone are the days when negative publicity over working conditions in supplier factories was the driving force behind calls for a sustainable and ethical supply chain. Because of the increasing environmental concerns threatening supply chain sustainability, businesses have never been so focused on achieving this goal – especially for retailers and consumer goods manufacturers.
A recent study from iPoint BiS based on survey of 250 U.S. and U.K. supply chain decision-makers in enterprise retail and FMCG/CPG industries highlights that 98% of firms have some level of commitment towards supply chain sustainability, with 45% confirming that they are ‘very committed.’ In fact, almost a third (30%) of businesses involved in the study have a full-time employee dedicated to working on sustainability in the supply chain.
Motivation for sustainability
One of the motivators behind this increase in commitment is consumer demand. As society has become educated on the way supply chains can impact the environment, consumers now expect more from their favorite retailers and brands. Mirroring this shift in public opinion, ruling public bodies have passed such restrictions and regulations as RoHS, ELV, and REACH to curb poor environmental practices. Businesses must adhere to these when considering supply chain strategies, and 40% of firms cited regulation as a further reason to aim for sustainability.
Another key driving factor for firms in their quest for sustainability is cost savings, with half (51%) of businesses stating this as their main objective. An understandable draw for companies, the economic benefits of going green can be huge, not only as a short-term investment but as a long-term approach.
For over three-quarters of participant firms, this commitment to change manifests itself in a clear plan and vision. While this is encouraging, the research has highlighted that only 8% of firms have met their supply chain sustainability plan, with just over half of businesses (55%) using informal, unclear measurement metrics. This shocking discrepancy in perception and reality prevents real change from being established, as environmental goals are left ambiguous and unmonitored.
Why are businesses failing to fulfill their sustainability goals?
Among the reasons given as barriers to implementing a successful sustainability strategy, 44% of firms claimed the time and effort involved were too great. While this is an understandable reasoning, well-planned moves to a sustainable supply chain should eliminate the risk of wasted time and energy. It is important to weigh the resource used to implement these changes against the positive outcomes such changes could have.
The study also revealed that 43% of respondents felt the difficulty proving sustainability’s benefits in a business case was also a barrier. There is no quicker way to kill a project than to have a poor business case. Without proper business mapping, which sets out a venture’s goals, processes and reporting, vital support from Executives and the Board might not be secured.
The final major barrier that responding firms highlighted was the cost of implementing such changes to their existing supply chain, with 41% stating they were worried that these costs would be felt by their customers.
What can be done to break down these barriers?
While resource should always be considered for new ventures, there are numerous tools now available that ease the burden of altering an existing supply chain, and external companies that specialize in ensuring businesses meet their sustainability quotas. It is important for businesses to understand that they do not have to fundamentally change their whole supply chain system.
Recent advances in technology enable the supply chain industry to move towards sustainability. Specialized software and automated system technology can be installed by organizations to help minimize risks, cut costs, and, in turn, build their reputation amongst business customers as well as end consumers. New tools can help create and implement measurable KPIs in any sustainability plan.
Using measurements that matter
Advances in technology have helped add accuracy and transparency to the sustainability sector, however, this must be narrated in a palatable way for stakeholders. It is all too easy for Chief Sustainability Officers to lose sight of the overall goal and get lost in numbers and KPIs. Use an effective strategy to translate and communicate meaning behind the data so as to avoid being obscured behind a wall of numeric complexity.
One highly important KPI to use when measuring sustainability is the International Organization for Standardization’s criteria, which over half of US firms are already monitoring. Executives and Board members are won over with recognizable targets and specific figures, which 40% of current firms are failing to utilize.
Paradoxically, saving money was the number one goal amongst managers when creating a sustainable supply chain, and yet cost was cited as a key barrier. The perception and reality of costs often differ, and retailers could make crucial savings by focusing on upstream practices from suppliers. Collaborative relationships with all suppliers ensure that knowledge is shared, products and processes are improved, and landed costs are lower.
Today, more than ever before, organizations are facing increased demands for transparency with their social and environmental performance. Our research shows that firms are committed to change, which is the right first step. Implementing the right business plan, incorporating realistic KPIs and measurable cost savings, will demonstrate the project’s viability and win the support of internal stakeholders. With the proper guidance and software, firms will be able to equip themselves with the right tools to enable them to drive supply chain sustainability throughout the organization in an effective way.
Oliver Mueller is co-founder and CEO of iPoint BiS, Member of iPoint Group and provider of software and consulting for environmental and social product compliance and sustainability.
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