Green supply chain choices make for marketing wins

Over the past cou­ple of years, sup­ply chains have been more of a nec­es­sary evil than a valu­able part of the busi­ness. Indeed, at their worst, they’ve been a source of sig­nif­i­cant headaches for busi­ness­es, from the sud­den stop­pages of the Covid lock­downs to the com­po­nents and mate­ri­als short­ages expe­ri­enced in their wake – and even var­i­ous logis­tics night­mares, such as the Suez Canal block­age.

Unfor­tu­nate­ly, the same would seem to apply to sus­tain­abil­i­ty too. Here, sup­ply chains have made them­selves some­thing of a nui­sance when it comes to added require­ments around envi­ron­men­tal account­ing (for the likes of scope-three emis­sions), social due dili­gence (for mod­ern slav­ery or human rights abus­es) and organ­i­sa­tion­al trans­paren­cy (for sanc­tions com­pli­ance, for instance). It’s all an extra bur­den on the shoul­ders of oper­a­tions pro­fes­sion­als. 

But beyond these pres­sures, some switched-on sup­ply chain exec­u­tives are real­is­ing that their every­day deci­sions can be an asset. They’re find­ing that not only do respon­si­ble sourc­ing choic­es help to cre­ate long-term oper­a­tional resilience but, cru­cial­ly, they can also be a valu­able point of dif­fer­en­ti­a­tion, help­ing busi­ness­es to attract and retain cus­tomers. 

How to make your green supply chain work for you

For one thing, the costs of fail­ing to get your sup­ply chain’s green cre­den­tials work­ing in your favour are plain enough to see. As many as 76% of con­sumers claim they would dis­con­tin­ue rela­tions with com­pa­nies that treat employ­ees, com­mu­ni­ties and the envi­ron­ment poor­ly, accord­ing to PwC. And research from the Mass­a­chu­setts Insti­tute of Tech­nol­o­gy indi­cates that con­sumers are will­ing to pay up to a 10% pre­mi­um for prod­ucts with greater sup­ply chain trans­paren­cy. It’s all evi­dence of con­sumers align­ing their spend­ing with their val­ues where ESG is con­cerned. 

The faster busi­ness­es recog­nise this – and appre­ci­ate the fact that a green­er sup­ply chain can serve as a cus­tomer acqui­si­tion tool – the faster their teams can start adopt­ing these prac­tices. And some are already doing so. One sur­vey by EY found that eight out of 10 sup­ply chain exec­u­tives active­ly con­sid­ered nat­ur­al resources use, decar­bon­i­sa­tion and eth­i­cal sourc­ing last year. And among those, 32% had already expe­ri­enced an increase in cus­tomer loy­al­ty. A fur­ther 44% expect to see a finan­cial return from this focus on sus­tain­abil­i­ty with­in the next three years. 

Glob­al food giant Danone is one exam­ple of a busi­ness where the bot­tom line and sus­tain­able sup­ply chain man­age­ment already go hand in hand. As respon­si­ble sourc­ing direc­tor Gem­ma Brier­ley explains: “We have a respon­si­bil­i­ty to respond to the shifts in our cus­tomers’ pri­or­i­ties as they call for more sus­tain­able prod­ucts. With bet­ter trans­paren­cy and man­age­ment prac­tices, we can antic­i­pate risk hotspots and poten­tial dis­rup­tions, and meet the increas­ing demands for sup­ply chain due dili­gence.”

Supply chain professionals need new ESG skills

Yet despite the rise of cli­mate con­scious­ness among con­sumers, pro­cure­ment pro­fes­sion­als haven’t tra­di­tion­al­ly been trained to con­sid­er how their sup­ply chain deci­sions affect cus­tomer engage­ment and loy­al­ty. So, what would it take to recon­fig­ure their skills to address these new demands? 

Updat­ed train­ing pro­grammes and a change in the dynam­ics between inter­nal teams – to work more close­ly with the likes of mar­ket­ing, sales and prod­uct teams – would be a good place to start, but might be eas­i­er said than done. Amid infla­tion, ongo­ing geopo­lit­i­cal tur­moil, cli­mate change wor­ries and Brex­it-relat­ed chal­lenges, many sup­ply chain man­agers are hav­ing to focus on tra­di­tion­al skills in ven­dor and project man­age­ment, mar­ket dynam­ics and logis­tics to meet key tar­gets. 

But, as PwC oper­a­tions trans­for­ma­tions part­ner Bar­ry Mid­dle­ton explains, there is an impor­tant skills crossover here. “Man­agers must adopt a famil­iar risk-based approach when it comes to sus­tain­abil­i­ty, and then con­tin­ue to upskill,” he says. 

That extra sus­tain­abil­i­ty train­ing is rapid­ly becom­ing an essen­tial invest­ment. A sur­vey from sup­ply chain plat­form Avet­ta found that ‘a lack of in-house under­stand­ing of the impor­tance of ESG issues with­in the sup­ply chain’ is now the great­est bar­ri­er to incor­po­rat­ing sus­tain­able prac­tices, fol­lowed by a ‘lack of sup­pli­ers’ under­stand­ing of ESG issues’.

It may help to begin by focus­ing on a few spe­cif­ic aspects of sup­ply chain sus­tain­abil­i­ty. Torsten Licht­e­nau, a sus­tain­abil­i­ty spe­cial­ist at man­age­ment con­sul­tan­cy Bain & Com­pa­ny, advis­es that man­agers in this more “ESG-con­scious era” should pri­ori­tise the skills required to address emis­sions and cli­mate change con­cerns – specif­i­cal­ly, under­stand­ing how to opti­mise qual­i­ty, price and car­bon foot­prints in their pro­cure­ment deci­sions. Not only is this a more man­age­able task than tack­ling every­thing envi­ron­men­tal, but it should also pro­duce some con­cise and tan­gi­ble results which can then be used by the mar­ket­ing team.

The train­ing for sup­ply chain pro­fes­sion­als doesn’t end there, though. Licht­e­nau adds that these envi­ron­men­tal capa­bil­i­ties must be in addi­tion to an aware­ness of social and gov­er­nance issues, par­tic­u­lar­ly those relat­ed to cor­rup­tion, work­ing con­di­tions and human rights abus­es.

Danone has done sev­er­al things to help its sup­ply chain man­agers nav­i­gate this dizzy­ing mix of require­ments, accord­ing to Brier­ley. “We devel­oped in-house online train­ing pro­grammes and inte­grat­ed them into our sourc­ing acad­e­my,” she says. “And we have part­nered with plat­forms such as Sedex and Eco­Vadis to pro­vide train­ing for our buy­ers.”

Why it pays to forge cross-department relationships

All this train­ing may end up giv­ing pro­cure­ment pro­fes­sion­als a whole new per­spec­tive on their role, sug­gests Mar­tin Roberts, direc­tor of dig­i­tal learn­ing pro­grammes at the Cam­bridge Insti­tute for Sus­tain­abil­i­ty Lead­er­ship. “Inte­grat­ing envi­ron­men­tal and social val­ue cre­ation across func­tions where pre­vi­ous­ly the focus was on finan­cial val­ue alone requires a shift in mind­set and an inno­v­a­tive approach to finance, invest­ment and mar­ket­ing strate­gies,” he says. 

That change of out­look could bring sup­ply chain man­agers into con­tact with some new col­lab­o­ra­tors. Licht­e­nau explains that sus­tain­able sup­ply chains can be a real point of dif­fer­en­ti­a­tion for prod­uct and mar­ket­ing teams to make the most of, assum­ing they have the right infor­ma­tion to work with. 

“It requires the sup­ply chain to work with the finance and sus­tain­abil­i­ty func­tions to put the track­ing and report­ing in place to assert the sus­tain­abil­i­ty cre­den­tials,” he says. “They should then work with sales and mar­ket­ing to embed the sus­tain­abil­i­ty fea­tures into the val­ue propo­si­tions and ulti­mate­ly the sales motion.”

For this process to work, though, sup­ply chain man­agers can’t afford to view sus­tain­abil­i­ty as a tick-box exer­cise, or to think of it as being sec­ondary to sim­ply keep­ing the show on the road. That kind of atti­tude will impress no one. 

As Roberts points out: “Mea­sur­ing and report­ing against ESG met­rics may be a first step, but on its own it will not trans­form a com­pa­ny into one that has a resilient sup­ply chain or that is seen by its cus­tomers and investors as man­ag­ing envi­ron­men­tal and social risks.” 

Only a gen­uine­ly proac­tive approach to sup­ply chain sus­tain­abil­i­ty can deliv­er that kind of trans­for­ma­tion. 

Over the past couple of years, supply chains have been more of a necessary evil than a valuable part of the business. Indeed, at their worst, they’ve been a source of significant headaches for businesses, from the sudden stoppages of the Covid lockdowns to the components and materials shortages experienced in their wake – and even various logistics nightmares, such as the Suez Canal blockage.

Unfortunately, the same would seem to apply to sustainability too. Here, supply chains have made themselves something of a nuisance when it comes to added requirements around environmental accounting (for the likes of scope-three emissions), social due diligence (for modern slavery or human rights abuses) and organisational transparency (for sanctions compliance, for instance). It’s all an extra burden on the shoulders of operations professionals. 

But beyond these pressures, some switched-on supply chain executives are realising that their everyday decisions can be an asset. They’re finding that not only do responsible sourcing choices help to create long-term operational resilience but, crucially, they can also be a valuable point of differentiation, helping businesses to attract and retain customers.