Spotlight on Supply Chain Sustainability: Important to Consumers, Good for Business

If your business hasn’t already embraced the concept of sustainability, what’s holding you back? Is it:

• Lack of clarity around what “sustainability” really means?
• The fact that it’s a challenging and slippery goal to measure?
• The impression that it will cost your company money without much benefit to speak of?
• The concern that it’s not a value that your customers will support—or even care about?

These and many other concerns have made some businesses and brands hesitant about pursuing sustainability initiatives. If this is the position you find yourself in, we’ve got some resources to help you take a deeper dive into this topic, including how to define what “sustainability” could mean for your organization. We’ll also share a few ways to adopt sustainability measures that can boost your revenue and keep your balance sheet in the black.

First, though, let’s talk about the benefits of pursuing sustainability—and why, if your company drags its feet on this topic, you might get left behind.

Sustainability Is Becoming Increasingly Important to Consumers

There’s been a long-held belief in the business world that customers love to pay lip service to the idea of sustainability, but they don’t actually shell out the money for sustainable products.

However, in many sectors, the data doesn’t support that belief. Instead, many brands that market their products as sustainable are seeing significant growth.

Consider, for example, this data from the research company IRI and NYU’s Stern Center for Sustainable Business. Between 2013 and 2018, 50% of growth in consumer packaged goods came from products marketed on their sustainability. In fact, products that were marketed as sustainable grew 5.6 faster than products that weren’t.

In other words, businesses that embrace sustainability can reap some rewards. For example, a study from Boston Consulting Group revealed that 70% of consumers are willing to pay a 5% price premium for sustainable products.

Additionally, those businesses that don’t might lose market share. A Hotwire survey in 2019 revealed that 47% of Internet users had stopped buying from a brand that violated their personal values, including those around the environment.

And, finally, if you happen to be a business that markets to consumers in Hawaii—as many of our customers are—this issue is even more important. Sustainability is a concept that’s deeply embedded in Hawaiian culture, likely due to the fact that early Hawaiians understood that they needed to care for the land and its resources or they simply wouldn’t survive. Malama aina, Hawaiian for “to care for the land,” was an early survival mechanism, and now it’s part of the way of life in Hawaii.

Case in point: The state has created a goal to move the state to 100% renewable power by 2045. In the words of Alan Oshima, former CEO of Hawaiian Electric Company (HECO), in Hawaii, “sustainability is a big selling point.”

So, if you happen to market to a group of consumers for whom sustainability is an important ideal, embracing it can be a way to stand out in the landscape—or ensure your own business’s survival. After all, if you don’t take advantage of this opportunity, it’s likely that one of your competitors will.

If you need any more convincing, let’s take a quick look at some of the other large players who have entered the landscape.

Sustainability Is Big Business

As the concept of sustainability begins to take hold in the business world, an increasing number of brands are getting in on the game:

• Patagonia is one of the pioneers in this category. The outfitter started introducing alternatives to destructive climbing pitons in 1972, knowing that their audience would appreciate climbing equipment that didn’t leave a permanent scar on the landscape they treasured. Their initiatives, including participation in the 1% for the planet initiative as well as their gear repair program, continue today.
• Apple recently announced that they would stop shipping iPhones with charging adaptors or wired headphones to reduce electronic waste.
• Clothing retailer Everlane’s “radical transparency” initiative has shined a light on the brand’s entire supply chain so consumers can see that their clothes are made in ethical factories.
• The Clean at Sephora storefront offers beauty enthusiasts a selection of makeup, skincare, haircare, and fragrance products that are formulated without parabens, sulfates, phthalates, mineral oils, and more.
• Unilever has committed to being carbon-positive by 2030 by eliminating fossil fuels from their operations and generating more renewable energy than they consume.
• Even Amazon, that legendary glutton of packing and shipping material, has committed to sustainability measures and rewards customers for grouping their shipments into the fewest possible packages.

Many of these companies view their sustainability as an investment, one that involves upfront costs but offers significant long-term results. As you consider sustainability initiatives within your organization, it might also help to think of sustainability measures as a move toward greater efficiency, and what manager doesn’t want greater efficiencies within their supply chain?

Now that we’ve discussed some of the benefits of sustainability and seen some examples of how other organizations are putting it into practice, let’s talk about the first steps toward establishing a sustainability initiative at your organization.

1. Decide What Sustainability Means to Your Organization

At the start of this article, we mentioned that vagueness around the meaning of “sustainability” holds many organizations back from moving forward. That’s why it’s important to start by deciding how your organization will define the concept.

One of the most frequently used models involves three areas of focus:

• Environment – This is probably what most people think of when they hear the word “sustainability.” This area focuses on a company’s environmental impact, including things like their resource usage and carbon footprint.
• Social Responsibility – Companies who make pledges in this area acknowledge their responsibility toward the people who come in contact with their organization. That includes both the direct employees, as well as those who, for example, work for suppliers and handle logistics. Social responsibility can also extend to the communities surrounding these businesses.
• Economic – This area focuses on ethical business practices, such as maintaining compliance with local and federal regulations and good corporate governance.

To give you some additional perspective, it’s also worth noting that the UN divides its Ten Principles of the United Nations Global Compact into four areas:

1. Human rights
2. Labor
3. Environment
4. Anti-corruption

Which should your organization adopt? The one that matches up to your company’s mission and vision for itself. If everything isn’t aligned, it will be difficult to make significant progress within your organization.

You might find it helpful to research other organizations in your industry, as well as others that you come in contact with. They might offer you some useful benchmarks to guide your thinking.

Then, once you have defined what “sustainability” means to your organization, do an audit so you understand where you’re starting from. That way, you’ll know what it will take to get where you want to go.

2. Train Your Teams

Once you’ve defined what sustainability means within your organization, creating a truly meaningful initiative at your company will likely require training your employees. In fact, during a Harvard Business Review study of 52 procurement officers, all of them felt that they needed more training to pursue supplier sustainability initiatives. (More on supplier sustainability in a moment!)

As with any significant change within an organization, you’ll need to invest in the team you task with executing this plan. In addition to giving them the knowledge and resources they need, they’ll also need additional bandwidth to devote themselves to this project. This is especially important when you start looking at the complexity of the work in front of them, which we’ll tackle next.

3. Understand the Supplier Challenge

This is the roadblock that stops some companies in their tracks. It’s one thing to initiate changes toward sustainability within your own organization. It’s another thing to start looking at the operations of your first-tier suppliers—and their suppliers. After all, how meaningful is a sustainability initiative if members of your supply chain act in direct contrast to the principles you’ve set up?

Considering that developing relationships with suppliers can be one of the biggest challenges within supply chain management, adding sustainability practices into the mix can feel like an added layer of complexity.

This is where training (and research!) comes in. Case studies from other organizations can spark ideas and help you overcome others’ missteps. For example, New Balance, the athletic shoe company, decided to reduce the number of suppliers it works with to meet its sustainability goals. Maybe that’s a strategy that will work for your organization—and maybe not.

The best way to find out is to give your team the chance to do the training, the research, and the time they need to come up with options for evaluation by your executive team.

4. Set Goals, Measure, Rinse, and Repeat

As with any aspect of your supply chain, once you decide to pursue an initiative, it’s important to set metrics to measure performance—and embrace the process as one of continuous improvement. You’ll need to make regular audits to evaluate the impact of your sustainability initiatives on all aspects of your business, even the unexpected ones.

Depending on your industry, you might get a leg up from some of the frameworks that have already been developed, including:

• The Higg Index, a set of tools developed by the Sustainable Apparel Coalitionto enable brands and retailers to accurately measure and score sustainability performance.
• The OECD Sustainable Manufacturing Toolkit, which includes a set of indicators to help businesses measure their environmental performance.
• The Together for Stability (TfS) Framework, designed to help chemical companies assess the environmental, labor, ethical, and sustainable procurement performance of their suppliers.

By researching whether a sustainability framework has already been developed for your industry, you can significantly shortcut some of the background research around adopting sustainability measures at your company.

And, finally…

Step 5: Communicate Early and Often—Both Internally and Externally

As with any organizational change, it’s important to clearly communicate all aspects of your sustainability initiative to your internal team members. That way, you’ll get the necessary buy-in you’ll need to execute this large-scale change. Additionally, your team will be well equipped to make the day-to-day decisions that support your initiative.

It’s also important to make sure you communicate externally with your customers. As we mentioned at the start of the article, increasingly, customers are choosing businesses that initiate sustainability measures. While good deeds are their own reward, by sharing your sustainability measures with your customers, you can enjoy the benefits that come along with it, including price premiums, an edge in a competitive marketplace, and more.

Making Sustainability Sustainable for Your Organization

Of course, these five steps are just the first toward implementing a sustainability strategy at your organization. However, at the very least, we hope we’ve given you some food for thought as you decide how your organization will approach sustainability over the next few years—and beyond.

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Looking for more efficient strategies for your supply chain? Our experts would be happy to help. Just reach out to us for a complimentary consultation, and we’ll take a holistic look at your supply chain—together.