Sustainability activities at many corporations have historically operated in a silo. When walled off from the rest of the company's activities, responsible supply chain programs offer little value. This lack of demonstrable return on investment (ROI) makes it difficult for internal program stakeholders to secure the funding necessary to improve traceability and visibility of the organization's supply chain.
Fortunately, the boardroom has begun to see the financial benefits of corporate sustainability, both within the company's own operations and those of their suppliers. While the primary goal of these programs is to pursue more ethical sourcing and environmentally friendly business practices, accomplishing these goals requires data. As a result, good sustainability practices provide enhanced visibility and traceability into the practices and processes of a company's vendors and suppliers.
To further demonstrate the ROI of such programs, the data gathered has broader applications across the entire company. Once the silo walls come down, other areas can benefit from the traceability data collected in pursuit of better overall corporate sustainability.
Consumer demand for eco-friendly, ethically sourced products continues to rise. While a strong CSR marketing program used to be enough to prove a company's commitments, consumers today want more as they hold companies accountable for the environmental and social business practices of their suppliers. In the age of the internet, a green marketing program will be considered "greenwashing" if it can't be verified through comprehensive and reliable reported data.1
Modern consumers want to positively affect the world around them, and reliable sustainability data helps companies appeal to that sensibility. When marketing teams can access and understand the data gathered from suppliers via sustainable supply chain initiatives, they can build a true brand story that appeals to consumers and drives increased sales.
Even better, these stories can help a business offset any potential costs associated with more sustainable practices. As much as 66% of consumers report a willingness to spend more money on goods and services that have a positive effect on the world.2
Corporate goals and sustainable business practices don't have to be mutually exclusive. Sustainability can affect the bottom line positively and demonstrate a good ROI in numerous ways. Some of these include:
Reduced waste. A multi-tiered approach to reducing waste in manufacturing processes can significantly lower overall materials costs for production.3
Lower energy consumption. Energy efficiency results in lower utility bills. Simply by switching to LED lighting at 6,000 stores, for example, Walmart saved hundreds of millions of dollars over a decade4, and their suppliers can see similar results.
Reduce loan interest rates. Sustainable practices signify responsibility to a bank. Companies that can back up their sustainability progress with reliable data often receive loan discounts from financial institutions.5
When walls break down and the entire business commits to sustainable and ethical operations, those practices affect the workforce positively. A company with a strong focus on sustainability tends to have a more inviting corporate culture, which can dramatically affect recruitment and retention.
As the largest generation in the workforce, millennials want to work at companies with strong environmental and social commitments. About three-fourths of millennial respondents to a 2019 Fast Company survey6 said they would take a pay cut to work for an environmentally responsible company, and 70% said that a strong sustainability plan would influence them to stay with the company long term.
Risk management and supply chain management have always gone hand in hand because the bulk of the risk for any company lies in its supply chain and logistics operations. As the world continues to recover from a global pandemic, risk management has seen the ROI offered by sustainability data. Caught relatively unaware by COVID-19 — and to a lesser degree by trade wars, ongoing natural disasters, and other disruptive events — risk management departments want as much supply chain transparency as they can get so they can predict when and where disruptions will happen and respond accordingly. The negative effects of global climate change have also fostered a closer relationship between risk management and sustainability as businesses strive to lessen the risks through eco-friendlier practices.
The SupplyShift platform provides comprehensive data in cooperation with a business's upstream and downstream suppliers and vendors. Breaking down silo walls and sharing this data company-wide facilitates the development of a truly sustainable organization.
1All in’ on Responsible Sourcing,” SupplyShift, https://www.supplyshift.net/resource/all-in-on-responsible-sourcing/
2The Sustainable CMO,” SupplyShift, https://www.supplyshift.net/resource/the-sustainable-cmo/
3How to Reduce Material Waste,” Thomas, https://www.thomasnet.com/insights/how-to-reduce-material-waste/
4How sustainable business practices help the bottom line,” Global Environment Facility, https://www.thegef.org/news/how-sustainable-business-practices-help-bottom-line
5How companies get cheaper loans for doing social good,” Bloomberg, https://www.bloomberg.com/professional/blog/how-companies-get-cheaper-loans-for-doing-social-good/
6Most millennials would take a pay cut to work at an environmentally responsible company,” Fast Company, https://www.fastcompany.com/90306556/most-millennials-would-take-a-pay-cut-to-work-at-a-sustainable-company