The sustainability imperative: Why it's time for action
Skill Dynamics surveyed more than 200 supply chain and procurement professionals on both sides of the Atlantic, about their organisations’ sustainability initiatives, practices, policies and the barriers they may be experiencing in achieving their goals.
As organisations grapple with sustainability concerns, they are turning to their procurement and supply chain teams - and their wider relationships in the supply chain. From carbon emissions through to packaging, and from the circular economy through to water use, suppliers can have a huge impact on businesses’ sustainability performance.
For example, CO2 emissions in the supply chain – so-called ‘Scope 3 emissions’ – can make up 95% of a business’s overall emissions footprint.
Procurement and supply chain has the greatest exposure to, and interaction with, those suppliers, and serve as the communications conduit between suppliers and an organisations’ own design and development teams.
Catherine Weetman, head of Rethink Global and a contributor to Skill Dynamics’ report said businesses have to grasp the nettle and start taking sustainability seriously.
“The planet is heading for multiple tipping points that pose major risks to businesses in terms of resource constraints and resource availability, such as lithium and rare earths. Climate change is another risk for key materials and foodstuffs: natural rubber, for instance, is under threat,” she said.
What are organisations doing?
The good news is that most organisations are doing something with 97% implementing sustainability initiatives. The most popular is reducing waste (63%), followed by reducing packaging (58%), reducing SU plastic (50%), and energy (48%).
More than half (61%) are going even further by considering the circular economy and looking at secondary use in the product design stage.
While this is all positive news, there is a suspicion that organisations are cherry picking their sustainability activities, Sam Pemberton, CEO Skill Dynamics questions.
“Just 41% of respondents reported having initiatives in place to reduce CO2 emissions. Are businesses really trying to be green, or are they picking and choosing easy-to-do sustainability initiatives that will look good, but not necessarily achieve much?” he said.
Barriers to progress
The majority (81%) of procurement and supply chain professionals feel comfortable in playing a role in sustainability and think they can contribute to making a difference. So what is stopping them from adopting more demanding sustainability targets?
Entrenched business models that place an inadequate premium on sustainability is a major factor the research found.
Almost two-fifths (37%) of respondents reported that their organisations prioritise cost over sustainability in their decision making. Another 31% said driving efficiencies and growth trumped improving sustainability.
A key strategy for making progress is to link success to reward, however only 25% of respondents said that their rewards were linked to achieving sustainability targets.
Certainly it can be harder to measure the impact of sustainability achievements than it is for productivity and cost reduction - and this results in sustainability initiatives getting bogged down in measurement and approval framework. If initiatives don’t have tangible ROI measures, they struggle to gain traction so supply chain and procurement professionals are in a tricky position.
One-third of respondents reported feeling overwhelmed by the task of improving sustainability, which could be indicative of a lack of skills, knowledge and training. This is compounded by more than two fifths (43%) of respondents, agreeing that they find it difficult to keep track of sustainability legislation.
However, there are reasons for optimism with 59% of respondents ‘encouraged to prioritise sustainability over price in decision making’, while 65% agreed that ‘leaders accept that improving sustainability requires compromises and trade-offs in other areas, such as price’.
A further 60% of respondents said their leaders were willing to sacrifice some profit to improve sustainability.
Changes for good
Skill Dynamics recommends five actions to make improvement on sustainability:
1. Invest in training – with 43% of procurement and supply chain professionals saying they find it difficult to keep up with changes in the sustainability legislation, ongoing training can help them feel more in control
2. Partner with organisations to measure and manage environmental impact – only 54% or organisations have sustainability targets. Companies need to know the benefits of sustainability, or they can’t build the case for them. Relevant third parties have the skills, tools, measurement systems and experience to assist.
3. Start small and build – there are on average four initiatives in each organisation. Make sure that what you are doing is working before escalating
4. Collaborate - moving forwards with others is easier than making the journey alone. Yet 41% of respondents identified supplier resistance as a barrier to progress, and 50% of respondents commented on the difficulty of obtaining an accurate view of sustainability all the way down the supply chain. Developing soft skills to improve collaboration is important.
5. Change KPIs to incentivise – linking pay directly to sustainability goals will help improve performance
It’s only just begun
Organisations are on a sustainability journey but need to ask more searching questions, particularly around CO2 emissions. Targets have to be meaningful and not just easy to achieve.
Overall there needs to be a better organisational framework to harness the undoubted enthusiasm for sustainability among supply chain professionals.
Aligning the organisation and its supply chain behind clear, measurable targets is a start and organisations can build from there.