Sustainability a business advantage when embedded in supply chains

Building a sustainable supply chain within an organization may start with the desire to implement a strategy, but companies that find the most success are those that mandate change.

During a presentation at this year’s Association for Supply Chain Management (ASCM) CHAINge conference in Columbus, Ohio, Laura Rainier, senior director and analyst for Gartner’s supply chain group, said organizations are facing a multitude of challenges when it comes to building sustainable supply chains. These include geopolitical issues and tariffs, which can create a “rebuilding while burning” scenario.

“We’re being asked to rebuild houses today when we have supply chains on fire,” said Rainier. “We have geopolitical issues. We’ve got tariffs. We’ve got Red Sea issues. We’ve got a whole host of disruptions today, and yet what we’re asking you to do is rebuild your house at the same time that your house is on fire.”

Rainier said the key to organizations seeing progress with a sustainability framework is to create a mandate, as those that do outperform others.

“Supply chain professionals really are the keys to this because you’re problem solvers. When you’re given a task, you tackle it,” she said. “If you want to make a difference in your organization, give it to a supply chain professional.”

There are three key elements that can help strengthen a supply chain mandate, the first being that a company’s sustainability goals are strategically aligned with its core business objectives.

“When sustainability contributes to other goals and benefits, it’s more likely to scale. Our research shows that companies with sustainability mandates are much less likely to trade off sustainability for other priorities,” said Rainier.

Ensuring the framework is implemented company-wide by establishing clear processes, policies and governance is also important, as is engaging employees through two-way communication.

“People across the organization care and want to contribute, but there’s a huge lack of understanding of how to do it,” said Rainier. “People want to be part of the solution, so when we provide clarity and guidance around how to do that, we can harness that desire.”

Nicolas Gordon, director of customer ESG for CMPC, also believes making sustainability a mandate is an important step toward companies asking questions they might not otherwise have asked.

“You can do things that are really good for business and the bottom line, and at the same time, if you plan well, you can really deliver some significant sustainability benefits,” he said during an ASCM panel discussion.

Zal Phiroz, a professor at Michigan State University and Harvard, added that it makes operational sense for companies to be sustainable.

“When you look at the intersection of innovation, sustainability and supply chain, you get some interesting conclusions,” he said, citing detergent production and packaging as an example of how a product has become more sustainable over the years.

“When you bought detergent at a retailer, you could buy a big container, and then around 2002, liquid detergent became the norm. It was a bottle of liquid detergent and about a cup of detergent for a load,” Phiroz said. “Around 2006, I finished a project at P&G in which we concentrated the actual liquid, so you only needed that much and the container was that size, and it still allowed a user to wash the same number of loads. What was interesting is that it was innovative because it reduced the amount you actually needed to buy – the size of the product was much smaller, but it also allowed the consumer to get the same number of loads of laundry from a smaller bottle.”

Phiroz said the change resulted in less plastic being used for packaging, transportation savings across the supply chain, and retailers able to stock more on shelves because of the space savings.

“So by looking at various innovative strategies, you’re not necessarily going against sustainability,” he said. “In many cases it actually goes hand in hand with business strategy and is a win-win situation.”

Not a new concept

The term “sustainability” has been around longer than many people realize. As Deborah Dull, founder of the Circular Supply Chain Network, explained, too often companies assume the adoption of sustainability comes at all costs and is not good for business. However, the origin of the term was to protect a company’s operation.

“When we think about the risks we need to manage, we talk a lot about resilience these days – it’s material risks, process risk, people risk,” she said. “We could say geopolitical, but at the end of the day, that ends up coming down to our inventory, our inputs, our people, or information.”

Dull said the reality is that sustainability has had its ups and downs over the past few years, and currently it is experiencing a backlash.

“There is an anti-ESG movement across the country and others as well, and that makes it a little tougher because sometimes the sustainable choice is the right business choice,” she said. “Where renewable energy is available, it’s almost always cheaper than traditionally created energy, but sometimes we have this mindset shift that we need to manage with stakeholders and decision makers. So often we end up doing sustainability by accident, and maybe without using that word. At the end of the day, it’s often the best business choice.”

Rainier agreed with that sentiment, but added that data shows sustainability is rising as an organizational priority, which was not the case a decade ago.

“We are in a moment where maybe there’s less incentive to say and more incentive to do,” she said. “It is a challenging time for supply chain sustainability strategy, but there is actually a real opportunity to tighten focus, to become better.”

Despite the backlash, Phiroz said sustainability is often used as a marketing tool to generate goodwill and demonstrate how responsible a corporation is being.

“In other words, the main goal, if I’m being perfectly honest, of a company saying their main priority is to take responsibility to ensure they are being ethical and as sustainable as they can, with secondary goals to manage profits and make sure operations move the way we want them to move, is usually flipped,” he said.

“The tariff piece is actually one of the best catalysts for the circular conversation that I’ve seen in the last decade.”

– Deborah Dull, founder of the Circular Supply Chain Network

Circling back

Circularity is another large part of sustainability.

As Dull explained, circularity is the process of finding inputs that do not require further extraction from the planet.

“The reason we do that, in my perspective, is as a risk mitigator,” she said. “We are running out of materials on the planet. As far as we know, we have less than 50 years of metals that we need to use in our electronics to run society.”

Dull pointed to the auto sector as a good example of where she sees industry employing circularity to be more sustainable.

“When OEMs started putting their stamp of approval on certified pre-owned vehicles, we started buying those. Now we’re starting to see certified pre-owned parts,” Dull said, using Mercedes as an example. “They are working with scrap yards and processing their own parts, because sometimes you need a branded part but you can’t afford it new. So if you can spend less money, get it today, and it’s certified by the manufacturer, you get less wear, use less energy in operations, and put that material back into use with lower carbon emissions.”

Ironically, Dull said that since the implementation of higher tariffs, conversations around circularity have also increased.

“When you have all these tariffs, the business case for keeping local remanufacturing starts to look pretty attractive,” she said. “The tariff piece is actually one of the best catalysts for the circular conversation that I’ve seen in the last decade.”

Attracting new talent

Regardless of popular theory, it is not only younger generations that care about working for a company that prioritizes sustainability.

As Dull emphasized, though there is a trend with the Millennial and Gen Z workforce, statistics show that every age group cares.

“The numbers are quite clear that people want to work for companies that align with their values,” said Dull. “If you had a choice between two job offers with the same package, and one did great things for the world and the other didn’t, it’s a pretty obvious choice.”

But as Dull pointed out, companies also play a role in ensuring their employees are aware of the work they do when it comes to sustainability.

“One of the gaps we have in our industry is, I don’t think we’re told very often that what we do makes a difference,” she said. “The decisions we make every day have a material, physical impact in the world. They impact people and humans around the world.

“Sustainability is sustaining and operating as we do today, but we use more than we should today. So if we sustain what we’re doing now, we’re using two planets’ worth of raw materials for our society, and so we have to start thinking about regeneration so that tomorrow’s supply chains are actually better than today’s.”