Supply Chain

Driving Value in the Purpose Economy:
It Starts with Supply Chain

Own your sustainability strategy and vision, and make it real. The impact of executing through the supply chain drives growth and company valuation, and protects your brand and society.

Sponsored Content | / This article is sponsored by Ecovadis | By Pierre-Francois Thaler | Published 4 years ago | About a 3 minute read

Image: UCLG

Big business is making big moves when it comes to sustainability. As evidenced by 2019’s monumental Business Roundtable declaration that redefined corporate purpose; and more recently, Blackrock pledging to ditch investments with high sustainability-related risks, corporate accountability for social and environmental stewardship is building.

With more pressure to serve a purpose beyond quarterly earnings and growth, today’s business leaders are prioritizing the creation of long-term, sustainable value. And to make it real, they’re turning their focus to the supply chain, as highlighted in our recent e-book, “The Substance of Purpose.”

A lever for accountability, purpose and profitability

Committing to purpose benefits both society and the bottom line — it’s not an either/or scenario. 88 percent of studies found companies that adhered to social or environmental standards showed better operational performance, with 80 percent showing a positive effect on stock performance (Morgan Stanley).

But this dual success requires engagement from all stakeholders — especially those within the supply chain. Most enterprises spend 50-70 percent of revenue in the supply base, making it the single most crucial medium for reducing risks, driving innovation; and creating real, networked impact. When suppliers are engaged on sustainability issues and work with enterprises to resolve concerns and address risks, all key stakeholders — customers, investors, the C-suite, sales, marketing, finance, human resources and the surrounding communities — feel the positive trickle-down impact.

The results are clear: Companies with mature sustainable procurement programs reap several long-term benefits — risk mitigation (88 percent), improved procurement metrics (53 percent), cost savings (35 percent), innovation (29 percent) and more.

The SDGs and sustainable supply chains

Many of today’s business leaders have committed to purpose by aligning overall corporate strategy with the United Nations’ Sustainable Development Goals (SDGs). Moving the dial on sustainability within this framework and driving real, tangible and profitable change starts with having management systems that limit exposure to risks caused by a globalized supply chain.

Responsible procurement practices help companies minimize risks such as forced labor and slavery, dangerous working conditions, environmental waste and information security lapses. When implemented beyond compliance, they form a foundation of business practices that can drive positive impact toward the SDGs — such as protecting the natural environment, assuring clean water and energy supply, supporting quality education, ending poverty and hunger — and create shareholder value in the process.

Purpose- and value-driven sustainable supply chain and procurement strategies ...

actively engage suppliers: Partner buy-in and ownership over sustainability performance is instrumental to the success of sustainable procurement initiatives.
leverage proven technology: Picking tools and methodologies for assessing supplier sustainability performance that offer evidence and validation of sustainability practices is paramount.
benchmark progress: Customizing metrics and key performance indicators (KPIs) for location, industry and company sizes keeps all parties accountable and offers a roadmap to results.
set clear expectations: Making measurement transparent across the team and business and emphasizing continuous improvement encourages better performance.

Companies that act on the SDGs and execute these strategies inherently have higher levels of executive engagement and tend to substantially improve their sustainability performance among their suppliers.

There's no time to waste

The world’s top business leaders view the supply chain as a competitive differentiator for driving market-leading results in the purpose economy — and professionals at all levels have the power and influence to shape their company’s purpose and roadmap. Two examples of CPOs who are driving purpose through their own organizations are Thomas Udesen at Bayer and Bertrand Conqueret at Henkel. They even went one step further to co-found the Sustainable Procurement Pledge.

While many start their journeys with commitments to the SDGs — which serve as a great guidepost for getting sustainable procurement programs off the ground — or with other industry collaboratives, there’s no right or wrong place to start.

Own your sustainability strategy and vision, and make it real. The impact of executing through the supply chain drives growth and company valuation, and protects your brand and society.