Supply Chain
New Understanding Around the ROI of a Sustainable Supply Chain

When it comes to developing sustainability programs, most brands begin by adding: by introducing “green” practices to their workplace or a recycling component to their manufacturing process. But to truly have impact, sustainability practitioners should create purpose that is built-in, not bolted-on, across both business and brand strategy.

How do we shift from bolting on sustainability to building it into the business? And what inspires this shift in the first place? To truly build in sustainability, we must look at the back-end of product creation: the supply chain.

And to best understand the drivers and ROI of developing a sustainable supply chain, Ketchum’s Monica Marshall, Director of Sustainability and Social Impact; and Carol Cone, CEO of Carol Cone ON PURPOSE (CCOP), led a conversation at SB’16 San Diego with Jean Bennington Sweeney, VP of Environmental, Health, Safety, and Sustainability at 3M; and Rob Zimmerman, Director of Marketing for Sustainability at Kohler.

What motivates sustainable supply chain creation?

Despite the strong consumer desire for purpose-led brands, it’s not the main driver for manufacturers to develop sustainable supply chains. Data from Ketchum’s Return on Purpose survey, conducted with CCOP, shows that brands improve their supply chains in response to corporate reputation and competitive advantage challenges.

For example, Kohler and 3M offer two different market models: One is through wholesale channel distribution, and the latter is direct-to-consumer. Zimmerman explained that although they sell retail through Home Depot and Lowe’s, Kohler directly targets consumers to influence their purchasing intent, more so than competing brands. In this way, Kohler differentiates with a competitive advantage so that consumers visit the store with their product in mind, rather than “a” toilet or “a” sink. Positioned as a luxury product, Kohler leverages its premium status to talk about sustainability as a desired functional benefit – as one that should be expected of a high-quality brand.

“To be a leading retailer in the 20th century, you have to integrate sustainability into the value offering and the business model,” Zimmerman said. “It’s the right thing to do, the right thing for business – and we have to be ahead of consumers asking for it.”

How do brands measure the return on business or return on reputation of sustainability?

Sweeney shared that 3M has publicized its sustainability goals for more than 25 years. They’ve evolved over time, and in 2016, span customer engagement, supply chain transparency, employee development, operations and more. Each of these goals has metrics attached for accountability and transparency.

3M has worked to create a ROI measurement for sustainability, but in doing so, kept returning to the question: How do we draw the boundaries around what “sustainability” means? What do we include or exclude? She suggested that if sustainability is embedded across the business model, then the ROI of sustainability programs should be the ROI of the company.

The true business measurement of social impact should be its benefit to investors and customers.

How does risk mitigation impact decisions around supply chain or product innovations?

Zimmerman noted that water scarcity in the developed world will continue to be a problem. Consumers across the U.S. face a variety of water challenges – from scarcity in the West to concerns about high levels of lead or nitrates in drinking water. Kohler strives to take a long-term approach to addressing these issues – not just in the U.S., but in developing nations such as India, where only 10 percent of wastewater is treated. Kohler is committed to thinking more holistically about water systems and how it can provide innovative products that help mitigate current environmental risks.

Despite the different product lines and to-market strategies of 3M and Kohler, the panelists all agreed that to really push sustainable supply chain development and achieve business buy-in, we have to understand the relationship between retailers, manufacturers, measurement, and consumer sentiment. Although not a consumer-facing strategy, integrating sustainability efforts throughout the supply chain can have a demonstrated impact on a brand’s cumulative triple bottom line.

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