Supply Chain Sustainability is here to stay…but is it really sustainable?

Posted on 2014/09/08 by David Weaver

In keeping a constant eye on the latest supply chain news, trends and best practices, it is impossible to miss the plethora of headlines in recent weeks addressing the topic of supply chain sustainability. Whether you call it a trend, fad, movement or awakening, supply chain sustainability is making its way to the forefront. Just have a look at some of these headlines:

“From tomatoes to tea – Unilever reveals next phase of sustainable supply chain push”

“Nespresso Investing $550 Million to Achieve Carbon Neutrality, Responsible Supply Chain”

“Kellogg Sets Bold Sustainability Goals for 2020”

“General Mills tells suppliers to cut greenhouse gases…”

“Pepsi Launches Water Monitoring Tool”

These are just a few of the top stories that came to mind. The timing of these headlines is, in my opinion, no coincidence. I believe we are seeing a direct reaction to two major market events from 2013. The first event is the collapse of the Rana Plaza building in Bangladesh, where over 1,000 garment factory workers lost their lives. Several large retailers were made aware of the fact that they were using this factory only after this tragic event occurred, highlighting a lack of supply chain transparency. This event brought the “social” pillar of the three pillars of sustainability (social, environment, economic) to the forefront and has, in my opinion, contributed to a more socially conscious consumer.

The second market event was the introduction of the “Behind the Brands” campaign from Oxfam. The campaign includes a scorecard for the top ten food companies. Each company is given a score for various sustainability issues. Some of the areas include workers, climate, water and land. This is something I wrote about last year in the article titled “Supply Chain Transparency: Do Consumers Really Care?”, and I have had an eye on this campaign ever since. I find it intriguing that the five companies named in the headlines above are also included in the Behind the Brands campaign scorecard. It seems as though the companies are continually trying to one-up each other with the announcement of their latest sustainability initiatives (I’m sure much to the pleasure of the Oxfam campaign leaders). This is of course good news for the environment and for those workers who have been able to benefit from these initiatives.

“…but is it really sustainable”

That being said, there are two reasons that motivated me to add the second half of the title to this article…”but is it really sustainable”:

1. Sustainable supply chains could lead to higher prices that consumers may not want to pay

Just looking at a very simplified example; if workers are being paid higher wages at a particular farm or factory, these costs may be passed on. Either the purchasing company or the end-consumer will end up inheriting these additional costs. When I see what happened with Primark, I question whether consumers are prepared to pay higher prices for an item that was sourced, produced and transported sustainably. Primark was involved in a scandal after cries for help were found sewn in the garments being produced by its suppliers. This video provides a candid look at how consumers reacted to this scandal:

I am not suggesting that sustainability initiatives will always lead to higher prices. In fact, many initiatives have saved companies lots of money in the end. However, higher prices to end-users is a potential side-effect that should not be ignored.

2. Measuring sustainability compliance is complex, especially in large networks

I know, for example, that if my landlord sends me an email stating that he is coming by in a week, I am going to make sure that my apartment is in top shape for the visit. The same holds true for supplier audits. If supplier audits are preannounced, you can bet it is not going to be a typical day in the factory. For this reason, it is important for a company to collaborate with its suppliers and “walk the walk” instead of just “talking the talk.” Establishing shared sustainability values is key to compliance. This is no easy task considering the differing cultural values across international supply chain networks. The successful outcome of these recently announced initiatives therefore lies heavily in the ability of these companies to create supplier compliance by communicating sustainability values.

One example of an attempt to collaborate and share sustainability values with suppliers is being conducted by Unilever with its annual “Partner to Win Supplier Summit.” Several hundred of Unilever’s suppliers were on hand this year, and the company committed to improving the lives of one million people and delivering environmental and commercial benefits through its sustainability initiatives.

Final Thoughts

I do believe supply chain sustainability is here to stay. These initiatives can, however, only be sustained through tight collaboration with suppliers and the transference of core sustainability values. Additionally, consumer buying behavior will have to shift as more value will need to be placed on purchasing sustainably sourced, produced and transported products. In my opinion, this shift is already underway, however there is a long road ahead as there is still a lack of transparency for many products, which prohibits the more socially and environmentally conscious consumers from making informed buying decisions.