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

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.

Published Mar 9, 2020 11am EDT / 8am PDT / 3pm GMT / 4pm CET

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