Supply Chain Sustainability: The New Green Lean Money Machine

Author

Paul Martyn

December 20, 2016

Here’s my 2018 prediction: Sustainability will be the new lean. How do I know? Because the right side of my brain won’t let it go and the left side stopped pushing back. Everything’s pointing in this direction –all the key indicators, including hard, soft, left and right sentiment. And if your economic intuition tends to “follow the money,” then the latest trends aren’t hearsay, they’re evidentiary.

Why not sooner –say 2017? Because the middle market needs the big players to lead, and that’s a work still in progress. That said, Unilever, P&G and 3M are rounding third and leading the market. Ikea Group just committed 1 billion euros to sustainable sourcing, on top of more than 2 billion already earmarked for sustainable energy. It’s already a billion-dollar bounty for at least 10 other global players, including Whole Foods, Target, General Electric, Tesla, Chipotle, Nike, Toyota and Natura. All are generating new offerings to prove their sustainability mettle.

And the fact that these multi-nationals are only too happy to have their support for all-things-sustainable made public, including their investments and target metrics, means it’s a fait accompli, further validated by private equity’s recent moves. This week, EcoVadis, a 10-year-old self-funded company that provides environmental, social and ethical performance ratings for global supply chains, accepted a 30 million euro investment from Partech Ventures. The company, founded in Paris nearly a decade ago, recently began expanding into the US. It counts 150 of the world’s largest buyers, including DuPont, Johnson & Johnson, Nestlé and Subway, and 30,000 suppliers, as its base. It plans to use the funding to further expand its footprint, helping even more organizations create responsible, profitable and sustainable global supply chains.

EcoVadis works with many of the most sophisticated organizations across the globe, helping to cement sustainable procurement as an essential aspect of responsible and profitable business behavior. Interestingly, Frédéric Trinel, the co-CEO of EcoVadis, noted that initiatives around sustainability, supply chain and Corporate Social Responsibility (CSR) are now merging. “Companies are now expected to expand the definition of a high-performing supply chain to include CSR criteria.” He added, “They must develop a sustainable mindset or their brand value will suffer.”

Said Omri Benayoun, General Partner of Partech Ventures, “The market has moved over the past few years — consumers, citizens and investors are all demanding that companies adopt and demonstrate sustainable practices.”

Frankly, if you’re getting the idea that sustainability is becoming a compulsory part of the new business curriculum, you’d probably grade an “A.” Citing McKinsey no less, a recent Harvard Business Review article said that the “value at stake” (i.e. the sustainability imperative) may get as a high as 70 percent of earnings before interest, taxes, depreciation, and amortization (EBITDA). Of the 8,000 supplier companies surveyed that sell to the largest multinationals, 72 percent said that sustainability is as much a top of mind issue as climate change.

“The business case for supply chain sustainability has never been more convincing,” said Trinel.

From R&D to product design, to manufacturing, packaging, shipment and consumption, even when factoring in the after-use value chain, today’s sustainability thought leaders are thinking more inclusively. Where optimizing the life cycle of a product has traditionally relied on linear models, the current state of the art is actually circular and far more combinatorial. It’s a virtuous cycle that is only bounded by what organizations choose not to include in their measurements.

My bet is that more than half of the top 100 multi-nationals will be doubling down on their sustainability commitments in 2017, not only relying on this philosophy but on their supply chain leadership as primary drivers. Although supply chain professionals will still have to deal with cynics, building empathy with them is clearly becoming less of a challenge. Worse case, they can point at the last U.S. election and make a case that lacking tolerance is genuinely warranted this time around. Just kidding.

While recognizing that current consumption patterns are not sustainable, making the business case becomes a function of where you draw your horizons.

 

This article was written by Paul Martyn from Forbes and was legally licensed through the NewsCred publisher network.

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