Analyst Insight: Supply chain sustainability is a moving target. But the need for supply chain collaboration and data collection are constants of growing importance.
Even as sustainability becomes a greater part of companies’ corporate missions, it remains difficult to pin down precisely which issues the term prioritizes, and which practices it necessitates. In three years of conducting our annual State of Supply Chain Sustainability survey, co-presented with the Council of Supply Chain Management Professionals, we’ve found that different hot-button issues within sustainability rise and fall in importance, and firms’ practices evolve every year.
The simplest way to understand how priorities change in supply chain sustainability is to group sustainability issues into two categories: environmental, such as climate change, water conservation and biodiversity protection, and social, such as diversity, equity and inclusion; fair pay; fair trade, and worker safety and welfare. A year-over-year comparison in survey data shows that from 2019 to 2020, social issues surged in importance compared with environmental issues. But from 2021 to 2022, environmental returned to the spotlight — especially climate change. See Figure 1 for a visualization of how goals shifted year over year.
Figure 1: Change in firms' supply chain sustainability goals from 2019 to 2021
The implication for firms is that while the importance placed on supply chain sustainability in general has grown consistently, achieving sustainability nevertheless remains a moving target. The focus areas within supply chain sustainability that are top of mind today among various stakeholders aren’t necessarily likely to be the pressing issues next year, or the year after. In this context, supply chain sustainability can be seen as not only a goal in and of itself, but also an adaptive competency to be developed and maintained within organizations.
Some sustainability practices are more common than others. The firms surveyed show that company codes of conduct, supplier codes of conduct, and supplier audits represent the “buy-in,” or table stakes to pursuing supply chain sustainability. These fundamental steps make sense because codifying a firm’s sustainability priorities and ensuring that they’re respected within and beyond its boundaries are imperative first steps — even if they might change over time. Danny Shields, vice president for risk at Avetta, one of the State of Supply Chain Sustainability report’s sponsors, summarized this idea in this way:
“Supply chain management has never held a more critical and influential role in the world than it does today, and organizations are rising to the challenge. To mitigate ongoing supply chain disruptions, the leaders in the space are becoming more conscientious and intentional in their supply chain monitoring. As a result, we’re not only seeing a rise in sustainability tracking, but also a push for evaluating all risks, including ESG, safety, business risk and much more, in one centralized location for greater transparency.”
To illustrate the distribution of practices in the chart, those that respondents reported using as part of their sustainability efforts are shown as a staircase, leading up from the most to least commonly employed. At the top of this staircase are third-party verification, supplier training, and even joint projects with non-governmental organizations and watchdogs. The highest (most advanced) steps seem to be collaborative, and by necessity cross firm boundaries. In this sense, supply chain sustainability itself can be seen as a job, one that’s too big to take on entirely on one’s own. Rachel Swalbach, vice president for ESG at C.H. Robinson, another sponsor of the report, spoke on this topic at an October 2022 supply chain sustainability summit: “Supply chains are so complex that no one can tackle sustainability alone. Collaborating with the right partners who have the right technology is essential.”
Figure 2: "Staircase" of supply chain sustainability practices
Building on the trends observed in our first three years of data collection, we’ve gone into year four of this study with an even broader reach and greater focus. Now, we’re collecting data in four languages (English, Spanish, Chinese and Portuguese). We’re also more specifically assessing respondents’ ability to track and measure their firms’ Scope 1, Scope 2, and Scope 3 emissions. This is, of course, challenging, especially since Scope 3 emissions by definition cross firm boundaries. But without this measurement, how will firms be able to manage to their net-zero carbon-emission goals? Brian Cristol, co-founder and chief executive officer of Isometric Technologies, another one of the report’s 2023 sponsors, called attention to this vital need: "The next step for improving supply chain sustainability is to prioritize transparency and traceability in every aspect of the supply chain. This includes data collaboration amongst business partners, and leveraging technology to increase visibility and accountability across the supply chain."
Year four of the MIT CTL–CSCMP State of Supply Chain Sustainability report will be available to the world in the fall of 2023.
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