Sustainability Becomes Increasingly Critical to Supply Chain Leaders
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Sustainability is increasingly becoming a priority among supply chain leaders because of technology and turbulent economic conditions.
“Everybody that I speak to recognizes how important this is,” said Jonathan Wright, global managing partner of finance and supply chain transformation at IBM. “Both for their company, but more than that, for the planet. If you are in supply chains, you know that you have a moral obligation to the next generation to be optimizing because ultimately supply chains have a huge impact on emissions as well as water consumption and energy consumption.”
The IBM Chief Supply Chain Officer study Sept. 20 showed how supply chain leaders from around the world were navigating the significant supply chain challenges of recent years. This included the challenges and opportunities associated with sustainability.
“I was pleasantly surprised at the findings that all these chief supply chain officers, how important sustainability is in their agenda,” Wright said. “What continues to be the challenge is the aspirations versus the progress that is actually being made. But I was really happy about the fact that now more than ever, it’s being noted as super important.”
The study found supply chain officers ranked sustainability as their third-biggest challenge in the next few years. It noted that 52% placed sustainability at or near the top of their priority list with 50% reporting that their sustainability investments will accelerate business growth. This compared to just 19% ranking sustainability as a top external force in 2019.
“When we asked these chief supply chain officers what their priorities were, it was there right at the top,” Wright said. “That is really important for me because I see this as a hugely important part of the supply chain.”
Wabash National has also noticed sustainability becoming more of a priority among supply chain businesses. The transportation equipment manufacturer has focused its sustainability investments on lightweighting, thermal performance and increased asset life spans. Not just in terms of money but also where the company is positioning its best employees.
“We’ve believed that we were going to find ourselves in this situation,” said Dustin Smith, the chief strategy officer at Wabash. “I think the conversations we’re having with customers is continuing to support the position that more and more shippers and carriers alike are truly looking to their partners, of which obviously Wabash is a pretty important one, on how we can help them advance their sustainability cause.”
A Wabash factory worker assembles a floor. The trailer maker has focused its sustainability investments on lightweighting, thermal performance and increased asset life spans. (Luke Sharrett/Bloomberg News)
Smith believes technology has helped facilitate this trend by making sustainability policies more feasible for more companies. This has better positioned these policies to be good for business as well as being a step to better secure supply chains. But he sees those companies that invested in sustainability early as finding themselves in a more competitive position long-term.
“No one would argue against focusing on sustainability and the environment,” Smith said. “They tend to take the approach that I’ll advance the cause as long as it doesn’t negatively impact my business. And I think the people that find themselves out in the marketplace as true leaders are the ones that are patient enough to focus on these types of elements that, granted, take a little more time than anyone would like to manifest themselves as good business.”
Sylvie Thompson, vice president of consumer brands, retail and distribution practices at NTT DATA Services, believes people place too much reliance on technology and that sustainable practice can be achieved low tech. She sees technology as being more the trigger for change versus needed for change.
Renewable diesel is produced from lipids and cellulosic biomass. (Neste)
“The business case is company/organizations specific,” Thompson said. “Simple things like the lack of water in main areas of the world, extreme weather, all are driven by climate change and that impacts companies. Sustainability is a challenge because the results are not immediate nor seen in the next quarter or two.”
Smith has noticed that the continuous supply chain turmoil of the last few years including the coronavirus pandemic has increased focus on sustainability. He noted global shocks tend to spur innovation because oftentimes companies have no other option in order to survive.
“Whenever people or businesses don’t get what they want from the outside, they look to vertically integrate,” Smith said. “You start to see people looking to shrink the supply chain, get it closer and under their control. That lends to the near-shoring conversation, bringing stuff back from low-cost countries, bringing it closer to the point of use.”
Wright noted the supply chain companies that bring together next-generation digital technology and sustainability policies can expect 11% higher revenue on average. But it could be as high as 20%. He noted that those companies also see higher profitability.
“Now that’s not really a surprise,” Wright said. “What happens when you bring digital and sustainability together is you reduce your operating costs because there is an inextricable link between efficient supply chains and lower carbon supply chains.”
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