Many Companies Can't Back Up Sustainability Commitments
While 60 percent of North American firms in the survey have a documented corporate-level sustainability strategy, just 36 percent have adopted a formal sustainability strategy for their supply chains -- a crucial step in ultimately being able to deliver on their sustainability promises.
The study, conducted by global management consulting firm A.T. Kearney in conjunction with the Institute for Supply Management, surveyed firms across a variety of industries to assess corporate sustainability practices and understand how sustainability is impacting businesses.
The research found that most firms recognize the value of adopting sustainable practices, whether to strengthen their brand or to differentiate products. Companies also understand that sustainability practices will allow them to grow their business, rather than simply complying with regulations. Furthermore, embracing sustainability gives companies an opportunity to improve their corporate image and differentiate their products.
But in terms of taking specific steps to meet their goals, especially in addressing sustainability within their supply chains, most companies are falling short in creating internal processes to promote sustainability practices. Just over half of the companies in the survey provide written guidelines to help supply management staff address sustainability questions, and just over 40 percent provide training on sustainability management.
"Supply management organizations have to support the corporate sustainability strategy by ensuring their company's suppliers extract their materials from sustainable sources and employ fair labor practices," said Daniel Mahler, A.T. Kearney vice president and leader of the Sustainability Study. "They are the 'litmus test' of the sustainability commitment."
50 percent of the companies said they choose suppliers that can meet sustainability criteria. The authors said that even five years ago it was rare that a company would base their supplier decisions on criteria of being "green and ethical." More than half the companies in the survey include sustainability metrics in the evaluation criteria of supply management executives. Some of the guidelines companies are using to determine sustainability include eco-efficiency of materials and packaging, fair labor practices throughout the supply chain, a quantification of the carbon footprint, and accounting for full lifecycle costs.
Some of the companies in the survey indicated that they are already beginning to see the financial benefits of focusing on sustainability including increased customer demand for sustainable products, improved employee morale, greater brand strength and enhanced marketing opportunities for environmentally friendly products.
"Supply management organizations should not only focus on being compliant with new green standards. They can also pro-actively engage the supply base to drive sustainability-related innovations that can lead to pricing premiums and access to new markets," said Mahler.
Over the next 12 months, the study's authors expect a dramatic shift as corporate supply management departments play catch-up across all aspects of sustainability. "Supply management executives should ask whether their company has adopted a comprehensive sustainability strategy, supported by the appropriate policies, processes, organization, incentives and suppliers, or whether it has simply adopted a set of related practices that are unlikely to unlock complete value," Mahler said.
The report, "True and Profitable Sustainability Management," can be found at ATKearney.com and the Institute for Supply Management website.
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