If Sustainability Costs You More, You're Doing it Wrong. The Do’s and Don’ts of Sustainable Value Chain Management

There is a lot of anecdotal information on what makes a value chain sustainable, but very little data. To change that, we partnered with ASQ, the Institute for Supply Management, and Deloitte, on a multi-year research study to identify proven management practices and cost-saving approaches, and the initial findings are out.

The supply chain is where the ROI on sustainability gets real — in the triple digits according to this research. It’s also what separates “real” sustainability from “green washing.” That’s why many businesses and NGOs are looking at how to make the value chain (supply chain, distributors, partner organizations, etc.) more sustainable. While others have conducted research in this area, there are two things that make this research significant:

·         Beyond focusing mainly on an organization’s suppliers, this study encompasses the entire value chain from the moment something comes out of the ground until it is put back into the ground, reused, or recycled — encompassing suppliers, distributors, partners, and internal operations.

·         Instead of looking just at interest in sustainability or at future plans, it looks at which concrete actions most effectively increase supply chain sustainability — helping organizations know where to put their time, energy, and resources to provide the greatest benefit.

The first phase of this research – a survey with almost 1,000 responses from sustainable supply chain execs – identified ten management practices that can improve sustainable value chain effectiveness, both in terms of the financial return and the sustainability outcome. Below are the top five. Click here to see the full Top 10 List.

1. Organizations that engaged with suppliers at any tier saw a 38% increase in their effectiveness.
2. Organizations that had sustainability embedded into their culture saw a 24% increase in effectiveness.
3. Organizations that had worked with suppliers and others (such as distributors) as part of quality programs in the past experienced a 22% increase in effectiveness.
4. Organizations that engaged with or talked about sustainability with value chain members saw a 21% increase in sustainable value chain effectiveness.
5. Organizations that rewarded suppliers for sharing expertise and knowledge around sustainability recorded a 17% increase in effectiveness.

The survey also identified five management practices that reduce operating costs. Below are the top three. Click here for the full Top 5 List.

1. Organizations that engaged with suppliers at any tier saw a 46% reduction in operating costs.
2. Organizations that provided suppliers with monetary rewards for sharing expertise and knowledge around sustainability saw a 45% reduction in operating costs.
3. Organizations that provided tools, policies, or processes to suppliers and value chain partners saw a 41% reduction in operating costs.

In the next phases of the research we will interview the best (and worst) in class companies and develop in-depth case studies on them. Interested in participating? Then make plans to join us at the COMMIT!Forum taking place October 2-3 in New York City for a deep dive into the research results and to sign up to participate in the next phase. Register with ID Code “SVC35” and receive 35% off your registration.

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Richard Crespin is the President of SharedXpertise and the Executive Director of the Corporate Responsibility Officers Association. The Center for Values-Driven Leadership is a member of the CROA and a proud supporter of sustainability initiatives.