Delivering the Good(s): Sustainability Takes Center Stage

SUSTAINABILITY AND CORPORATE stewardship — delivering goods and “the good” to customers, employees, society and the environment — is a social ideal and a business necessity. The former tension between efficiency and sustainability has vanished. Being sustainable is now a source of competitive advantage and a matter of corporate survival, rather than a costly inconvenience.

Although CEOs and marketers are embracing sustainability as a top-line priority, the dream of doing good work and making a good profit will go unfulfilled unless orderly supply chains literally and sustainably “deliver the goods.” Corporate claims about sustainability undergo fierce scrutiny. Internet-savvy consumers, advisory groups and a booming audit industry compare, contrast and assess company statements about carbon footprints, suppliers’ labor practices and the eco-efficiency of raw materials. Beyond compliance, executives must promote their supply chains as sources of sustainable innovation and competitive advantage.

When customers buy products they’re supporting the supply chains that deliver the products. Customers will compare carbon footprints as easily as they compare nutrition values and price. The carbon cost of sending 1 kilogram of green beans from Provence to Paris by truck, for example, is 64 grams of carbon dioxide. Those same beans flown from Morocco to Paris, however, result in 3,948 grams of carbon dioxide emissions. Terry Leahy, CEO of Tesco, the British supermarket chain, says his firm will spend almost $1 billion to create standardized labels reporting products’ carbon footprints.

Sustainable supply management has become the litmus test of any company’s claims of social and environmental responsibility. To assess corporate sustainability practices, A.T. Kearney and the Institute for Supply Management surveyed Fortune 100 firms across several industries. Our study reveals almost 60 percent of firms adopted sustainable practices to strengthen brand names or differentiate products, and more than 50 percent of companies de-select suppliers for not meeting formal sustainability standards.

We recommend that firms move beyond the first wave of sustainability—beyond merely responding to public pressure to go “green” and mitigating public relations disasters—and address “second wave” sustainability. In this wave, sustainability is a growth industry that creates lasting value and exploits efficiencies, opportunities for differentiation and improvements in brand image. The onus is on supply managers to conceive and guide the sustainability of their supply chains in the broadest terms. They should start now to survey one-, five-, and ten-year horizons for potential supply-demand imbalances and draft appropriate risk-management strategies. Such strategies will include securing diverse supplies of potentially scarce resources to introducing new, less-scarce resources into production.

In the end, the three commandments— go green, get sustainable, be ethical—will woo corporate disciples who understand that embracing these values is an opportunity to grow the top line while delivering value and support to stakeholders at every level.