Unintended Positive Consequences
According to the EcoVadis 2021 Sustainable Procurement Barometer survey of more than 350 firms, companies that had improved visibility into their suppliers and supply chains in pursuit of sustainability goals also gained operational resilience. This strength gave them the information and infrastructure they needed to quickly adapt to fluid market conditions.
This translated into solid bottom line performance during an otherwise stressful year for shippers. 38% of mid-size companies surveyed (annual revenue between $100M and $1B) pursuing sustainability objectives during the year prior enjoyed improving procurement metrics such as quality, on-time delivery, realized savings and generally more reliable, longer-lasting supplier relationships.
What’s more, 38% of these companies saw reduced costs overall while 34% of them saw increased sales. 52% claimed to have increased their operational resilience while a striking 59% said they had reduced their business risks because of their efforts.
No Longer Business As Usual
Social and environmental goals have historically been considered corporate “nice-to-haves.” They are often the first to lose resources when a business is under financial stress. However, the visibility into business operations these initiatives gave their adopters became a strategic advantage when “business as usual” simply wasn’t possible.
“Sustainability and sustainable procurement practices actually help companies improve their resilience and reduce risk,” said Barchi Gillai, associate director of the Value Chain Innovation Initiative at Stanford Graduate School of Business and coauthor of the report. Because sustainable procurement requires greater visibility into suppliers’ practices and encourages collaboration between suppliers and buyers, these programs can make it easier to assess and respond to crises.
Suppliers actively pursuing sustainability goals—in part to differentiate their company and offerings—tend to be smaller than the category leaders. This can have two benefits. These companies can be more nimble in adapting to changing conditions. And, their customers (the companies surveyed) often engage with several such suppliers to assure availability of resources when the need arises.
All About Digital
Networked infrastructure makes these types of matrixed relationships manageable. It is not clear whether the infrastructure build-out was motivated as part of a sustainability initiative (not likely) or if forward-thinking companies commit to both better digital infrastructure and sustainability goals. However, the success of these companies during the pandemic is clear evidence that supply chain visibility is more than a point solution. Advanced digital infrastructure helps companies advance towards all their goals.
And all those goals can still point to a better bottom line.
