Few companies truly embracing green supply chains

24 November 2015 Consultancy.uk

Creating sustainable supply chains remains a challenging issue for many organisations, according to a new survey. While many organisations remain open to the idea, with best practices proving the case, reasons for implementation often remain at the level of branding and differentiation, while actual execution remains on a small scale and does not produce wide-scale impact across the board. According to the authors, regulation is required to drive most companies towards change.

Producing goods in a way that is sustainable to the environment is becoming more and more important to consumers and the environment itself, as the reality of humanity’s footprint is being realised throughout ecology. A survey from 2014 for instance shows that more than half of consumers would be willing to pay 5% more for a sustainable product, while 76% said they would accept waiting an extra day to have their products delivered in a sustainable fashion.

With consumer sentiment edging toward more sustainable ways of acting, important questions are starting to be asked by organisations about whether sustainable practices should be the norm for their wider supply chains. To gain further insight in the matter, consulting firm West Monroe Partners and the Supply and Value Chain Centre at Loyola University Chicago partnered to identify the current business sentiment toward greener supply chains.

Is having a green supply chain a strategic priority in your organization?

The study involved 52 executives from company sizes ranging from $100 million to over $120 billion. The largest industry represented was consumer packaged goods (30%), followed by retail (12%), although there were respondents from most sectors. The information was further supplemented by data from BearingPoint, West Monroe Partners’ consulting partner in the EMEA region, which conducted similar surveys of both consumers (2014) and supply chain executives (2015) in Europe.

Sustainability matters?
When respondents were asked whether having a green supply chain is a strategic priority in their organisation, 51% answered affirmatively. 22% answered that it will be in 1-3 years, while 8% said it would take 3-5 years before it became one. 12% said it was not a strategic priority.

What were the main reasons for undertaking actions to move towards having a green supply chain

Respondents were also asked about what motivates them to undertake actions to move towards embracing a green supply chain. The most important reason cited by respondents is brand image improvement at almost 35%, followed by innovation in products or processes and then executive management decision. The attribute seen by the most respondents as least important is pressure from lobbyists, cited by 27% of respondents. This was followed by ‘other’ (24%), which includes risk control, customer expectations and consistency with corporate values.

Despite the fact that the motivations for implementing sustainability initiatives greatly vary, the study reveals that across the business community, sustainability can be a clear differentiator and source of competitive advantage, in addition to its other benefits. One case study the authors explore is a firm that has been able to improved its customer rating by approximately 25% through better sustainability in product management, while another company has been able to reduce carbon emissions by 15% – something that gave them an edge against competitors.

Over the past three years, has your organization intensified, reduced or stabilized your efforts in green supply chain 

Sustaining sustainability
When asked whether, over the past three years, their organisation had intensified, reduced or stabilised their efforts in green supply chain, 56% said they have intensified their efforts. “Awareness and, more importantly, action are becoming commonplace and are increasing in both quantity and intensity,” write the researchers. 27% indicated they have either reduced or not implemented any green supply chain initiatives, however, of these respondents, only two indicated there are no plans to add any sustainability initiatives. Interestingly West Monroe Partners and Loyola University Chicago also find that sustainability commitment is not related to organisational size – several of the organisations that aren’t doing anything currently are multi-billion dollar companies.

In the past three years, did you plan, implement, further develop or discontinue a program for green design

Implementation?
Green design is also on the rise, the survey reveals. Almost 60% of respondents that answered acknowledge they have either rolled-out or are planning to execute a “green design” project. The primary focus was on products and packaging (tied for first), distribution/logistics, production processes, the entire supply chain life cycle and components/ingredients (tied). 

“Based on our survey results, it appears very few companies are embracing sustainability initiatives in any meaningful way. Until regulations force action, many companies won’t be able to find resources and funding to make significant change,” conclude the authors.

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Private equity firms ramp up sustainability focus

19 April 2019 Consultancy.uk

In line with business leaders across the industrial gamut, private equity firms are increasingly on board with sustainability projects. According to a new study, the investment arms for major funds are implementing a number of strategies aimed at supporting sustainable economic development in line with global goals.

While the business world has finally begun to acknowledge the danger of climate change, effective action plans remain difficult to achieve. The Paris Agreement has stipulated a clear target for the decades leading up to 2100, although massively reducing emissions while not crashing the economy could be a tall order.

Businesses that are able to acquire capital can use it to boost productivity and output, thereby creating a virtuous cycle of development. However, some businesses are better able to utilise resources than others, both in terms of their relative productivity, as well as the value of the respective outcomes relative to costs (including environmental harms). Financing can therefore provide an avenue to select businesses that are aligned with various global sustainability goals, while shunning those that drive little or unsustainable social value creation.

Top moves made by investment arms towards responsible investment

Profit has for the longest time been the central criterion for investment decisions. Yet profit at any cost is increasingly seen as creating considerable social harms, while often delivering only marginal value. As a result, the private equity sector, which was initially sluggish to change its ways with regards to sustainability, has started to see the topic as an opportunity as much as a challenge.

A new study from PwC has explored how far sustainability goals have become part of the wider investment strategy for private equity (PE) firms. The report is based on analysis of a survey of 162 firms and includes responses from 145 general partners and 38 limited partners.

Maturing sustainability

Top-line results show that responsible investment has become an issue for 91% of respondents. For 81% of respondents, ESG (environmental, social, and corporate governance) was a board matter at least once a year, while 60% said that they already have implemented measures to address human rights issues. Two-thirds have identified and prioritised Sustainable Development goals that are relevant to their investment segments.

Change in concern and action on climate-related topics over time

While there is increasing concern around key issues, from human rights protections to environmental and biodiversity protection, the study finds there are mismatches between concern and action. For instance, concern among investment vehicles around climate change has increased since 2016.

In terms of risks to the PE firm itself, concern has increased from 46% of respondents in 2016 to 58% in the latest survey. However, the number who have taken action remains far below those concerned, at 9% in 2016 and 20% in 2019. Given the relatively broader scope of investment opportunities, portfolio companies face higher risks – and more concern – from PE professionals, at 83% in the latest survey. However, action is less than half of those concerned, at 31%.

Changing climate

In terms of the climate footprint of the portfolio companies, 77% of respondents state concern in the latest survey. 28% of respondents are taking action through the implementation of measures to mitigate their concerns.

Concern and action taken on ESG issues

In terms of the more pressing issues for emerging responsible investment or ESG issues, governance concern of portfolio companies comes in at number one (92% of respondents), while 60% have taken action on it. Firms have focused on improving awareness – setting up policies and a range of training modules for their professionals around responsible investment decision making. Cybersecurity takes the number two spot, with 89% concerned and 41% implementing strategies to mitigate risks.

Climate risks take the number three spot in terms of concern for portfolio companies (83%), but falls behind in terms of action (31%). Health and safety track records are a key concern at 80% of businesses, with 49% implementing action. Gender imbalance within PE firms themselves ranks at 78%, which is being dealt with by 31%. A recent survey from Oliver Wyman showed that there is gender balance at 13% of GP teams in developed countries.

Biodiversity is also an increasingly pertinent topic, with risks from pollution and chemical use increasingly driving wider systematic risks around environmental outcomes. It featured at number eight on the ranking of most likely global risks for the coming decade, with its impact at number six. As it stands, biodiversity is noted as an issue at 57% of firms, with 15% implementing action.