Sustainability & Tech
4 Reasons Why Supply Chain Sustainability is Profitability
March 23, 2021
In 2021 Sustainability is Profitability for Industry-Leading Shippers
A decade ago, “green” initiatives were considered a luxury, something nice to have to enhance a brand’s image, and were exclusively seen at larger companies. But concerns about the environmental impacts of business have long been discussed across boardrooms and legislators, but efforts and action have historically fallen secondary to revenue generation. In the past, feigning interest in green issues and getting listed on a “sustainability index” or advertising greenwashed products was enough to meet consumer demands at the time.
Sustainable Supply Chains are the Future of Consumer Demand
But, those times are long gone. In the last few years, consumers have become more adamant and educated about their desires for more sustainable business practices that support the goods they purchase. As corporations recognize their consumers’ demands are changing, they have shifted their strategies and priorities, and as a result technology and products that support sustainability initiatives, particularly in the alternative energy and supply chain spaces, have exploded.
This trend continues to strengthen and has even picked up steam in 2021 with the onset of a new presidential administration in the U.S. According to a study administered by Accenture, 99% of over 1,000 CEOs at organizations with over $1 billion in annual revenue believe sustainability will be central to the future of their business.
While Corporate Social Responsibility (CSR) has been in the limelight, we have entered into a market where discussions, goals, and promises are not enough to keep pace with competitors. As more and more companies pledge major movements toward actively reducing greenhouse gas emissions (GHG), creating in-house carbon offsets, and striving for net-neutrality, shippers need to focus on actionable initiatives to support their position in the marketplace. In a world where stakeholders across the board are watching and transparency is paramount, market-leading organizations have built sustainability into their DNA.
Part of that DNA focuses heavily on supply chain sustainability, and while many organizations have yet to create formal plans around their scope 3 emissions, the transportation and supply chain sectors are moving into the cross-hairs.
Read about the importance of prioritizing scope 3 emissions, and the role that transportation plays in that, here.
With any major change at an organization, comes a cost. And for the transportation and supply chain industry, many are left wondering, “does sustainability increase profit?”
In fact, many companies of all sizes understand that success on sustainability metrics has a real, bottom-line impact. As consultants Doug and Polly White of Whitestone Partners wrote in Entrepreneur:
“We view sustainability in the same light as quality. Sustainability, if properly implemented, cannot only be free, it can be profitable.”
In other words, supply chain sustainability has evolved past the point of simply being interested in _looking _like a good corporate citizen – organizations are fully subscribing to both profitability _and _sustainability.
How to Improve Logistics to Increase Profitability Sustainably
Far from being a cost sink, sustainability can, itself, be a source of supply chain profitability. From the fuel consumption that moves your goods to market, to intermodal conversions, to emissions reductions and other factors in the sustainable trucking industry, the supply chain is full of green possibilities that are fully accessible with the right data and technology partner.
4 Benefits of Sustainable Supply Chain Management
The benefits of sustainability efforts reach organization-wide:
1. Increased efficiency: reducing overall resources will aid in a transportation network’s efficiency and ultimately cut out excess waste and emissions. Increasing fleet fuel efficiencies, minimizing deadhead miles, and finding natural turns in carrier networks are examples where efficiency reduces the tailpipe emissions associated with a product while cutting out extra costs.
2. Competitive advantage: When an organization adopts a proactive approach, they position themselves to remain ahead of consumer demands and regulatory pressures like those experienced in California’s low carbon fuel standard, or in response to a new presidential administration. The trends are clear, sustainability will continue to live at the forefront of strategies, so investing efforts into sustainable programming will benefit in the long run.
3. Risk management: Reputational risks can also be mitigated or avoided when organizations adopt systemic sustainable practices. Organizations with a positive track record will rise above challenges more resiliently than companies that wait for disaster to evolve. A 2016 study from Harvard Business School stated:
“…companies with strong corporate responsibility reputations ‘experience no meaningful declines in share price compared to their industry peers during crises’ versus firms with poor CSR reputations whose reputations declined by “2.4-3%; a market capitalization loss of $378M per firm.”
4. Recruitment: New generations of young professionals want to see the companies they work for engaged in value creation beyond mere profit. Many are highly interested in working for companies that have a positive impact on society at large, and corporate social responsibility and environmentally friendly business practices are highly attractive attributes for the future workforce. As the MIT Sloan study states:
“Overall, the results of the study show that by improving environmental, social and governance (ESG) performance throughout their supply chains, companies can enhance processes, save costs, increase labor productivity, uncover product innovation, achieve market differentiation and have a significant impact on society.”
It’s no wonder, then, that a Harvard Business School study found “high-sustainability” companies exhibited better financial performance than their peers.
For more information about the future of sustainability in the supply chain, you can download our Transportation Leadership Journal, here.
Additionally, contact us to learn how Breakthrough helps some of the world’s largest brands measure and reduce their transportation emissions footprint.