A new report from the World Economic Forum identifies 31 proven practices to help companies achieve a triple advantage of increased revenue, a reduction in supply chain cost and added brand value. The practices also help companies shrink their carbon footprint and contribute to local development, including the health, welfare and working conditions of the communities in which they operate.
The report, written in collaboration with Accenture, outlines 31 practices that can help companies realize the “triple supply chain advantages” identified through interviews with 25 corporations — including Nestlé, SABMiller, Unilever and UPS— non-government organizations and other sustainability experts.
“Sustainability must become a higher priority in supply chain management, given the scarcity of natural resources, rising commodity prices, and greater consumer expectations for responsible sourcing and production. Those who act now and capture the market opportunity of more sustainable supply chains can differentiate themselves and generate higher margins,” said Mark Pearson, Senior Managing Director, Accenture Strategy. “This is not about trade-offs; it is about behaving in a socially responsible way that can also deliver a competitive edge.”
“Part of the difficulty to date has been the decision-making process itself as it relates to sustainability,” said Wolfgang Lehmacher, Head of Supply Chain and Transport, Mobility Industries, World Economic Forum. “Our hope is that this report will empower companies to act now and place an emphasis on the maintenance and creation of responsible supply chains.”
Beyond Supply Chains: Empowering Value Chains reveals that companies included in the analysis have improved their competitiveness through increases in revenue (5-20 percent), a reduction in supply chain costs (9-16 percent) and a boost in brand value (15-30 percent), while reducing their operational risks. The practices, which span product design, sourcing, production and distribution through to the end of the product lifecycle, can help companies shrink their carbon footprints by 13-22 percent.
SABMiller’s Eagle brand beer, produced by Nile Breweries Uganda, is one example of how local sourcing can help gain advantage for communities. In 2001, SABMiller decided to launch Eagle as a low-cost beer, and source the sorghum used in its production from local farmers. As part of its smallholder relationships, Nile Breweries committed to longer-term contracts and price agreements. Over 20,000 farmers are now part of the supply chain for Eagle, and the brand represents more than 50 percent of Nile Breweries’ sales. For farmers, the success of Eagle means more stable income and access to medical care and funding to achieve their own growth goals.
“We are committed to accelerating growth and social development in our value chain. We have hundreds of thousands of customers and suppliers that are small-scale businesses at the heart of their communities,” said Anna Swaithes, Head of Water and Food Security Policy at SABMiller. “Supporting them to prosper is a key part of our business strategy.
In addition to outlining practices that others have successfully used, the report also offers guidelines executives can apply to evaluate the value-creation potential of their organizations’ supply chain practices and prioritize sustainability investments. It also provides guidance for businesses looking to engage in ethical commerce.
Aside from the financial and brand value advantages, responsible supply chains enable companies — and entire countries — to be more resilient in a world increasingly vulnerable to climate-change risks. According to a CDP report released in January, lack of preparation has left supply chains in Brazil, China, India and the United States more vulnerable to climate risks than those in Europe and Japan.