Supply Chain Sustainability Snakes and Ladders

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The national and company-led commitments made on Earth Day to reduce greenhouse gas emissions signal increased ambition to avoiding the most severe impacts of climate change. However, with many enterprise emissions falling in Scope 3, the value chain, it puts the CSCO front and center to deliver on these macro goals. In addition to greenhouse gas emissions, supply chains are also being asked to act on issues such as responsible sourcing, biodiversity loss and water. It is easy to feel overwhelmed in a sustainability landscape that is constantly changing, with ever increasing expectations for transparency across multiple issues. So why is sustainability such a hard topic, and why do some enterprises find it easier than others? As a child, I have fond memories of playing the game Snakes and Ladders (also known as Chutes and Ladders) with my grandmother. The snakes would move you further away from winning and the ladders would act as an accelerator to reaching the goal. I want to share with you three traps and three accelerators for supply chain sustainability strategies that we have identified through client engagements. Supply Chain Sustainability Snakes — Traps Timing: There is a question as to when the supply chain team should act on sustainability goals. Acting now may mean significant costs and lost profits whereas delaying action may mean stranded assets. With many enterprises committing to net zero greenhouse gas emissions, it is prudent to act early to lock in initial savings and create more time to manage more challenging elements of the supply chain to decarbonize. The question of timing itself frames sustainability as purely a risk. Sustainability represents both risk and opportunity. Reframing the sustainability challenge as an opportunity is likely to lead to more near-term action. See Maverick Research: Supply Chains Need Radical Action as “Our House is Still on Fire” Supplier Engagement: Meeting supply chain sustainability goals will not come in isolation; it means getting suppliers onboard. The challenge is that some suppliers will not have the capabilities or capital to act. Examples of how supply chain organizations are overcoming this impasse are as follows: Walmart has launched its Gigaton Power Purchase Agreement (GPPA) program in collaboration with Schneider Electric. The aim of this program is to increase supplier awareness about renewable energy purchases and to enable aggregate power purchase agreements.1 Tesco has become the first U.K. retailer to offer its supply chain sustainability-linked finance to encourage suppliers to sign up to science-based emissions reduction goals.2 Supply chain leaders need to think of new strategies to engage with suppliers who struggle to act on sustainability goals. Investment: Enterprise investment in operational sustainability improvement may be constrained by return on investment rules, risking programmatic stall. Supply chains are leveraging energy performance contracts and carbon pricing as a mechanism to gain access to financing. With some lenders linking borrowing rates to sustainability performance, this will act as a further catalyst for improvement. Supply Chain Sustainability Ladders — Accelerators Technology: Supply chain leaders should leverage technology and innovation to accelerate sustainability outcomes. For example, Unilever has partnered with Google Cloud to detect deforestation issues.3 A convergence between sustainability and digital business could lead to accelerated outcomes. See Apply Digital Business to Sustainability Stakeholders: Knowing stakeholder sustainability expectations of the enterprise will help supply chain leaders to prioritize the most meaningful and impactful actions. In our Sustainability Executive research 2020, we found that customers (63%), investors (48%) and regulators (46%) are creating pressure for enterprises to invest in sustainability initiatives. Collaboration: Decarbonization of the economy and enterprises, while restoring natural capital, cannot be done in isolation. Collaboration and partnerships are needed. Supply chain leaders should seek partnerships to overcome core challenges or to maximize opportunities. For example, Adidas worked with Parley on a clothing collection made from ocean plastics.4 As I think about the next 10 years, I am optimistic about what we can do together. We can create truly transparent and sustainable value chains which serve society. It won’t be easy, but it will be worth it — I can’t wait to be part of that story. Sarah Watt Senior Director Analyst Gartner Supply Chain [email protected] [1] https://corporate.walmart.com/newsroom/2020/09/10/walmart-and-schneider-electric-announce-groundbreaking-collaboration-to-help-suppliers-access-renewable-energy [2] https://www.tescoplc.com/news/2021/tesco-set-to-become-first-uk-retailer-to-offer-sustainability-linked-supply-chain-finance/ [3] https://www.unilever.com/news/news-and-features/Feature-article/2020/how-google-will-help-end-deforestation-in-our-supply-chain.html [4] https://www.adidas.co.uk/parley

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The national and company-led commitments made on Earth Day to reduce greenhouse gas emissions signal increased ambition to avoiding the most severe impacts of climate change. However, with many enterprise emissions falling in Scope 3, the value chain, it puts the CSCO front and center to deliver on these macro goals. In addition to greenhouse gas emissions, supply chains are also being asked to act on issues such as responsible sourcing, biodiversity loss and water.

It is easy to feel overwhelmed in a sustainability landscape that is constantly changing, with ever increasing expectations for transparency across multiple issues. So why is sustainability such a hard topic, and why do some enterprises find it easier than others?

As a child, I have fond memories of playing the game Snakes and Ladders (also known as Chutes and Ladders) with my grandmother. The snakes would move you further away from winning and the ladders would act as an accelerator to reaching the goal. I want to share with you three traps and three accelerators for supply chain sustainability strategies that we have identified through client engagements.

Supply Chain Sustainability Snakes — Traps

Timing: There is a question as to when the supply chain team should act on sustainability goals. Acting now may mean significant costs and lost profits whereas delaying action may mean stranded assets. With many enterprises committing to net zero greenhouse gas emissions, it is prudent to act early to lock in initial savings and create more time to manage more challenging elements of the supply chain to decarbonize. The question of timing itself frames sustainability as purely a risk. Sustainability represents both risk and opportunity. Reframing the sustainability challenge as an opportunity is likely to lead to more near-term action. See Maverick Research: Supply Chains Need Radical Action as “Our House is Still on Fire”
Supplier Engagement: Meeting supply chain sustainability goals will not come in isolation; it means getting suppliers onboard. The challenge is that some suppliers will not have the capabilities or capital to act. Examples of how supply chain organizations are overcoming this impasse are as follows:

Walmart has launched its Gigaton Power Purchase Agreement (GPPA) program in collaboration with Schneider Electric. The aim of this program is to increase supplier awareness about renewable energy purchases and to enable aggregate power purchase agreements.1
Tesco has become the first U.K. retailer to offer its supply chain sustainability-linked finance to encourage suppliers to sign up to science-based emissions reduction goals.2

Supply chain leaders need to think of new strategies to engage with suppliers who struggle to act on sustainability goals.

Investment: Enterprise investment in operational sustainability improvement may be constrained by return on investment rules, risking programmatic stall. Supply chains are leveraging energy performance contracts and carbon pricing as a mechanism to gain access to financing. With some lenders linking borrowing rates to sustainability performance, this will act as a further catalyst for improvement.

Supply Chain Sustainability Ladders — Accelerators

Technology: Supply chain leaders should leverage technology and innovation to accelerate sustainability outcomes. For example, Unilever has partnered with Google Cloud to detect deforestation issues.3 A convergence between sustainability and digital business could lead to accelerated outcomes. See Apply Digital Business to Sustainability
Stakeholders: Knowing stakeholder sustainability expectations of the enterprise will help supply chain leaders to prioritize the most meaningful and impactful actions. In our Sustainability Executive research 2020, we found that customers (63%), investors (48%) and regulators (46%) are creating pressure for enterprises to invest in sustainability initiatives.
Collaboration: Decarbonization of the economy and enterprises, while restoring natural capital, cannot be done in isolation. Collaboration and partnerships are needed. Supply chain leaders should seek partnerships to overcome core challenges or to maximize opportunities. For example, Adidas worked with Parley on a clothing collection made from ocean plastics.4

As I think about the next 10 years, I am optimistic about what we can do together. We can create truly transparent and sustainable value chains which serve society. It won’t be easy, but it will be worth it — I can’t wait to be part of that story.

Sarah Watt
Senior Director Analyst
Gartner Supply Chain
[email protected]

[1] https://corporate.walmart.com/newsroom/2020/09/10/walmart-and-schneider-electric-announce-groundbreaking-collaboration-to-help-suppliers-access-renewable-energy

[2] https://www.tescoplc.com/news/2021/tesco-set-to-become-first-uk-retailer-to-offer-sustainability-linked-supply-chain-finance/

[3] https://www.unilever.com/news/news-and-features/Feature-article/2020/how-google-will-help-end-deforestation-in-our-supply-chain.html

[4] https://www.adidas.co.uk/parley

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